Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Note 14 – Leases

On January 1, 2019, we adopted ASC 842. Results for reporting periods beginning January 1, 2019 are presented in accordance with ASC 842, while prior period amounts are reported in accordance with FASB ASC Topic 840 – Leases. On January 1, 2019, we recognized approximately $7.7 million in right-of-use assets and approximately $7.7 million in lease liabilities, representing the present value of minimum payment obligations associated with compressor, vehicle, and office space operating leases with non-cancellable lease terms in excess of one year. We do not have any finance leases, nor are we the lessor in any leasing arrangements. We have elected certain practical expedients available under ASC 842 including those that permit us to (i) account for lease and non-lease components in our contracts as a single lease component for all asset classes; (ii) not evaluate existing and expired land easements; (iii) not apply the recognition requirements of ASC 842 to leases with a lease term of twelve months or less; and (iv) retain our existing lease assessment and classification. As such, there was no cumulative-effect adjustment to retained earnings required at January 1, 2019. Additionally, the Company has elected the short-term lease recognition exemption for all classes of underlying assets and therefore, leases with a term of one year or less will not be recognized on the unaudited consolidated balance sheet. 

The lease amounts disclosed herein are presented on a gross basis. A portion of these costs may have been or will be billed to other working interest owners, and our net share of these costs, once paid, are included in lease operating expenses, pipeline operating expenses or general and administrative expenses, as applicable.

During the three months ended March 31, 2019, we did not acquire any right-of-use assets or incur any lease liabilities. Our right-of-use assets and lease liabilities are recognized at their discounted present value on the balance sheet at $7.3 million as of March 31, 2019. All leases recognized on our unaudited consolidated balance sheet are classified as operating leases, which include leases related to the asset classes reflected in the table below:

(in thousands)	Right-of-Use Assets		Lease Liability
Compressors	$	4,178	$	4,178
Corporate leases		2,433		2,438
Vehicles		645		645
Total	$	7,256	$	7,261

We recognize lease expense on a straight-line basis excluding short-term and variable lease payments which are recognized as incurred. Short-term lease cost represents payments for leases with a lease term of one year or less, excluding leases with a term of one month or less. Short-term leases include certain compressors and vehicles that have a non-cancellable lease term of less than one year.

The following table summarizes the components of our gross operating lease costs incurred during the three months ended March 31, 2019:

(in thousands)	Three Months Ended March 31, 2019
Operating lease cost	$	531
Short-term lease cost		161
Total lease cost	$	692

We do not have any leases with an implicit interest rate that can be readily determined. As a result, we calculate collateralized incremental borrowing rates to use as discount rates. We utilize the benchmark rates defined in our credit facilities, and adjust for facility utilization and term considerations, to establish collateralized incremental borrowing rates. Refer to Note 7 for additional information on our credit facilities.

Our weighted-average lease term and discount rate used are as follows:

(in thousands)	Three Months Ended March 31, 2019
Weighted-average lease term (years)		4.3
Weighted-average discount rate		6.34	%

The following table summarizes supplemental cash flow information related to leases:

Cash paid for amounts included in measurement of lease liabilities (in thousands)	Three Months Ended March 31, 2019
Operating cash flows for operating leases	$	526

Minimum future commitments by year for our long-term operating leases as of March 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 as follows:

(in thousands)	Amount
Remainder of 2019	$	1,535
2020		1,946
2021		1,889
2022		1,718
2023		1,222
Thereafter		11
Total lease payments	$	8,321
Less: imputed interest		(1,060	)
Total lease liability	$	7,261