Leases

12 Months Ended

Dec. 31, 2021

Note 5 — Leases

The Company has operating leases principally for office space, drilling rigs, compressors and other equipment necessary to support the Company’s operations. Additionally, the Company has a finance lease related to the use of the Helix Producer I (the “HP-I”), a dynamically positioned floating production facility that interconnects with the Phoenix Field through a production buoy. The HP-I is utilized in the Company’s oil and natural gas development activities and the right-of-use asset was capitalized and included in proved property and depleted as part of the full cost pool. Once items are included in the full cost pool, they are indistinguishable from other proved properties. The capitalized costs within the full cost pool are amortized over the life of the total proved reserves using the unit-of-production method, computed quarterly. Costs associated with the Company’s leases are either expensed or capitalized depending on how the underlying asset is utilized.

The lease costs described below are presented on a gross basis and do not represent the Company’s net proportionate share of such amounts. A portion of these costs have been or may be billed to other working interest owners. The Company’s share of these costs is included in property and equipment, lease operating expense or general and administrative expense, as applicable. The components of lease costs were as follows (in thousands):


	Year Ended December 31,
	2021		2020		2019
Finance lease cost - interest on lease liabilities	$	11,453	$	15,748	$	19,115
Operating lease cost, excluding short-term leases(1)		2,706		3,361		3,261
Short-term lease cost(2)		38,472		53,573		85,865
Variable lease cost(3)		1,356		543		11
Total lease cost	$	53,987	$	73,225	$	108,252

(1)

Operating lease cost reflect a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis.

(2)

Short-term lease costs are reported at gross amounts and primarily represent costs incurred for drilling rigs, most of which are short-term contracts not recognized as a right-of-use asset and lease liability on the Consolidated Balance Sheets.

(3)

Variable lease costs primarily represent differences between minimum payment obligations and actual operating charges incurred by the Company related to its long-term leases.

The present value of the fixed lease payments recorded as the Company’s right-of-use asset and liability, adjusted for initial direct costs and incentives were as follows (in thousands):


	Year Ended December 31,
	2021		2020
Operating leases:
Operating lease assets	$	5,714	$	6,855

Current portion of operating lease liabilities	$	1,715	$	1,793
Operating lease liabilities		16,330		18,554
Total operating lease liabilities	$	18,045	$	20,347

Finance leases:
Proved property	$	124,299	$	124,299

Other current liabilities	$	27,083	$	21,804
Other long-term liabilities		13,138		40,222
Total finance lease liabilities	$	40,221	$	62,026

The table below presents the lease maturity by year as of December 31, 2021 (in thousands). Such commitments are reflected at undiscounted values and are reconciled to the discounted present value recognized on the Consolidated Balance Sheets.


	Operating Leases			Finance Leases
2022	$	3,712		$	33,257
2023		3,652			13,857
2024		3,454			—
2025		3,519			—
2026		3,584			—
Thereafter		9,258			—
Total lease payments	$	27,179		$	47,114
Imputed interest		(9,134	)		(6,893	)
Total lease liabilities	$	18,045		$	40,221

The table below presents the weighted average remaining lease term and discount rate related to leases:


	Year Ended December 31,
	2021			2020			2019
Weighted average remaining lease term:
Operating leases	7.4 years			7.8 years			8.4 years
Finance leases	1.4 years			2.4 years			3.4 years
Weighted average discount rate:
Operating leases		11.9	%		12.0	%		10.2	%
Finance leases		21.9	%		21.9	%		21.9	%

The table below presents the supplemental cash flow information related to leases (in thousands):


	Year Ended December 31,
	2021		2020		2019
Operating cash outflow from finance leases	$	11,453	$	15,748	$	19,115
Operating cash outflow from operating leases	$	3,864	$	2,648	$	1,812

Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,020	$	—	$	2,225