Leases

3 Months Ended

Mar. 31, 2020

Lessee Disclosure [Abstract]

Leases

Leases

Nature of Leases

The Company has entered into various operating leases such as a 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:

		Three Months Ended March 31,
(Thousands of dollars)	Financial Statement Category	2020			2019
Operating lease 1,2	Lease operating expenses	$	71,601		48,671
Operating lease 2	Transportation, gathering and processing	9,926			9,852
Operating lease 2	Selling and general expense	3,469			3,109
Operating lease 2	Other operating expense	414			—
Operating lease 2	Property, plant and equipment	24,556			23,447
Operating lease 2	Asset retirement obligations	—			3,024
Finance lease
Amortization of asset	Depreciation, depletion and amortization	268			210
Interest on lease liabilities	Interest expense, net	96			101
Sublease income	Other income	(306		)	(217	)
Net lease expense		$	110,024		88,197

¹  The three months ended March 31, 2020 and 2019 included variable lease expenses of $6.3 million and $7.2 million, respectively, primarily related to additional volumes processed at a gas processing plant.

²  The three months ended March 31, 2020 included $32.9 million for Lease operating expense, $1.4 million for Transportation, gathering and processing, $1.2 million for Selling and general expense and $15.4 million for Property, plant and equipment, net relating to short-term leases due within 12 months.  The three months ended March 31, 2019 included $12.0 million for Lease operating expense, $1.1 million for Selling and general expense, $20.1 million for Property, plant and equipment, net and $3.0 million for Asset retirement obligations relating to short-term leases.  Expenses primarily relate to drilling rigs and other oil and gas field equipment.

Maturity of Lease Liabilities໿

(Thousands of dollars)	Operating Leases 1			Finance Leases		Total
2020	$	103,106		801		103,907
2021	135,875			1,069		136,944
2022	116,818			1,069		117,887
2023	114,990			1,069		116,059
2024	110,652			1,069		111,721
Remaining	478,780			4,541		483,321
Total future minimum lease payments	1,060,221			9,618		1,069,839
Less imputed interest	(247,935		)	(1,842	)	(249,777	)
Present value of lease liabilities 2	$	812,286		7,776		820,062

¹ Excludes $256.7 million of minimum lease payments for leases entered but not yet commenced. These payments relate to an expansion of an existing gas processing plant and payments are anticipated to commence at the end of 2020 for 20 years.

² Includes both the current and long-term portion of the lease liabilities.

Lease Term and Discount Rate

	March 31, 2020
Weighted average remaining lease term:
Operating leases	9 years
Finance leases	9 years
Weighted average discount rate:
Operating leases	5.3	%
Finance leases	5.1	%

Other Information໿

	Three Months Ended March 31,
(Thousands of dollars)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	53,039	44,730
Operating cash flows from finance leases	102		102
Financing cash flows from finance leases	168		160
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases ¹	$	274,237	311

¹ The three months ended March 31, 2020 includes $268.8 million related to a 5-year lease for the Cascade/Chinook FPSO in the U.S. Gulf of Mexico.

Leases

Leases

Nature of Leases

The Company has entered into various operating leases such as a 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:

		Three Months Ended March 31,
(Thousands of dollars)	Financial Statement Category	2020			2019
Operating lease 1,2	Lease operating expenses	$	71,601		48,671
Operating lease 2	Transportation, gathering and processing	9,926			9,852
Operating lease 2	Selling and general expense	3,469			3,109
Operating lease 2	Other operating expense	414			—
Operating lease 2	Property, plant and equipment	24,556			23,447
Operating lease 2	Asset retirement obligations	—			3,024
Finance lease
Amortization of asset	Depreciation, depletion and amortization	268			210
Interest on lease liabilities	Interest expense, net	96			101
Sublease income	Other income	(306		)	(217	)
Net lease expense		$	110,024		88,197

¹  The three months ended March 31, 2020 and 2019 included variable lease expenses of $6.3 million and $7.2 million, respectively, primarily related to additional volumes processed at a gas processing plant.

²  The three months ended March 31, 2020 included $32.9 million for Lease operating expense, $1.4 million for Transportation, gathering and processing, $1.2 million for Selling and general expense and $15.4 million for Property, plant and equipment, net relating to short-term leases due within 12 months.  The three months ended March 31, 2019 included $12.0 million for Lease operating expense, $1.1 million for Selling and general expense, $20.1 million for Property, plant and equipment, net and $3.0 million for Asset retirement obligations relating to short-term leases.  Expenses primarily relate to drilling rigs and other oil and gas field equipment.

Maturity of Lease Liabilities໿

(Thousands of dollars)	Operating Leases 1			Finance Leases		Total
2020	$	103,106		801		103,907
2021	135,875			1,069		136,944
2022	116,818			1,069		117,887
2023	114,990			1,069		116,059
2024	110,652			1,069		111,721
Remaining	478,780			4,541		483,321
Total future minimum lease payments	1,060,221			9,618		1,069,839
Less imputed interest	(247,935		)	(1,842	)	(249,777	)
Present value of lease liabilities 2	$	812,286		7,776		820,062

¹ Excludes $256.7 million of minimum lease payments for leases entered but not yet commenced. These payments relate to an expansion of an existing gas processing plant and payments are anticipated to commence at the end of 2020 for 20 years.

² Includes both the current and long-term portion of the lease liabilities.

Lease Term and Discount Rate

	March 31, 2020
Weighted average remaining lease term:
Operating leases	9 years
Finance leases	9 years
Weighted average discount rate:
Operating leases	5.3	%
Finance leases	5.1	%

Other Information໿

	Three Months Ended March 31,
(Thousands of dollars)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	53,039	44,730
Operating cash flows from finance leases	102		102
Financing cash flows from finance leases	168		160
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases ¹	$	274,237	311

¹ The three months ended March 31, 2020 includes $268.8 million related to a 5-year lease for the Cascade/Chinook FPSO in the U.S. Gulf of Mexico.