Leases

12 Months Ended

Dec. 31, 2022

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 ROU 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.

In November 2022, the Company exercised its option to extend the lease of the HP-I through June 1, 2024. The extension resulted in a remeasurement of the lease liability to $166.3 million and corresponding adjustment to proved property.

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,
	2022		2021		2020
Finance lease cost - interest on lease liabilities	$	7,558	$	11,453	$	15,748
Operating lease cost, excluding short-term leases(1)		2,281		2,706		3,361
Short-term lease cost(2)		55,072		38,472		53,573
Variable lease cost(3)		1,450		1,356		543
Total lease cost	$	66,361	$	53,987	$	73,225

(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 ROU 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 ROU asset and liability, adjusted for initial direct costs and incentives were as follows (in thousands):


	Year Ended December 31,
	2022		2021
Operating leases:
Operating lease assets	$	5,903	$	5,714

Current portion of operating lease liabilities	$	1,943	$	1,715
Operating lease liabilities		14,855		16,330
Total operating lease liabilities	$	16,798	$	18,045

Finance leases:
Proved property	$	166,261	$	124,299

Other current liabilities	$	16,306	$	27,083
Other long-term liabilities		149,064		13,138
Total finance lease liabilities	$	165,370	$	40,221

The table below presents the lease maturity by year as of December 31, 2022 (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
2023	$	3,774		$	30,782
2024		3,579			30,782
2025		3,645			30,782
2026		3,712			30,782
2027		3,596			30,782
Thereafter		5,727			74,389
Total lease payments	$	24,033		$	228,299
Imputed interest		(7,235	)		(62,929	)
Total lease liabilities	$	16,798		$	165,370

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


	Year Ended December 31,
	2022			2021			2020
Weighted average remaining lease term:
Operating leases	6.4 years			7.4 years			7.8 years
Finance leases	7.4 years			1.4 years			2.4 years
Weighted average discount rate:
Operating leases		11.8	%		11.9	%		12.0	%
Finance leases		9.2	%		21.9	%		21.9	%

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


	Year Ended December 31,
	2022		2021		2020
Operating cash outflow from finance leases	$	7,181	$	11,453	$	15,748
Operating cash outflow from operating leases	$	3,722	$	3,864	$	2,648

ROU assets obtained in exchange for new finance lease liabilities	$	166,261	$	—	$	—
ROU assets obtained in exchange for new operating lease liabilities	$	474	$	1,020	$	—