(3) Leases

SilverBow Resources has contractual agreements for its corporate office lease, vehicle fleet, drilling rigs, compressors, treating equipment, and for surface use rights. For leases with a primary term of more than 12 months, a right-of-use (“ROU”) asset and the corresponding lease liability is recorded. The Company determines at inception if an arrangement is an operating or financing lease. As of June 30, 2019 all of the Company’s leases were operating leases.

The initial asset and liability balances are recorded at the present value of the payment obligations over the lease term. If lease terms include options to extend the lease and it is reasonably certain that the Company will exercise that option, the lease term used for capitalization includes the expected renewal periods. Most leases do not provide an implicit interest rate. Unless the lease contract contains an implicit interest rate, the Company uses its incremental borrowing rate at the time of lease inception to compute the fair value of the lease payments. The ROU asset balance and current and non-current lease liabilities are reported separately on the accompanying Condensed Consolidated Balance Sheet. Certain leases have payment terms that vary based on the usage of the underlying assets. Variable lease payments are not included in ROU assets and lease liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense on a straight-line basis over the lease term.

Lease costs represent the straight-line lease expense of ROU assets and short-term leases. The components of lease cost are classified as follows (in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Lease Costs Included in the Asset Additions in the Condensed Consolidated Balance Sheets
Property, plant and equipment acquisitions - short-term leases	$	2,184	$	6,168
Property, plant and equipment acquisitions - operating leases	11		18
Total lease costs in property, plant and equipment additions	$	2,195	$	6,186



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Lease Costs Included in the Condensed Consolidated Statement of Operations
Lease operating costs - short-term leases	$	329	$	1,664
Lease operating costs - operating leases	1,084		1,138
General and administrative, net - operating leases	175		331
Total lease cost expensed	$	1,588	$	3,133

The lease term and the discount rate related to the Company's leases are as follows:



	As of June 30, 2019
Weighted-average remaining lease term (in years)	2.1
Weighted-average discount rate	5.0	%

As of June 30, 2019, the Company's future undiscounted cash payment obligation for its operating lease liabilities are as follows (in thousands):



	June 30, 2019
2019 (remaining after June 30, 2019)	$	3,503
2020	7,091
2021	2,344
2022	40
2023	40
Thereafter	348
Total undiscounted lease payments	$	13,366
Present value adjustment
Net operating lease liabilities	$	13,366

Supplement cash flow information related to leases was as follows (in thousands):



	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,457
Investing cash flows from operating leases	$	18