On March 31, 2021, we signed an amendment to our long-term operating lease agreement for BOP and related well control equipment (or Well Control Equipment) on our four drillships, which became effective on the Effective Date. The general terms of the lease were unchanged, including the stipulated cost per day and available renewal options, however, a ceiling was added to a previously unpriced purchase option at the end of the original 10-year lease term.

This amendment is considered a lease modification effective on April 23, 2021, whereby we were required to reassess lease classification and remeasure the corresponding ROU asset and lease liability. Due to the purchase option ceiling provision included in the amendment, we now believe that we are reasonably certain to exercise the purchase option at the end of the original lease term. Therefore, we have changed the lease classification from an operating lease to a finance lease and remeasured the right-of-use asset and lease liability to include the estimated purchase option price of the Well Control Equipment.

At the date of the modification, we had an aggregate prepaid rent balance attributable to the original sale and lease back transaction for the Well Control Equipment of $8.4 million, which was previously recorded within the operating lease right-of-use asset within “Other assets” in our Consolidated Balance Sheets. This balance was written off in connection with fresh start accounting at the Effective Date.

We have used our incremental borrowing rate to discount the future lease payments for these finance leases as the rate implicit in the leases is not readily determinable. The incremental borrowing rate was determined based on the secured borrowing rates negotiated in relation to our reorganization and the valuations received for our new debt.

Components of expense attributable to these finance leases are as follows (in thousands):

	Successor
	Period from April 24
	through June 30,
	2021
Finance lease cost:
Amortization of ROU assets	$	3,318
Interest on lease liabilities		2,152
Total	$	5,470

Supplemental information related to the finance leases is as follows (in thousands, except weighted-average data):

	Successor
	Period from April 24
	through June 30,
	2021
Finance Leases:
Operating cash flows used	$	2,152
Financing cash flows used		2,240
ROU assets obtained in exchange for lease liabilities		174,571
Weighted-average remaining lease term	4.94 years
Weighted-average discount rate		6.72	%

Maturities of the finance lease liabilities as of June 30, 2021 are as follows (in thousands):

2021 (excluding six months ended June 30, 2021)	$	13,248
2022		26,280
2023		26,280
2024		26,352
2025		26,280
2026		96,430
Thereafter		-
Total lease payments		214,870
Less: interest		(43,043	)
Total lease liability	$	171,827

Additionally, during the period from April 24 through June 30, 2021, we commenced various new operating leases associated with an integrated services agreement with one of our customers under which we lease requested equipment for the duration of the drilling contract. As a result, we recorded approximately $13 million of ROU assets and offsetting lease liabilities during the period for the leased equipment which have an estimated lease term of approximately 17 months.

Amounts recognized in our unaudited Condensed Consolidated Balance Sheets for both our operating and finance leases are as follows:

	Successor			Predecessor
	June 30, 2021			December 31, 2020
Operating Leases:
Other assets	$	44,727		$	154,796
Accrued liabilities		(16,267	)		(5,072	)
Other liabilities		(28,545	)		(23,476	)
Liabilities subject to compromise ⁽¹⁾		—			(112,646	)
Finance Leases:
Drilling and other property and equipment, net of accumulated depreciation		171,253			—
Current finance lease liabilities		(15,338	)		—
Noncurrent finance lease liabilities		(156,489	)		—