Leases

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Leases

(6) Leases

The majority of our leases are for the following types of assets:

•Office space. Our primary offices are in Dallas, Houston, and Midland, with smaller offices in other locations near our assets. Our office leases are long-term in nature and represent $46.2 million of our lease liability and $24.2 million of our right-of-use asset as of December 31, 2022. Our office leases represented $51.8 million of our lease liability and $27.9 million of our right-of-use asset as of December 31, 2021. These office leases typically include variable lease costs related to utility expenses, which are determined based on our pro-rata share of the building expenses each month and expensed as incurred.

•Compression and other field equipment. We pay third parties to provide compressors or other field equipment for our assets. Under these agreements, a third party installs and operates compressor units based on specifications set by us to meet our compression needs at specific locations. While the third party determines which compressors to install and operates and maintains the units, we have the right to control the use of the compressors and are the sole economic beneficiary of the identified assets. These agreements are typically for an initial term of one to three years but will automatically renew to month to month until canceled by us or the lessor. Compression and other field equipment rentals represent $30.6 million of our lease liability and $33.0 million of our right-of-use asset as of December 31, 2022. Compression and other field equipment rentals represented $17.7 million of our lease liability and $19.5 million of our right-of-use asset as of December 31, 2021. Under certain agreements, we may incur variable lease costs related to incidental services provided by the equipment lessor, which are expensed as incurred.

•Land and land easements. We make periodic payments to lease land or to have access to our assets. Land leases and easements are typically long-term to match the expected useful life of the corresponding asset and represent $15.6 million of our lease liability and $12.3 million of our right-of-use asset as of December 31, 2022. Land and land easement leases represented $15.6 million of our lease liability and $12.6 million of our right-of-use asset as of December 31, 2021.

•Other. Office equipment and other items did not represent any amounts related to our lease liability and our right-of-use asset as of December 31, 2022. We rented office equipment and other items that represented $0.1 million of our lease liability and $0.1 million of our right-of-use asset as of December 31, 2021.

Lease balances are recorded on the consolidated balance sheets as follows (in millions):

Operating leases:	December 31, 2022			December 31, 2021
Other assets, net	$	69.5		$	60.1
Other current liabilities	$	26.2		$	18.1
Other long-term liabilities	$	66.2		$	67.1
Other lease information
Weighted-average remaining lease term—Operating leases	8.7 years			10.3 years
Weighted-average discount rate—Operating leases	4.7		%	4.9		%

Certain of our lease agreements have options to extend the lease for a certain period after the expiration of the initial term. We recognize the cost of a lease over the expected total term of the lease, including optional renewal periods that we can reasonably expect to exercise. We do not have material obligations whereby we guarantee a residual value on assets we lease, nor do our lease agreements impose restrictions or covenants that could affect our ability to make distributions.

Lease expense is recognized on the consolidated statements of operations as “Operating expenses” and “General and administrative” depending on the nature of the leased asset. Impairments of right-of-use assets are recognized in “Impairments” on the consolidated statements of operations. Sublease income is recognized as a reduction in “General and administrative” or as “Other income” depending on the nature of the subleased asset. The components of total lease expense are as follows (in millions):

	Year Ended December 31,
	2022		2021		2020
Operating lease expense:
Long-term operating lease expense	$	28.2	$	21.7	$	23.1
Short-term lease expense	34.3		17.5		22.1
Variable lease expense	18.8		15.6		11.8
Impairments	—		0.2		6.8
Total lease expense, before sublease income	81.3		55.0		63.8
Sublease income	(1.1)		—		—
Total lease expense, net of sublease income	$	80.2	$	55.0	$	63.8

Impairments

Right-of-Use Asset Impairment Analysis for the Year Ended December 31, 2021

During the fourth quarter of 2021, we entered into a sublease agreement for a portion of our Houston office that became effective in 2022. We evaluated the related right-of-use asset for impairment by comparing the estimated fair value of the right-of-use asset to its carrying value. The estimated fair value was calculated using a discounted cash flow analysis that utilized Level 3 inputs, which included future cash flows based on the terms of the sublease and a discount rate derived from market data. As the carrying value of the right-of-use asset exceeded the estimated fair value, we have recognized impairment expense of $0.2 million for the year ended December 31, 2021.

Right-of-Use Asset Impairment Analysis for the Year Ended December 31, 2020

During the fourth quarter of 2020, we determined that we would cease using a portion of our Dallas, Houston, and Midland offices. We believed the terms of a sublease would be below our rental rates at the time and, therefore, evaluated the related right-of-use assets for impairment by comparing the estimated fair values of the right-of-use assets to their carrying values. Estimated fair values were calculated using a discounted cash flow analysis that utilized Level 3 inputs, which included estimated future cash flows and a discount rate derived from market data. As the carrying value of each right-of-use asset exceeded its estimated fair value, we recognized impairment expense of $6.8 million for the year ended December 31, 2020.

Lease Maturities

The following table summarizes the maturity of our lease liability as of December 31, 2022 (in millions):

	Total		2023		2024		2025		2026		2027		Thereafter
Undiscounted operating lease liability	$	119.9	$	29.2	$	18.3	$	12.9	$	8.9	$	8.1	$	42.5
Reduction due to present value	(27.5)		(3.7)		(3.1)		(2.5)		(2.0)		(1.7)		(14.5)
Operating lease liability	$	92.4	$	25.5	$	15.2	$	10.4	$	6.9	$	6.4	$	28.0

Leases

(6) Leases

The majority of our leases are for the following types of assets:

•Office space. Our primary offices are in Dallas, Houston, and Midland, with smaller offices in other locations near our assets. Our office leases are long-term in nature and represent $46.2 million of our lease liability and $24.2 million of our right-of-use asset as of December 31, 2022. Our office leases represented $51.8 million of our lease liability and $27.9 million of our right-of-use asset as of December 31, 2021. These office leases typically include variable lease costs related to utility expenses, which are determined based on our pro-rata share of the building expenses each month and expensed as incurred.

•Compression and other field equipment. We pay third parties to provide compressors or other field equipment for our assets. Under these agreements, a third party installs and operates compressor units based on specifications set by us to meet our compression needs at specific locations. While the third party determines which compressors to install and operates and maintains the units, we have the right to control the use of the compressors and are the sole economic beneficiary of the identified assets. These agreements are typically for an initial term of one to three years but will automatically renew to month to month until canceled by us or the lessor. Compression and other field equipment rentals represent $30.6 million of our lease liability and $33.0 million of our right-of-use asset as of December 31, 2022. Compression and other field equipment rentals represented $17.7 million of our lease liability and $19.5 million of our right-of-use asset as of December 31, 2021. Under certain agreements, we may incur variable lease costs related to incidental services provided by the equipment lessor, which are expensed as incurred.

•Land and land easements. We make periodic payments to lease land or to have access to our assets. Land leases and easements are typically long-term to match the expected useful life of the corresponding asset and represent $15.6 million of our lease liability and $12.3 million of our right-of-use asset as of December 31, 2022. Land and land easement leases represented $15.6 million of our lease liability and $12.6 million of our right-of-use asset as of December 31, 2021.

•Other. Office equipment and other items did not represent any amounts related to our lease liability and our right-of-use asset as of December 31, 2022. We rented office equipment and other items that represented $0.1 million of our lease liability and $0.1 million of our right-of-use asset as of December 31, 2021.

Lease balances are recorded on the consolidated balance sheets as follows (in millions):

Operating leases:	December 31, 2022			December 31, 2021
Other assets, net	$	69.5		$	60.1
Other current liabilities	$	26.2		$	18.1
Other long-term liabilities	$	66.2		$	67.1
Other lease information
Weighted-average remaining lease term—Operating leases	8.7 years			10.3 years
Weighted-average discount rate—Operating leases	4.7		%	4.9		%

Certain of our lease agreements have options to extend the lease for a certain period after the expiration of the initial term. We recognize the cost of a lease over the expected total term of the lease, including optional renewal periods that we can reasonably expect to exercise. We do not have material obligations whereby we guarantee a residual value on assets we lease, nor do our lease agreements impose restrictions or covenants that could affect our ability to make distributions.

Lease expense is recognized on the consolidated statements of operations as “Operating expenses” and “General and administrative” depending on the nature of the leased asset. Impairments of right-of-use assets are recognized in “Impairments” on the consolidated statements of operations. Sublease income is recognized as a reduction in “General and administrative” or as “Other income” depending on the nature of the subleased asset. The components of total lease expense are as follows (in millions):

	Year Ended December 31,
	2022		2021		2020
Operating lease expense:
Long-term operating lease expense	$	28.2	$	21.7	$	23.1
Short-term lease expense	34.3		17.5		22.1
Variable lease expense	18.8		15.6		11.8
Impairments	—		0.2		6.8
Total lease expense, before sublease income	81.3		55.0		63.8
Sublease income	(1.1)		—		—
Total lease expense, net of sublease income	$	80.2	$	55.0	$	63.8

Impairments

Right-of-Use Asset Impairment Analysis for the Year Ended December 31, 2021

During the fourth quarter of 2021, we entered into a sublease agreement for a portion of our Houston office that became effective in 2022. We evaluated the related right-of-use asset for impairment by comparing the estimated fair value of the right-of-use asset to its carrying value. The estimated fair value was calculated using a discounted cash flow analysis that utilized Level 3 inputs, which included future cash flows based on the terms of the sublease and a discount rate derived from market data. As the carrying value of the right-of-use asset exceeded the estimated fair value, we have recognized impairment expense of $0.2 million for the year ended December 31, 2021.

Right-of-Use Asset Impairment Analysis for the Year Ended December 31, 2020

During the fourth quarter of 2020, we determined that we would cease using a portion of our Dallas, Houston, and Midland offices. We believed the terms of a sublease would be below our rental rates at the time and, therefore, evaluated the related right-of-use assets for impairment by comparing the estimated fair values of the right-of-use assets to their carrying values. Estimated fair values were calculated using a discounted cash flow analysis that utilized Level 3 inputs, which included estimated future cash flows and a discount rate derived from market data. As the carrying value of each right-of-use asset exceeded its estimated fair value, we recognized impairment expense of $6.8 million for the year ended December 31, 2020.

Lease Maturities

The following table summarizes the maturity of our lease liability as of December 31, 2022 (in millions):

	Total		2023		2024		2025		2026		2027		Thereafter
Undiscounted operating lease liability	$	119.9	$	29.2	$	18.3	$	12.9	$	8.9	$	8.1	$	42.5
Reduction due to present value	(27.5)		(3.7)		(3.1)		(2.5)		(2.0)		(1.7)		(14.5)
Operating lease liability	$	92.4	$	25.5	$	15.2	$	10.4	$	6.9	$	6.4	$	28.0