Leases

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

Note V – Leases

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:

		Year Ended December 31,
(Thousands of dollars)	Financial Statement Category	2020		2019
Operating lease 1,2	Lease operating expenses	$	208,104	$	208,674
Operating lease 2	Transportation, gathering and processing	39,121		41,113
Operating lease 2	Selling and general expense	10,638		12,325
Operating lease 2	Other operating expense	9,524		2,588
Operating lease 2	Property, plant and equipment	40,227		133,837
Operating lease 2	Asset retirement obligations	—		3,024
Operating lease	Impairment of assets	6,565		—
Operating lease 2	Exploration Expenses	994		—
Finance lease
Amortization of asset	Depreciation, depletion and amortization	—		420
Interest on lease liabilities	Interest expense, net	372		202
Sublease income	Other income	(1,118)		(1,419)
Net lease expense		$	314,427	$	400,764

1  For the year ended December 31, 2020 and 2019, includes variable lease expenses of $21.8 million and $28.7 million, primarily related to additional volumes processed at a natural gas processing plant.

2  For the year ended December 31, 2020, includes $73.9 million in Lease operating expense, $22.9 million for Transportation, gathering and processing, $3.3 million in Selling and general expense, $2.5 million in Other operating expense, $25 million in Property, plant and equipment, net relating to short-term leases due within 12 months..  For the year ended December 31, 2019, includes $56.3 million in Lease operating expense, $4.3 million in Selling general expense, $2.6 million in Other operating expense, $102.7 million in Property, plant and equipment, net and $3 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
2021	$	149,099	1,068	150,167
2022	140,029		1,068	141,097
2023	136,909		1,069	137,978
2024	131,894		1,069	132,963
2025	81,647		1,069	82,716
Remaining	708,931		3,473	712,404
Total future minimum lease payments	1,348,509		8,816	1,357,325
Less imputed interest	(399,663)		(1,566)	(401,229)
Present value of lease liabilities 2	$	948,846	7,250	956,096

1 Excludes $90 million of minimum lease payments for leases entered but not yet commenced. These payments relate to an offshore drilling rig and payments are planned to commence in the second quarter of 2021 for 16 months.

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, 2020.

Lease Term and Discount Rate

	December 31, 2020
Weighted average remaining lease term:
Operating leases	8 years
Finance leases	11 years
Weighted average discount rate:
Operating leases	5.7	%
Finance leases	5.1	%

Other Information

	Year Ended December 31,
(Thousands of dollars)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	160,385	$	193,968
Operating cash flows from finance leases	372		408
Financing cash flows from finance leases	695		688
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases ¹	$	453,719	$	125,026

1 For the year ended December 31, 2020, includes $268.8 million related to a 5-year lease for the Cascade/Chinook FPSO in the U.S. Gulf of Mexico and $168.4 million related to a 20-year lease for a gas plant expansion in Canada.

Leases

Note V – Leases

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:

		Year Ended December 31,
(Thousands of dollars)	Financial Statement Category	2020		2019
Operating lease 1,2	Lease operating expenses	$	208,104	$	208,674
Operating lease 2	Transportation, gathering and processing	39,121		41,113
Operating lease 2	Selling and general expense	10,638		12,325
Operating lease 2	Other operating expense	9,524		2,588
Operating lease 2	Property, plant and equipment	40,227		133,837
Operating lease 2	Asset retirement obligations	—		3,024
Operating lease	Impairment of assets	6,565		—
Operating lease 2	Exploration Expenses	994		—
Finance lease
Amortization of asset	Depreciation, depletion and amortization	—		420
Interest on lease liabilities	Interest expense, net	372		202
Sublease income	Other income	(1,118)		(1,419)
Net lease expense		$	314,427	$	400,764

1  For the year ended December 31, 2020 and 2019, includes variable lease expenses of $21.8 million and $28.7 million, primarily related to additional volumes processed at a natural gas processing plant.

2  For the year ended December 31, 2020, includes $73.9 million in Lease operating expense, $22.9 million for Transportation, gathering and processing, $3.3 million in Selling and general expense, $2.5 million in Other operating expense, $25 million in Property, plant and equipment, net relating to short-term leases due within 12 months..  For the year ended December 31, 2019, includes $56.3 million in Lease operating expense, $4.3 million in Selling general expense, $2.6 million in Other operating expense, $102.7 million in Property, plant and equipment, net and $3 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
2021	$	149,099	1,068	150,167
2022	140,029		1,068	141,097
2023	136,909		1,069	137,978
2024	131,894		1,069	132,963
2025	81,647		1,069	82,716
Remaining	708,931		3,473	712,404
Total future minimum lease payments	1,348,509		8,816	1,357,325
Less imputed interest	(399,663)		(1,566)	(401,229)
Present value of lease liabilities 2	$	948,846	7,250	956,096

1 Excludes $90 million of minimum lease payments for leases entered but not yet commenced. These payments relate to an offshore drilling rig and payments are planned to commence in the second quarter of 2021 for 16 months.

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, 2020.

Lease Term and Discount Rate

	December 31, 2020
Weighted average remaining lease term:
Operating leases	8 years
Finance leases	11 years
Weighted average discount rate:
Operating leases	5.7	%
Finance leases	5.1	%

Other Information

	Year Ended December 31,
(Thousands of dollars)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	160,385	$	193,968
Operating cash flows from finance leases	372		408
Financing cash flows from finance leases	695		688
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases ¹	$	453,719	$	125,026

1 For the year ended December 31, 2020, includes $268.8 million related to a 5-year lease for the Cascade/Chinook FPSO in the U.S. Gulf of Mexico and $168.4 million related to a 20-year lease for a gas plant expansion in Canada.