Leases

6 Months Ended

Jun. 30, 2019

8. Leases

We determine if an arrangement is a lease at inception. We determine lease classification and recognize ROU assets and liabilities on the lease commencement date based on the present value of lease payments over the lease term. As the discount rate implicit in the lease is rarely readily determinable, we estimate our incremental borrowing rate using information available at commencement date in determining the present value of the lease payments. The lease term includes options to extend when we are reasonably certain to exercise the option. Short-term leases, those with an initial term of 12 months or less, are not recorded on the balance sheet. Variable costs such as our proportionate share of actual costs for utilities, common area maintenance, property taxes and insurance are not included in the lease liability and are recognized in the period in which they are incurred. Operating lease expense for lease payments is recognized on a straight-line basis over the term of the lease. As of June 30, 2019, all of our leases were operating.

The facility leases discussed below, of which we are the lessee, contain lease and nonlease components for which we have elected the practical expedient to account for as a single lease component, as the nonlease components are not significant to the total consideration in the contract and separating the nonlease component would have no effect on lease classification. As it relates to our contract operations services agreements in which we are the lessor, the services nonlease component is predominant over the compression unit lease component and therefore ongoing recognition of these agreements will continue to follow the ASC 606 Revenue guidance.

We have operating leases and subleases for office space, temporary housing, storage and shops. Our leases have remaining lease terms of one to 11 years and most include options to extend the lease term, at our discretion, for an additional three to five years. We are not, however, reasonably certain that we will exercise any of the options to extend and as such, they have not been included in the remaining lease terms.

Balance sheet information related to our operating leases was as follows (in thousands):



	Classification	June 30, 2019
ROU assets	Operating lease ROU assets	$	18,022

Lease liabilities
Current	Accrued liabilities	$	2,827
Noncurrent	Operating lease liabilities	16,647
Total lease liabilities		$	19,474

The components of lease cost were as follows (in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	970	$	1,944
Short-term lease cost	65		238
Variable lease cost	560		942
Total lease cost	$	1,595	$	3,124

Cash flow and noncash information related to our operating leases were as follows (in thousands):



	Six Months Ended June 30, 2019
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities	$	2,802
Operating lease ROU assets obtained in exchange for new lease liabilities	862

Other supplemental information related to our operating leases was as follows:



	June 30, 2019
Weighted average remaining lease term (in years)	8.5
Weighted average discount rate	5.3	%

Remaining maturities of lease liabilities governed under ASC 842 Leases as of June 30, 2019 were as follows (in thousands):



2019	$	1,569
2020	3,763
2021	3,538
2022	2,439
2023	2,131
2024	1,740
Thereafter	9,310
Total lease payments	24,490
Less: Interest	(5,016		)
Total lease liabilities under ASC 842 Leases	$	19,474

Maturities of lease liabilities governed under ASC 840 Leases as of December 31, 2018 were as follows (in thousands):



2019	$	4,317
2020	3,980
2021	3,562
2022	2,433
2023	2,170
Thereafter	11,935
Total lease liabilities under ASC 840 Leases	$	28,397