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Leases (Notes)

12 Months Ended

Dec. 31, 2019

Leases

In February 2016 the FASB issued ASU 2016-02, Leases (Topic 842), which requires companies to recognize a right-of-use asset and related liability on the balance sheet for the rights and obligations arising from leases with durations greater than twelve months. The standard became effective for interim and annual reporting periods beginning after December 15, 2018. The Company adopted the new standard on January 1, 2019 on a prospective basis using the simplified transition method prescribed by ASU 2018-11, Leases (Topic 842): Targeted Improvements. Offsetting right-of-use assets and lease liabilities recognized by the Company on the January 1, 2019 adoption date totaled approximately $19 million, representing minimum payment obligations associated with drilling rig commitments, surface use agreements, equipment, and other leases with contractual durations in excess of one year. No cumulative-effect adjustment to retained earnings was recognized upon adoption of the new standard.

The Company has elected to account for lease and non-lease components in its contracts as a single lease component for all asset classes. Additionally, the Company has elected not to apply the recognition requirements of ASC Topic 842 to leases with durations of twelve months or less and has elected to use hindsight in determining the lease term for all leases. The Company's leasing activities as a lessor are negligible.

Presented below are disclosures required by the new lease standard. The amounts disclosed herein primarily represent costs associated with properties operated by the Company that are presented on a gross basis and do not reflect the Company's net proportionate share of such amounts. A portion of these costs have been or will be billed to other working interest owners. Once paid, the Company's share of these costs are included in property and equipment, production expenses, or general and administrative expenses, as applicable.

The Company’s lease liabilities recognized on the balance sheet as a lessee totaled $9.1 million as of December 31, 2019 at discounted present value, which is comprised of the asset classes reflected in the table below. All leases recognized on the Company's balance sheet are classified as operating leases.



In thousands	Amount
Drilling rig commitments	$	3,154
Surface use agreements	4,487
Field equipment	1,164
Other	323
Total	$	9,128

Drilling rig commitments reflected above represent minimum payment obligations expected to be incurred on enforceable commitments with durations in excess of one year at the inception of the lease.

Minimum future commitments by year for the Company's operating leases as of December 31, 2019 are presented in the table below. Such commitments are reflected at undiscounted values and are reconciled to the discounted present value recognized on the balance sheet.



In thousands	Amount
2020	$	3,999
2021	750
2022	734
2023	667
2024	411
Thereafter	5,755
Total operating lease liabilities, at undiscounted value	$	12,316
Less: Imputed interest	(3,188		)
Total operating lease liabilities, at discounted present value	$	9,128
Less: Current portion of operating lease liabilities	(3,695		)
Operating lease liabilities, net of current portion	$	5,433

Additional information for the Company's operating leases is presented below. Lease costs are reflected at gross amounts and primarily represent costs incurred for drilling rigs, most of which are short term contracts that are not recognized as right-of-use assets and lease liabilities on the balance sheet. Variable lease costs primarily represent differences between minimum payment obligations and actual operating day-rate charges incurred by the Company for its long term drilling rig contracts.



In thousands, except weighted average data	Year ended December 31, 2019
Lease costs:
Operating lease costs	$	11,130
Variable lease costs	11,930
Short-term lease costs	176,586
Total lease costs	$	199,646

Other information:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,208
Operating cash flows from operating leases included in lease liabilities	804
Weighted average remaining lease term as of December 31, 2019 (in years)	11.5
Weighted average discount rate as of December 31, 2019	4.9		%

Prior to the January 1, 2019 adoption of ASU 2016-02, the Company’s operating lease obligations, as defined and accounted for under legacy U.S. GAAP in effect as of December 31, 2018, primarily represented leases for surface use agreements, office buildings and equipment, communication towers, and field equipment. Lease payments associated with legacy operating leases for the years ended December 31, 2018 and 2017 were $2.0 million and $1.9 million, respectively, a portion of which was capitalized and/or billed to other interest owners. At December 31, 2018, the minimum future rental commitments under legacy operating leases having enforceable lease terms in excess of one year are reflected in the table below. Such commitments are reflected at undiscounted values and were not required to be recognized on the Company's balance sheet under legacy U.S. GAAP in effect as of December 31, 2018.



In thousands	Total amount as of December 31, 2018
2019	$	1,535
2020	1,042
2021	833
2022	805
2023	745
Thereafter	6,795
Total obligations as of December 31, 2018	$	11,755

Lessee, Operating Lease, Liability, Maturity [Table Text Block]



In thousands	Amount
2020	$	3,999
2021	750
2022	734
2023	667
2024	411
Thereafter	5,755
Total operating lease liabilities, at undiscounted value	$	12,316
Less: Imputed interest	(3,188		)
Total operating lease liabilities, at discounted present value	$	9,128
Less: Current portion of operating lease liabilities	(3,695		)
Operating lease liabilities, net of current portion	$	5,433

Lessee, Operating Lease, Disclosure [Table Text Block]



In thousands	Amount
Drilling rig commitments	$	3,154
Surface use agreements	4,487
Field equipment	1,164
Other	323
Total	$	9,128

Lease, Cost [Table Text Block]



In thousands, except weighted average data	Year ended December 31, 2019
Lease costs:
Operating lease costs	$	11,130
Variable lease costs	11,930
Short-term lease costs	176,586
Total lease costs	$	199,646

Other information:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,208
Operating cash flows from operating leases included in lease liabilities	804
Weighted average remaining lease term as of December 31, 2019 (in years)	11.5
Weighted average discount rate as of December 31, 2019	4.9		%

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

At December 31, 2018, the minimum future rental commitments under legacy operating leases having enforceable lease terms in excess of one year are reflected in the table below. Such commitments are reflected at undiscounted values and were not required to be recognized on the Company's balance sheet under legacy U.S. GAAP in effect as of December 31, 2018.



In thousands	Total amount as of December 31, 2018
2019	$	1,535
2020	1,042
2021	833
2022	805
2023	745
Thereafter	6,795
Total obligations as of December 31, 2018	$	11,755