Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

Leases

    We have cancellable and non-cancellable finance and operating lease liabilities for the lease of land, vehicles, office space, retail facilities, and other facilities used in the storage and transportation of crude oil and refined products. Most of our leases include one or more options to renew, with renewal terms that can extend the lease term from one to 30 years or more. There are no material lease arrangements where we are the lessor and no material residual value guarantees associated with any of our leases.

    The following table provides information on the amounts (in thousands) of our right-of-use assets (“ROU assets”) and liabilities as of March 31, 2022 and December 31, 2021 and their placement within our condensed consolidated balance sheets:

Lease type	Balance Sheet Location	March 31, 2022		December 31, 2021
Assets
Finance	Property, plant, and equipment	$	21,150	$	20,556
Finance	Accumulated amortization	(8,880)		(8,397)
Finance	Property, plant, and equipment, net	$	12,270	$	12,159
Operating	Operating lease right-of-use assets	377,745		383,824
Total right-of-use assets		$	390,015	$	395,983
Liabilities
Current
Finance	Other accrued liabilities	$	1,685	$	1,540
Operating	Operating lease liabilities	55,440		53,640
Long-term
Finance	Finance lease liabilities	7,653		7,691
Operating	Operating lease liabilities	330,031		335,094
Total lease liabilities		$	394,809	$	397,965

The following table summarizes the weighted-average lease terms and discount rates of our leases as of March 31, 2022 and December 31, 2021:

	March 31, 2022		December 31, 2021
Weighted-average remaining lease term (in years)
Finance	6.07		6.29
Operating	11.11		11.28
Weighted-average discount rate
Finance	7.31	%	7.46	%
Operating	6.68	%	6.70	%

The following table summarizes the lease costs recognized in our condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
Lease cost type	2022		2021
Finance lease cost
Amortization of finance lease ROU assets	$	484	$	490
Interest on lease liabilities	161		174
Operating lease cost	22,254		22,377
Variable lease cost	1,246		1,772
Short-term lease cost	986		29
Net lease cost	$	25,131	$	24,842

    The following table summarizes the supplemental cash flow information related to leases as follows (in thousands):

	Three Months Ended March 31,
Lease type	2022		2021
Cash paid for amounts included in the measurement of liabilities
Financing cash flows from finance leases	$	482	$	1,539
Operating cash flows from finance leases	161		176
Operating cash flows from operating leases	19,394		19,704
Non-cash supplemental amounts
ROU assets obtained in exchange for new finance lease liabilities	594		1,072
ROU assets obtained in exchange for new operating lease liabilities	10,678		85,426
ROU assets terminated in exchange for release from operating lease liabilities	1,029		—

    The table below includes the estimated future undiscounted cash flows for finance and operating leases as of March 31, 2022 (in thousands):

For the year ending December 31,	Finance leases		Operating leases		Total
2022 (1)	$	1,700	$	62,261	$	63,961
2023	2,286		63,617		65,903
2024	1,955		55,588		57,543
2025	1,794		51,354		53,148
2026	1,327		46,756		48,083
2027	1,097		44,848		45,945
Thereafter	1,582		191,789		193,371
Total lease payments	11,741		516,213		527,954
Less amount representing interest	(2,403)		(130,742)		(133,145)
Present value of lease liabilities	$	9,338	$	385,471	$	394,809

_________________________________________________________

(1)Represents the period from April 1, 2022 to December 31, 2022.

    Additionally, we have $3.8 million and $6.1 million in future undiscounted cash flows for finance and operating leases that have not yet commenced, respectively. These leases are expected to commence when the lessor has made the equipment or location available to us to operate or begin construction, respectively.

Sale-Leaseback Transaction

In February and March 2021, PHL and Par Hawaii Property Company, LLC (collectively, the “Sellers”), both our wholly owned subsidiaries, and MDC Coast HI 1, LLC, a subsidiary of Realty Income Corporation (the “Buyer”), entered into sale-leaseback transactions with respect to twenty-two (22) retail convenience store/fuel station properties located in Hawaii. We recognized a gain of $63.9 million as a result of these transactions, which is included in Loss (gain) on sale of assets, net on our condensed consolidated statements of operations for the three months ended March 31, 2021.

Leases

Leases

    We have cancellable and non-cancellable finance and operating lease liabilities for the lease of land, vehicles, office space, retail facilities, and other facilities used in the storage and transportation of crude oil and refined products. Most of our leases include one or more options to renew, with renewal terms that can extend the lease term from one to 30 years or more. There are no material lease arrangements where we are the lessor and no material residual value guarantees associated with any of our leases.

    The following table provides information on the amounts (in thousands) of our right-of-use assets (“ROU assets”) and liabilities as of March 31, 2022 and December 31, 2021 and their placement within our condensed consolidated balance sheets:

Lease type	Balance Sheet Location	March 31, 2022		December 31, 2021
Assets
Finance	Property, plant, and equipment	$	21,150	$	20,556
Finance	Accumulated amortization	(8,880)		(8,397)
Finance	Property, plant, and equipment, net	$	12,270	$	12,159
Operating	Operating lease right-of-use assets	377,745		383,824
Total right-of-use assets		$	390,015	$	395,983
Liabilities
Current
Finance	Other accrued liabilities	$	1,685	$	1,540
Operating	Operating lease liabilities	55,440		53,640
Long-term
Finance	Finance lease liabilities	7,653		7,691
Operating	Operating lease liabilities	330,031		335,094
Total lease liabilities		$	394,809	$	397,965

The following table summarizes the weighted-average lease terms and discount rates of our leases as of March 31, 2022 and December 31, 2021:

	March 31, 2022		December 31, 2021
Weighted-average remaining lease term (in years)
Finance	6.07		6.29
Operating	11.11		11.28
Weighted-average discount rate
Finance	7.31	%	7.46	%
Operating	6.68	%	6.70	%

The following table summarizes the lease costs recognized in our condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
Lease cost type	2022		2021
Finance lease cost
Amortization of finance lease ROU assets	$	484	$	490
Interest on lease liabilities	161		174
Operating lease cost	22,254		22,377
Variable lease cost	1,246		1,772
Short-term lease cost	986		29
Net lease cost	$	25,131	$	24,842

    The following table summarizes the supplemental cash flow information related to leases as follows (in thousands):

	Three Months Ended March 31,
Lease type	2022		2021
Cash paid for amounts included in the measurement of liabilities
Financing cash flows from finance leases	$	482	$	1,539
Operating cash flows from finance leases	161		176
Operating cash flows from operating leases	19,394		19,704
Non-cash supplemental amounts
ROU assets obtained in exchange for new finance lease liabilities	594		1,072
ROU assets obtained in exchange for new operating lease liabilities	10,678		85,426
ROU assets terminated in exchange for release from operating lease liabilities	1,029		—

    The table below includes the estimated future undiscounted cash flows for finance and operating leases as of March 31, 2022 (in thousands):

For the year ending December 31,	Finance leases		Operating leases		Total
2022 (1)	$	1,700	$	62,261	$	63,961
2023	2,286		63,617		65,903
2024	1,955		55,588		57,543
2025	1,794		51,354		53,148
2026	1,327		46,756		48,083
2027	1,097		44,848		45,945
Thereafter	1,582		191,789		193,371
Total lease payments	11,741		516,213		527,954
Less amount representing interest	(2,403)		(130,742)		(133,145)
Present value of lease liabilities	$	9,338	$	385,471	$	394,809

_________________________________________________________

(1)Represents the period from April 1, 2022 to December 31, 2022.

    Additionally, we have $3.8 million and $6.1 million in future undiscounted cash flows for finance and operating leases that have not yet commenced, respectively. These leases are expected to commence when the lessor has made the equipment or location available to us to operate or begin construction, respectively.

Sale-Leaseback Transaction

In February and March 2021, PHL and Par Hawaii Property Company, LLC (collectively, the “Sellers”), both our wholly owned subsidiaries, and MDC Coast HI 1, LLC, a subsidiary of Realty Income Corporation (the “Buyer”), entered into sale-leaseback transactions with respect to twenty-two (22) retail convenience store/fuel station properties located in Hawaii. We recognized a gain of $63.9 million as a result of these transactions, which is included in Loss (gain) on sale of assets, net on our condensed consolidated statements of operations for the three months ended March 31, 2021.