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Leases

12 Months Ended

Dec. 31, 2021

Note U – 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 19 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	2021		2020
Operating lease 1,2	Lease operating expenses	$	198,189	$	208,104
Operating lease 2	Transportation, gathering and processing	39,396		39,121
Operating lease 2	Selling and general expense	9,019		10,638
Operating lease 2	Other operating expense	7,480		9,524
Operating lease 2	Exploration Expenses	902		994
Operating lease	Impairment of assets	—		6,565
Operating lease 2	Property, plant and equipment	81,924		40,227
Operating lease 2	Asset retirement obligations	11,103		—
Finance lease
Amortization of asset	Depreciation, depletion and amortization	1,173		—
Interest on lease liabilities	Interest expense, net	228		372
Sublease income	Other income	(2,482)		(1,118)
Net lease expense		$	346,932	$	314,427

1 Variable lease expenses. For the year ended December 31, 2021 and 2020, includes variable lease expenses of $25.8 million and $21.8 million, primarily related to additional volumes processed at a natural gas processing plant.

2 Short-term leases due within 12 months. For the year ended December 31, 2021, includes $56.9 million in Lease operating expense, $30.2 million for Transportation, gathering and processing, $2.1 million in Selling and general expense, $0.2 million in Other operating expense, $28.9 million in Property, plant and equipment, net and $11.1 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.

For the year ended December 31, 2020, includes $73.9 million in Lease operating expense, $22.9 million in Transportation, gathering, and processing, $3.3 million in Selling general expense, $2.5 million in Other operating expense, and $25.0 million in Property, plant and equipment, net 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		Finance Leases	Total
2022	$	184,854	1,068	185,922
2023	137,767		1,069	138,836
2024	132,568		1,069	133,637
2025	82,063		1,069	83,132
2026	64,660		1,069	65,729
Remaining	648,805		2,404	651,209
Total future minimum lease payments	1,250,717		7,748	1,258,465
Less imputed interest	(350,128)		(2,259)	(352,387)
Present value of lease liabilities 1	$	900,589	5,489	906,078

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

Lease Term and Discount Rate


	December 31, 2021		December 31, 2020
Weighted average remaining lease term:
Operating leases	12 years		12 years
Finance leases	7 years		8 years
Weighted average discount rate:
Operating leases	5.7	%	5.8	%
Finance leases	4.7	%	4.7	%

Other Information


	Year Ended December 31,
(Thousands of dollars)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	194,412	$	160,385
Operating cash flows from finance leases	228		372
Financing cash flows from finance leases	803		695
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases ¹	$	95,500	$	453,719

1 For the year ended December 31, 2021, includes $90.3 million related to an offshore drilling rig with a lease term of 16 months. 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