Operating leases are reflected as an operating lease right of use (“ROU”) asset included in “Other assets, net”, and as a ROU liability in “Accrued liabilities and other” and “Operating lease liability” on the Company’s unaudited condensed consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. In addition to the present value of lease payments, the operating lease ROU asset would also include any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred, if any. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term and are presented as “General and administrative expenses” in the unaudited condensed consolidated statements of operations. 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. For all operating leases, lease and non-lease components are accounted for as a single lease component.

As a non-operator and having adequate liquidity, the Company has generally not entered into lease transactions. The Company’s only operating lease is for corporate office space in Houston, Texas, effective May 1, 2019 and which expires November 30, 2022. The Company has no leases that meet the criteria for classification as a finance lease or a short-term lease.

The Company makes certain assumptions and judgments when evaluating a contract that meets the definition of a lease under ASC 842, Leases. As the Company’s operating lease did not provide an implicit rate, an incremental borrowing rate was calculated using the prime-rate-based borrowing rate under the Company’s Senior Secured Credit Facility, as discussed below, as the term facility was based on a similar lease term and is appropriately risk-adjusted. The lease term was determined by considering any option available to extend or to early terminate the lease which the Company believed was reasonably certain to be exercised.

The table below summarized the Company’s leases for the three months ended September 30, 2022 and 2021 (in thousands, except years and discount rate):

The following table presents the Company’s ROU assets and lease liabilities (in thousands):

(1)	A portion of the cash paid for operating leases during the three months ended September 30, 2022 includes a prepayment for the subsequent quarter.

As of September 30, 2022, the future minimum lease payments associated with the Company’s non-cancellable operating lease for office space are as follows (in thousands):


Fiscal Year	September 30, 2022
Remaining in 2023	$	5
Total operating lease payments		5
Less: discount to present value		—
Total operating lease liabilities		5
Less: current operating lease liabilities		5
Non current operating lease liabilities	$	—