Leases (Notes)

12 Months Ended

Dec. 31, 2019

Nature of Leases

The Company has entered into various operating leases such as a natural gas processing plant, floating production storage and off-take vessels, buildings, marine vessels, vehicles, drilling rigs, pipelines and other oil and gas field equipment. Remaining lease terms range from 1 year to 20 years, some of which may include options to extend leases for multi-year periods and others which include options to terminate the leases within 1 month. Options to extend lease terms are at the Company’s discretion. Early lease terminations are a combination of both at Company discretion and mutual agreement between the Company and lessor. Purchase options also exist for certain leases.

Related Expenses

Expenses related to finance and operating leases included in the Consolidated Financial Statements are as follows:



(Thousands of dollars)	Financial Statement Category	Year Ended December 31, 2019
Operating lease ^1,2	Lease operating expenses	$	249,787
Operating lease ²	Selling and general expense	12,325
Operating lease ²	Other operating expense	2,588
Operating lease ²	Property, plant and equipment	133,837
Operating lease ²	Asset retirement obligations	3,024
Finance lease
Amortization of asset	Depreciation, depletion and amortization	420
Interest on lease liabilities	Interest expense, net	202
Sublease income	Other income	(1,419		)
Net lease expense		$	400,764

¹ For the year ended December 31, 2019, includes variable lease expenses of $28.7 million, primarily related to additional volumes processed at a natural gas processing plant.

² For the year ended December 31, 2019, includes $56.3 million in Lease operating expense, $4.3 million in Selling and general expense, $2.6 million in Other operating expense, $102.7 million in Property, plant and equipment, net and $3.0 million in Asset retirement obligations relating to short-term leases due within 12 months. Expenses primarily relate to drilling rigs and other oil and natural gas field equipment.

Maturity of Lease Liabilities໿



(Thousands of dollars)	Operating Leases ¹			Finance Leases		Total
2020	$	124,267		1,069		125,336
2021	74,978			1,069		76,047
2022	56,756			1,069		57,825
2023	54,986			1,069		56,055
2024	50,640			1,069		51,709
Remaining	493,833			4,541		498,374
Total future minimum lease payments	855,460			9,886		865,346
Less imputed interest	(241,850		)	(1,941	)	(243,791	)
Present value of lease liabilities²	$	613,610		7,945		621,555

¹ Excludes $278.7 million of minimum lease payments for leases entered but not yet commenced. These payments relate to an expansion of an existing natural gas processing plant and payments are planned to commence at the end of 2020 for 20 years.

² Includes both the current and long-term portion of the lease liabilities. Financing lease pertains to Brunei, which is classified as held for sale on the Consolidated Balance Sheet as of December 31, 2019.

Lease Term and Discount Rate



	December 31, 2019
Weighted average remaining lease term:
Operating leases	10 years
Finance leases	9 years
Weighted average discount rate:
Operating leases	4.7	%
Finance leases	4.7	%

Other Information໿



(Thousands of dollars)	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	193,968
Operating cash flows from finance leases	408
Financing cash flows from finance leases	688
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	125,026