Leases

12 Months Ended

Dec. 31, 2021

Note 12 - Leases

As of December 31, 2021, and 2020, the Company had operating leases for asset classes that include office space, office equipment, drilling rigs, midstream agreements, vehicles, and equipment rentals used in field operations. For operating leases recorded on the accompanying balance sheets, remaining lease terms range from less than one year to approximately 11 years. Certain leases contain optional extension periods that allow for terms to be extended for up to an additional 10 years, however in order to maintain financial and operational flexibility, there are no available options to extend that the Company is reasonably certain it will exercise. An early termination option exists for certain leases, some of which allow the Company to terminate a lease within one year, however, there are no leases in which material early termination options are reasonably certain to be exercised by the Company. As of December 31, 2021, and 2020, the Company did not have any agreements in place that were classified as finance leases under Topic 842. As of December 31, 2021, and through the filing of this report, the Company has no material lease arrangements which are scheduled to commence in the future. Please refer to Note 1 – Summary of Significant Accounting Policies for additional information on the Company’s policies for lease determination and classification.

The following table reflects the components of the Company’s total costs, whether capitalized or expensed, related to operating leases, including short-term leases, and variable lease payments made for leases with initial lease terms greater than 12 months, for the years ended December 31, 2021, and 2020. This total does not reflect amounts that may be reimbursed by other third parties in the normal course of business, such as non-operating working interest owners.


	For the Years Ended December 31,
	2021		2020
	(in thousands)
Operating lease cost	$	12,825	$	17,980
Short-term lease cost (1)	145,052		143,892
Variable lease cost (2)	48,931		70,858
Total lease cost	$	206,808	$	232,730

____________________________________________

(1) Costs associated with short-term lease agreements relate primarily to operational activities where underlying lease terms are less than one year. This amount includes drilling and completion activities and field equipment rentals, most of which are contracted for 12 months or less. It is expected that this amount will fluctuate primarily with the number of drilling rigs and completion crews the Company is operating under short-term agreements.

(2) Variable lease payments include additional payments made that were not included in the initial measurement of the ROU asset and corresponding liability for lease agreements with terms longer than 12 months. Variable lease payments relate to the actual volumes transported under certain midstream agreements, actual usage associated with drilling rigs, completion crews, and vehicles, and variable utility costs associated with the Company’s leased office space. Fluctuations in variable lease payments are driven by actual volumes delivered and the number of drilling rigs and completion crews operating under long-term agreements.

Cash paid for amounts included in the measurement of lease liabilities for the years ended December 31, 2021, and 2020, were as follows:


	For the Years Ended December 31,
	2021		2020
	(in thousands)
Operating cash flows from operating leases	$	11,286	$	12,046
Investing cash flows from operating leases	$	2,316	$	7,313

Maturities for the Company’s operating lease liabilities included on the accompanying balance sheets as of December 31, 2021, were as follows:


	As of December 31, 2021
	(in thousands)
2022	$	7,123
2023	4,601
2024	3,330
2025	3,308
2026	2,381
Thereafter	10,965
Total Lease payments	$	31,708
Less: Imputed interest (1)	(5,752)
Total	$	25,956

____________________________________________

(1) The weighted-average discount rate used to determine the operating lease liability as of December 31, 2021, was 5.4 percent.

The following table presents supplemental accompanying balance sheet information for operating leases as of December 31, 2021, and 2020:


	As of December 31,
	2021		2020
	(in thousands, except discount rate and lease term)
Balance sheet classifications of operating leases:
Other noncurrent assets	$	19,026	$	21,701
Other current liabilities	$	6,516	$	11,659
Other noncurrent liabilities	$	19,440	$	11,898

ROU assets obtained in exchange for operating lease liabilities	$	13,018	$	745
Weighted-average discount rate	5.4%		7.0%
Weighted-average remaining lease term (in years)	7		3