Leases

6 Months Ended

Jun. 30, 2023

Leases

Leases

Note 11. Leases

The Company has leases for office space and equipment in its corporate office and operating regions as well as warehouse space, vehicles, compressors and surface rentals related to its business operations. In addition, the Company has offshore Southern California pipeline right-of-way use agreements. Most of the Company’s leases, other than its corporate office lease, have an initial term and may be extended on a month-to-month basis after expiration of the initial term. Most of the Company’s leases can be terminated with 30-day prior written notice. The majority of its month-to-month leases are not included as a lease liability in its balance sheet because continuation of the lease is not reasonably certain. Additionally, the Company elected the short-term practical expedient to exclude leases with a term of twelve months or less. For the quarter ended June 30, 2023, all of the Company’s leases qualified as operating leases and it did not have any existing or new leases qualifying as financing leases or variable leases.

The Company’s corporate office lease does not provide an implicit rate. To determine the present value of the lease payments, the Company uses its incremental borrowing rate based on the information available at the inception date. To determine the incremental borrowing rate, the Company applies a portfolio approach based on the applicable lease terms and the current economic environment. The Company uses a reasonable market interest rate for its office equipment and vehicle leases.

For the six months ended June 30, 2023 and 2022, the Company recognized approximately $1.1 million and $0.7 million, respectively, of costs relating to the operating leases in the Unaudited Condensed Consolidated Statements of Net Income.

Supplemental cash flow information related to the Company’s lease liabilities is included in the table below:

	For the Six Months Ended
	June 30,
	2023		2022
	(In thousands)
Non-cash amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	948	$	3,874

The following table presents the Company’s right-of-use assets and lease liabilities for the period presented:

	June 30,		December 31,
	2023		2022
	(In thousands)
Right-of-use asset	$	6,428	$	7,376
Lease liabilities:
Current lease liability		1,462		1,401
Long-term lease liability		5,818		6,567
Total lease liability	$	7,280	$	7,968

The following table reflects the Company’s maturity analysis of the minimum lease payment obligations under non-cancelable operating leases with a remaining term in excess of one year (in thousands):

		Office and	Leased vehicles
		warehouse	and office
	leases		equipment		Total
2023	$	685	$	478	$	1,163
2024		1,369		670		2,039
2025		1,369		484		1,853
2026		1,151		5		1,156
2027 and thereafter		2,466		—		2,466
Total lease payments		7,040		1,637		8,677
Less: interest		1,270		127		1,397
Present value of lease liabilities	$	5,770	$	1,510	$	7,280

The weighted average remaining lease terms and discount rate for all of the Company’s operating leases for the period presented:

	June 30,
	2023		2022
Weighted average remaining lease term (years):
Office and warehouse space	4.46		5.92
Vehicles	0.35		0.10
Office equipment	0.03		0.06
Weighted average discount rate:
Office leases	5.01	%	5.60	%
Vehicles	1.27	%	0.16	%
Office equipment	0.10	%	0.15	%