Leases

12 Months Ended

Dec. 31, 2019

LEASES

We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations, and machinery and equipment. We have finance leases for certain facility storage tanks and equipment rentals. These finance leases are not material to our financial statements. Our leases have remaining lease terms ranging from 1 to 16 years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. The office space, warehouse space, operating location leases, and machinery and equipment leases generally require us to pay all maintenance and insurance costs. During the fourth quarter of 2019, our Compression Division entered into a lease agreement commitment for 14 compressor packages that are currently being fabricated. The leases are for a term of seven years and will commence upon the completion of the equipment fabrication, which is expected to occur during the second quarter of 2020. We have no other leases that have not yet commenced that create significant rights and obligations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Variable rent expense was not material.

Our corporate headquarters facility located in The Woodlands, Texas, was sold on December 31, 2012, pursuant to a sale and leaseback transaction. As a condition to the consummation of the purchase and sale of the facility, the parties entered into a lease agreement for the facility having an initial lease term of 15 years, which is classified as an operating lease. Under the terms of the lease agreement, we have the ability to extend the lease for five successive five year periods at base rental rates to be determined at the time of each extension. In November 2019, our Compression Division entered into a sale and leaseback transaction with a third-party lessor whereby we received $9.8 million of proceeds from the sale of compression equipment in service and entered into an associated lease of the equipment having an initial lease term of seven years.

Components of lease expense, included in either cost of revenues or general and administrative expense based on the use of the underlying asset, are as follows (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less):



	Twelve Months Ended December 31, 2019
	(In Thousands)
Operating lease expense	$	20,507
Short-term lease expense	38,924
Total lease expense	$	59,431

Rental expense for all operating leases was $59.4 million, $40.9 million, and $27.1 million for the years ended December 31, 2019, 2018, and 2017, respectively. At December 31, 2019, future minimum rental receipts under a non-cancelable sublease for office space in one of our locations totaled $6.3 million. For the year ended December 31, 2019, we recognized sublease income of $1.0 million.

Supplemental cash flow information:



	Twelve Months Ended December 31, 2019
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	20,326

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	20,542

Supplemental balance sheet information:



	December 31, 2019
	(In Thousands)
Operating leases:
Operating lease right-of-use assets	$	68,131

Accrued liabilities and other	$	15,850
Operating lease liabilities	53,919
Total operating lease liabilities	$	69,769

Additional operating lease information:



	December 31, 2019
Weighted average remaining lease term:
Operating leases	6.4 years

Weighted average discount rate:
Operating leases	9.46	%

Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year consist of the following at December 31, 2019:



	Operating Leases
	(In Thousands)
2020	$	21,096
2021	16,099
2022	12,588
2023	9,695
2024	8,323
Thereafter	26,020
Total lease payments	93,821
Less imputed interest	(24,052		)
Total lease liabilities	$	69,769