Leases

12 Months Ended

Dec. 31, 2022

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 natural 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 year. 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	2022		2021
Operating lease 1,2	Lease operating expenses	$	217,038	$	198,189
Operating lease 2	Transportation, gathering and processing	39,669		39,396
Operating lease 2	Selling and general expense	8,003		9,019
Operating lease 2	Other operating expense	510		7,480
Operating lease 2	Exploration expenses	10,019		902

Operating lease 2	Property, plant and equipment	196,829		81,924
Operating lease 2	Asset retirement obligations	11,190		11,103
Finance lease
Amortization of asset	Depreciation, depletion and amortization	5,481		1,173
Interest on lease liabilities	Interest expense, net	254		228
Sublease income	Other income	(1,296)		(2,482)
Net lease expense		$	487,697	$	346,932

1 Variable lease expenses. For the years ended December 31, 2022 and 2021, includes variable lease expenses of $32.2 million and $25.8 million, respectively, 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, 2022, includes $62.8 million in LOE, $31.5 million for “Transportation, gathering and processing”, $8.8 million for “Exploration expenses, including undeveloped lease amortization”, $0.7 million in “Selling and general expenses”, $0.1 million in “Other operating expense”, $125.4 million in “Property, plant and equipment, net” and $11.2 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, 2021, includes $56.9 million in LOE, $30.2 million in “Transportation, gathering and processing”, $2.1 million in “Selling and general expenses", $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.

Maturity of Lease Liabilities


(Thousands of dollars)	Operating Leases		Finance Leases		Total
2023	$	270,868	$	1,068	$	271,936
2024	241,455		1,069		242,524
2025	79,974		1,068		81,042
2026	61,534		1,069		62,603
2027	59,964		1,069		61,033
Remaining	548,118		1,336		549,454
Total future minimum lease payments	1,261,913		6,679		1,268,592
Less imputed interest	(298,846)		(1,835)		(300,681)
Present value of lease liabilities 1	$	963,067	$	4,844	$	967,911

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

Lease Term and Discount Rate


	December 31, 2022		December 31, 2021
Weighted average remaining lease term:
Operating leases	9 years		12 years
Finance leases	6 years		7 years
Weighted average discount rate:
Operating leases	5.9	%	5.7	%
Finance leases	4.7	%	4.7	%

Other Information


	Year Ended December 31,
(Thousands of dollars)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	212,061	$	194,412
Operating cash flows from finance leases	254		228
Financing cash flows from finance leases	636		803
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases ¹	$	262,669	$	95,500

1 For the year ended December 31, 2022, ROU assets obtained in exchange for lease liabilities primarily includes $254.0 million related to an extension of the lease of an existing offshore drilling rig by 24 months. December 31, 2021, includes $90.3 million related to an offshore drilling rig with a lease term of 16 months.

Leases