Leases (Notes)

6 Months Ended

Jun. 30, 2019

Leases

In the ordinary course of business, EOG enters into contracts for drilling, fracturing, compression, real estate and other services which contain equipment and other assets that meet the definition of a lease under ASU 2016-02. The lease term for these contracts, which includes any renewals at EOG's option that are reasonably certain to be exercised, ranges from one month to 30 years. ROU assets and related liabilities are recognized on commencement date on the Condensed Consolidated Balance Sheets based on future lease payments, discounted based on the rate implicit in the contract, if readily determinable, or EOG's incremental borrowing rate commensurate with the lease term of the contract. Contracts with lease terms less than 12 months are not recorded on the Condensed Consolidated Balance Sheets, but instead are disclosed as short-term lease cost.

EOG has elected not to separate non-lease components from all leases, excluding those for fracturing services, real estate and salt water disposal, as lease payments for these contracts contain significant non-lease components, such as labor and operating costs.

Lease costs are classified by the function of the ROU asset. The lease costs related to exploration and development activities are initially included in the Oil and Gas Properties line on the Condensed Consolidated Balance Sheets and subsequently accounted for in accordance with the Extractive Industries - Oil and Gas Topic of the Accounting Standards Codification. Variable lease cost represents costs incurred above the contractual minimum payments for operating and finance leases. The components of lease cost for the three month and six month periods ended June 30, 2019, were as follows (in millions):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating Lease Cost	$	134	$	253
Finance Lease Cost:
Amortization of Lease Assets	4		7
Interest on Lease Liabilities	—		1
Variable Lease Cost	97		128
Short-Term Lease Cost	157		228
Total Lease Cost	$	392	$	617

The following table sets forth the amounts and classification of EOG's outstanding ROU assets and related lease liabilities and supplemental information at June 30, 2019 (in millions, except lease terms and discount rates):



Description	Location on Balance Sheet	Amount
Assets
Operating Leases	Other Assets	$	895
Finance Leases	Property, Plant and Equipment, Net ⁽¹⁾	59
Total		$	954

Liabilities
Current
Operating Leases	Current Portion of Operating Lease Liabilities	$	397
Finance Leases	Current Portion of Long-Term Debt	15
Long-Term
Operating Leases	Other Liabilities	527
Finance Leases	Long-Term Debt	49
Total		$	988

(1)

Finance lease assets are recorded net of accumulated amortization of $53 million at June 30, 2019.



	Six Months Ended June 30, 2019
Weighted Average Remaining Lease Term (in years):
Operating Leases	3.3
Finance Leases	5.3

Weighted Average Discount Rate:
Operating Leases	3.5	%
Finance Leases	3.0	%

Cash paid for leases was as follows for the six months ended June 30, 2019 (in millions):



	Six Months Ended June 30, 2019
Repayment of Operating Lease Liabilities Associated with Operating Activities	$	104
Repayment of Operating Lease Liabilities Associated with Investing Activities	146
Repayment of Finance Lease Liabilities	8

Upon adoption of ASU 2016-02 effective January 1, 2019, EOG recognized operating lease ROU assets of $566 million. Non-cash leasing activities for the six months ended June 30, 2019, included the addition of $606 million of operating leases.

At June 30, 2019, the future minimum lease payments under non-cancellable leases were as follows (in millions):



	Operating Leases		Finance Leases
July 1, 2019 to December 31, 2019	$	230	$	8
2020	362		15
2021	177		15
2022	104		12
2023	45		8
2024 and Beyond	63		14
Total Lease Payments	981		72
Less: Discount to Present Value	57		8
Total Lease Liabilities	924		64
Less: Current Portion of Lease Liabilities	397		15
Long-Term Lease Liabilities	$	527	$	49

At June 30, 2019, EOG had additional leases of $823 million, of which $97 million, $521 million and $205 million were expected to commence in the remainder of 2019, 2020 and 2021, respectively, with lease terms of 1 month to 10 years.

At December 31, 2018 and prior to the adoption of ASU 2016-02 and other related ASUs, the future minimum commitments under non-cancellable leases, including non-lease components and excluding contracts with lease terms less than 12 months, were as follows (in millions):



	Operating Leases		Finance Leases
2019	$	380	$	15
2020	213		15
2021	86		15
2022	39		12
2023	30		8
2024 and Beyond	62		14
Total Lease Payments	$	810	$	79