The Company leases certain office space, processing plants, drilling rigs and completion services, gas gathering lines, compressor stations, and other office and field equipment. Leases with an initial term of 12 months or less are considered short-term

and are not recorded on the balance sheet. Instead, the short-term leases are recognized in expense on a straight-line basis over the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease from one to 20 years or more. The exercise of the lease renewal options are at the Company’s sole discretion. The depreciable lives of the leased assets are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Certain of the Company’s lease agreements include minimum payments based on a percentage of produced volumes over contractual levels and others include rental payments adjusted periodically for inflation.

The Company considers all contracts that have assets specified in the contract, either explicitly or implicitly, that the Company has substantially all of the capacity of the asset, and has the right to obtain substantially all of the economic benefits of that asset, without the lessor’s ability to have a substantive right to substitute that asset, as leased assets. For any contract deemed to include a leased asset, that asset is capitalized on the balance sheet as a right-of-use asset and a corresponding lease liability is recorded at the present value of the known future minimum payments of the contract using a discount rate on the date of commencement. The leased asset classification is determined at the date of recording as either operating or financing, depending upon certain criteria of the contract.

The discount rate used for present value calculations is the discount rate implicit in the contract. If an implicit rate is not determinable, a collateralized incremental borrowing rate is used at the date of commencement. As new leases commence or previous leases are modified the discount rate used in the present value calculation is the current period applicable discount rate.

The Company has made an accounting policy election to adopt the practical expedient for combining lease and non-lease components on an asset class basis. This expedient allows the Company to combine non-lease components such as real estate taxes, insurance, maintenance, and other operating expenses associated with the leased premises with the lease component of a lease agreement on an asset class basis when the non-lease components of the agreement cannot be easily bifurcated from the lease payment. Currently, the Company is only applying this expedient to certain office space agreements.

The Company’s lease assets as of December 31, 2019 and June 30, 2020 consisted of the following items (in thousands):

(1)	Gas gathering lines and compressor stations leases includes $0.9 billion related to Antero Midstream Corporation as of December 31, 2019 and June 30, 2020. See “—Related party lease disclosure” for additional discussion.

(2)	Financing lease assets are recorded net of accumulated amortization of $9 million and $3 million as of December 31, 2019 and June 30, 2020, respectively.

The Company’s lease liabilities as of December 31, 2019 and June 30, 2020 consisted of the following items (in thousands):


	December 31, 2019				June 30, 2020
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Location on the balance sheet:
Short-term lease liabilities	$	304,397		923	$	229,415		1,084
Long-term lease liabilities		2,582,103		1,575		2,333,530		697
Total lease liabilities	$	2,886,500		2,498	$	2,562,945		1,781

The processing plants, gathering lines and compressor stations that are classified as lease liabilities are classified as such under ASC 842 because Antero is the sole customer of the assets and because Antero makes the decisions that most impact the economic performance of the assets.

Supplemental Information Related to Leases

Costs associated with operating leases were included in the statement of operations and comprehensive income (loss) for the three and six months ended June 30, 2019 and 2020 (in thousands):


	Three months ended June 30,				Six months ended June 30,
Statement of Operations Location	2019		2020		2019		2020
Gathering, compression, processing, and transportation	$	218,542		350,853	$	406,389		703,496
General and administrative		2,810		2,789		5,536		5,670
Contract termination and rig stacking		2,673		5,841		10,692		5,841
Total lease expense	$	224,025		359,483	$	422,617		715,007

Costs associated with finance leases of less than $1 million for each of the three months and six months ended June 30, 2019 and 2020 were included in interest expense.

For the three months ended June 30, 2019 and 2020, we capitalized $53 million and $26 million, respectively, of costs related to operating leases and less than $1 million of costs related to finance leases. For the six months ended June 30, 2019, and 2020, we capitalized $108 million and $59 million, respectively, of costs related to operating leases and less than $1 million of costs related to finance leases.

Short-term lease costs that are more than one month but less than 12 months are excluded from the above amounts and total $39 million and $29 million, respectively, for the three months ended June 30, 2019 and 2020 and $74 million and $92 million, respectively, for the six months ended June 30, 2019 and 2020.

Supplemental Cash Flow Information Related to Leases

The following is the Company’s supplemental cash flow information related to leases for the three and six months ended June 30, 2019 (in thousands):


	Three months ended June 30, 2019				Six months ended June 30, 2019
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash out flows related to operating leases	$	207,244		—	$	357,564		—
Investing cash out flows related to operating leases		46,532		—		98,898		—
Financing cash out flows related to financing leases		—		873		—		1,664
	$	253,776		873	$	456,462		1,664

Noncash activities:
Right of use assets obtained in exchange for operating lease liabilities	$	—		—	$	3,345,549		—
Right of use assets obtained in exchange for financing lease liabilities	$	—		—	$	—		—

The following is the Company’s supplemental cash flow information related to leases for the three and six months ended June 30, 2020 (in thousands):


	Three months ended June 30, 2020				Six months ended June 30, 2020
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash out flows related to operating leases	$	303,758		—	$	661,797		—
Investing cash out flows related to operating leases		35,745		—		63,279		—
Financing cash out flows related to financing leases		—		278		—		717
	$	339,503		278	$	725,076		717

Noncash activities:
Right of use assets obtained in exchange for operating lease liabilities	$	104,380		—	$	113,762		—
Right of use assets obtained in exchange for financing lease liabilities	$	—		—	$	—		—

Maturities of Lease Liabilities

The table below is a schedule of future minimum payments for operating and financing lease liabilities as of June 30, 2020 (in thousands):


(in thousands)	Operating Leases		Financing Leases		Total
Remainder of 2020	$	311,128		647		311,775
2021		582,546		844		583,390
2022		567,631		321		567,952
2023		563,076		7		563,083
2024		554,308		—		554,308
2025		481,630		—		481,630
Thereafter		1,501,759		—		1,501,759
Total lease payments		4,562,078		1,819		4,563,897
Less: imputed interest		(1,999,133)		(38)		(1,999,171)
Total	$	2,562,945		1,781		2,564,726

Lease Term and Discount Rate

The table below is the Company’s weighted-average remaining lease term and discount rate as of June 30, 2020:


	June 30, 2020
	Operating Leases		Finance Leases
Weighted-average remaining lease term:	8.5 years		1.8 years
Weighted-average discount rate:	15.1	%	6.1	%

Related party lease disclosure

The Company has a gathering and compression agreement with Antero Midstream Corporation, whereby Antero Midstream Corporation receives a low-pressure gathering fee per Mcf, a high-pressure gathering fee per Mcf, and a compression fee per Mcf, in each case subject to adjustments based on the consumer price index. If and to the extent we request that Antero Midstream Corporation construct new high pressure lines and compressor stations, the gathering and compression agreement contains minimum volume commitments that require Antero Resources to utilize or pay for 75% and 70%, respectively, of the requested capacity of such new construction for 10 years. In December 2019, the Company and Antero Midstream Corporation agreed to extend the initial term of the gathering and compression agreement to 2038 and established a growth incentive fee program whereby low pressure gathering fees will be reduced from 2020 through 2023 to the extent the Company achieves certain volumetric targets at certain points during such time. Upon completion of the initial contract term, the gathering and compression agreement will continue in effect from year to

year until such time as the agreement is terminated, effective upon an anniversary of the effective date of the agreement, by either the Company or Antero Midstream Corporation on or before the 180^th day prior to the anniversary of such effective date. The Company achieved the volumetric targets for the three months ended March 31, 2020 and June 30, 2020, and Antero Midstream Corporation provided a rebate of $12 million in each period.

For the three and six months ended June 30, 2019, gathering and compression fees paid by Antero related to this agreement were $163 million and $315 million, respectively. For the three and six months ended June 30, 2020, gathering and compression fees paid by Antero related to this agreement were $166 million and $321 million, respectively. As of December 31, 2019 and June 30, 2020, $57 million and $53 million was included within Accounts payable, related parties, respectively, on the Condensed Consolidated Balance Sheet as due to Antero Midstream Corporation related to this agreement.