Under ASC 842, Leases, there are two types of leases: finance and operating. Regardless of the type of lease, the initial measurement of the lease results in recording a Right-of-Use (“ROU”) asset and a lease liability at the present value of the future lease payments.

Practical Expedients –The Company elected to use these practical expedients, effectively carrying over its previous identification and classification of leases that existed as of January 1, 2019. Additionally, a lessee may elect not to recognize ROU assets and liabilities arising from short-term leases provided there is no purchase option the entity is likely to exercise. The Company has elected this short-term lease exemption. The adoption of ASC 842 resulted in a material increase in the Company’s total assets and liabilities on the Company’s condensed consolidated balance sheet as certain of its operating leases are significant. In addition, adoption resulted in a decrease in working capital as the ROU asset is noncurrent, but the lease liability has both long-term and short-term portions. There was no material overall impact on results of operations or cash flows. In the statement of cash flows, operating leases remain an operating activity.

The Company is currently a party to several lease agreements for the rental of marine vessels and helicopters, warehouse and storage facilities, equipment and the FPSO. The duration for these agreements range from 15 to 32 months. In some cases, the lease contracts require the Company to make payments both for the use of the asset itself and for operations and maintenance services. Only the payments for the use of the asset related to the lease component are included in the calculation of ROU assets and lease liabilities. Payments for the operations and maintenance services are considered non-lease components and are not included in calculating the ROU assets and lease liabilities. For leases on ROU assets used in joint operations, generally the operator reflects the full amount of the lease component, including the amount that will be funded by the non-operators. As operator for the Etame Marin block, the ROU asset recorded for the FPSO, the marine vessels, helicopter, certain equipment and warehouse and storage facilities used in the joint operations includes the gross amount of the lease components.

For all other leases that contain an option to extend, the Company has concluded that it is not reasonably certain it will exercise the renewal option and the renewal periods have been excluded in the calculation for the ROU assets and liabilities. During the third quarter of 2019, the Company notified the lessor of the FPSO of its intent to extend the lease term by the first option that extends the FPSO lease to September 2021. Similarly, during the third quarter of 2020, the Company gave notification to extend the FPSO lease to September 2022.

The FPSO agreement also contains options to purchase the assets during or at the end of the lease term. The Company does not consider these options reasonably certain of exercise and has excluded the purchase price from the calculation of ROU assets and lease liabilities.

The FPSO, helicopter, marine vessels and certain equipment leases include provisions for variable lease payments, under which the Company is required to make additional payments based on the level of production or the number of days or hours the asset is deployed, or the number of persons onboard the vessel. Because the Company does not know the extent that the Company will be required to make such payments, they are excluded from the initial calculation of ROU assets and lease liabilities.

The discount rate used to calculate ROU assets and lease liabilities represents the Company’s incremental borrowing rate. The Company determined this by considering the term and economic environment of each lease, and estimating the resulting interest rate the Company would incur to borrow the lease payments.

For the three months ended March 31, 2021 and 2020, the components of the lease costs and the supplemental information were as follows:


	Three Months Ended March 31,
	2021		2020
Lease cost:	(in thousands)
Operating lease cost	$	4,390	$	4,190
Short-term lease cost		794		1,032
Variable lease cost		1,434		1,926
Total lease expense		6,618		7,148
Lease costs capitalized		—		3,281
Total lease costs	$	6,618	$	10,429

Other information:
Cash paid for amounts included in the measurement of lease liabilities:	2021		2020
Operating cash flows attributable to operating leases	$	4,773	$	8,510
Weighted-average remaining lease term		1.5 years		2.5 years
Weighted-average discount rate		6.09%		6.16%

The table below describes the presentation of the total lease cost on the Company’s condensed consolidated statement of operations. As discussed above, the Company’s joint venture owners are required to reimburse the Company for their share of certain expenses, including certain lease costs.


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Production expense	$	2,649	$	2,205
General and administrative expense		49		49
Lease costs billed to the joint venture owners		3,920		7,073
Total lease expense		6,618		9,327
Lease costs capitalized		—		1,102
Total lease costs	$	6,618	$	10,429

The following table describes the future maturities of the Company’s operating lease liabilities at March 31, 2021:


	Lease Obligation
Year	(in thousands)
2021	$	10,437
2022		9,685
2023		179
		20,301
Less: imputed interest		852
Total lease liabilities	$	19,449