Leases

12 Months Ended

Dec. 31, 2020

14. LEASES

The Partnership adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019, using the modified retrospective method applied to all leases in existence on January 1, 2019, and prior-period financial statements were not adjusted. The Partnership elected not to reassess contracts that commenced prior to adoption, to continue applying its current accounting policy for existing or expired land easements, and not to recognize ROU assets or lease liabilities for short-term leases.

Lessee. The Partnership has entered into operating leases that extend through 2039 for corporate offices, shared field offices, easements, and equipment supporting the Partnership’s operations, with both Occidental and third parties as lessors. The Partnership also had subleased equipment from Occidental via finance leases that extended through April 2020. During the first quarter of 2020, the Partnership entered into finance leases with third parties for equipment and vehicles extending through 2029.

The following table summarizes information related to the Partnership’s leases:


	December 31,
	2020				2019
thousands except lease term and discount rate	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Assets
Other assets	$	38,985	$	—	$	3,985	$	—
Net property, plant, and equipment	—		31,487		—		7,892
Total lease assets (1)	$	38,985	$	31,487	$	3,985	$	7,892

Liabilities
Accrued liabilities	$	3,958	$	—	$	1,805	$	—
Short-term debt	—		8,264		—		7,873
Other liabilities	34,843		—		3,035		—
Long-term debt	—		23,644		—		—
Total lease liabilities (1)	$	38,801	$	31,908	$	4,840	$	7,873

Weighted-average remaining lease term (years)	9		7		5		—
Weighted-average discount rate (%)	5.1		4.3		4.7		2.9

________________________________________________________________________________________

(1)Includes additions to ROU assets and lease liabilities of $39.7 million and $8.5 million related to finance leases for the year ended December 31, 2020 and 2019, respectively. Includes additions to ROU assets and lease liabilities of $40.5 million related to operating leases for the year ended December 31, 2020.

Lease expense charged to the Partnership was $56.5 million for the year ended December 31, 2018. The following table summarizes the Partnership’s lease cost:


	Year Ended December 31,
thousands	2020		2019
Operating lease cost	$	7,702	$	6,932
Short-term lease cost	43,102		1,295
Variable lease cost	(46)		256
Sublease income	(414)		(414)
Finance lease cost
Amortization of ROU assets	8,346		562
Interest on lease liabilities	1,516		137
Total lease cost	$	60,206	$	8,768

14. LEASES

The following table summarizes cash paid for amounts included in the measurement of lease liabilities:


	Year Ended December 31,
	2020				2019
thousands	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Operating cash flows	$	5,750	$	1,516	$	7,042	$	118
Financing cash flows	—		14,207		—		508

The following table reconciles the undiscounted cash flows to the operating and finance lease liabilities at December 31, 2020:


thousands	Operating Leases		Finance Leases
2021	$	4,042	$	8,557
2022	7,763		6,757
2023	4,902		4,383
2024	4,253		3,205
2025	4,101		3,095
Thereafter	25,415		10,752
Total lease payments	50,476		36,749
Less portion representing imputed interest	11,675		4,841
Total lease liabilities	$	38,801	$	31,908

Lessee, Finance Leases

14. LEASES

The following table summarizes information related to the Partnership’s leases:


	December 31,
	2020				2019
thousands except lease term and discount rate	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Assets
Other assets	$	38,985	$	—	$	3,985	$	—
Net property, plant, and equipment	—		31,487		—		7,892
Total lease assets (1)	$	38,985	$	31,487	$	3,985	$	7,892

Liabilities
Accrued liabilities	$	3,958	$	—	$	1,805	$	—
Short-term debt	—		8,264		—		7,873
Other liabilities	34,843		—		3,035		—
Long-term debt	—		23,644		—		—
Total lease liabilities (1)	$	38,801	$	31,908	$	4,840	$	7,873

Weighted-average remaining lease term (years)	9		7		5		—
Weighted-average discount rate (%)	5.1		4.3		4.7		2.9

________________________________________________________________________________________

Lease expense charged to the Partnership was $56.5 million for the year ended December 31, 2018. The following table summarizes the Partnership’s lease cost:


	Year Ended December 31,
thousands	2020		2019
Operating lease cost	$	7,702	$	6,932
Short-term lease cost	43,102		1,295
Variable lease cost	(46)		256
Sublease income	(414)		(414)
Finance lease cost
Amortization of ROU assets	8,346		562
Interest on lease liabilities	1,516		137
Total lease cost	$	60,206	$	8,768

14. LEASES

The following table summarizes cash paid for amounts included in the measurement of lease liabilities:


	Year Ended December 31,
	2020				2019
thousands	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Operating cash flows	$	5,750	$	1,516	$	7,042	$	118
Financing cash flows	—		14,207		—		508

The following table reconciles the undiscounted cash flows to the operating and finance lease liabilities at December 31, 2020:


thousands	Operating Leases		Finance Leases
2021	$	4,042	$	8,557
2022	7,763		6,757
2023	4,902		4,383
2024	4,253		3,205
2025	4,101		3,095
Thereafter	25,415		10,752
Total lease payments	50,476		36,749
Less portion representing imputed interest	11,675		4,841
Total lease liabilities	$	38,801	$	31,908

Lessor, Operating Leases

Lessor. Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership entered into an operating and maintenance agreement pursuant to which Occidental provides operational and maintenance services with respect to a crude-oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021. The agreement and underlying contracts include (i) fixed consideration, which is measured as the minimum-volume commitment for both gathering and treating, and (ii) variable consideration, which consists of all volumes above the minimum-volume commitment. Subsequent to the initial two-year term, the agreement provides for automatic one-year extensions, unless either party exercises its option to terminate the lease with advance notice. For the year ended December 31, 2020, the Partnership recognized fixed-lease revenue of $175.8 million and variable-lease revenue of $47.9 million related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations.

The following table presents the undiscounted cash flows expected to be received for all operating leases in effect as of December 31, 2020. This presentation includes minimum fixed lease payments and does not include an estimate of variable lease consideration.


thousands
2021	$	193,925
2022	—
2023	—
2024	—
2025	—
Thereafter	—
Total lease payments	$	193,925