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Leases | 12 Months Ended
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Dec. 31, 2021
Leases [Abstract] |
Leases | LeasesAdoption of ASC Topic 842, Leases On January 1, 2021, we adopted ASC Topic 842 using the modified retrospective method. We elected the package of practical expedients, including the hindsight and land easement expedients, upon transition which will retain the lease classification for leases and any unamortized initial direct costs that existed prior to the adoption of this standard. In accordance with the adoption of ASC Topic 842, we now record a net operating lease right-of-use ("ROU") asset and operating lease liability on the consolidated balance sheets for all operating leases with a lease term in excess of 12 months. Prior to the adoption of ASC Topic 842, these same leases were treated as operating leases under ASC Topic 840 and therefore were not recorded on the consolidated balance sheets as of December 31, 2020. There was no impact to retained earnings and no significant impact on the combined and consolidated statements of operations or the combined and consolidated statements of cash flows as a result of adopting ASC Topic 842. Lease Recognition We enter into contractual lease arrangements to rent buildings, compressors, drilling rigs, office and rental equipment and vehicles from third-party lessors. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make future lease payments arising from the lease. Operating lease ROU assets and liabilities are recorded at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. We use our incremental borrowing rate based on the information available at commencement date of the contract in determining the present value of future lease payments. The incremental borrowing rate is calculated using our collateralized incremental borrowing rate based on our debt structure. The operating lease ROU asset also includes any lease incentives received in the recognition of the present value of future lease payments. Certain of our leases may also include escalation clauses or options to extend or terminate the lease. These options are included in the present value recorded for the leases when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. If an arrangement is determined to be a lease, we record the resulting ROU asset on the consolidated balance sheets with offsetting liabilities at the commencement date. We recognize a lease in the financial statements when the arrangement either explicitly or implicitly involves property, plant or equipment ("PP&E"), the contract terms are dependent on the use of the PP&E, and we have the ability or right to control the PP&E or to direct others to control the PP&E and receive the majority of the economic benefits of the assets. The following tables show the presentation of the right-of-use assets and lease liabilities within our combined and consolidated financial statements:
| As of December 31, 2021
| (in thousands)
Field and other property and equipment, at cost |
Financing right-of-use asset | $ | 5,249 |
Other assets |
Operating right-of-use asset | 2,299 |
Other current liabilities |
Short-term operating lease liability | (1,292) |
Other liabilities |
Long-term operating lease liability | (1,007) |
| Year Ended December 31, 2021
| (in thousands)
Lease cost included in combined and consolidated statement of operations |
Operating lease cost | $ | 939 |
Financing lease cost - amortization of ROU assets | 20 |
Financing lease cost - interest on lease liabilities | 131
Administrative lease cost (1) | 100
Short-term lease cost (2) | 876
Total lease cost | $ | 2,066 |
(1) Costs related primarily to office equipment and IT solutions with lease terms of more than one month and less than one year. (2) Costs related primarily to generators, compressors and vehicle agreements with lease terms of more than one month and less than one year. Lease term and discount rate related to our leases are as follows:
| As of December 31, 2021
| Operating |  | Financing
Weighted-average remaining lease term (years) | 2.3 |  | 3.1
Weighted-average discount rate | 4.50% |  | 4.50%
As of December 31, 2021, the maturity analysis for our lease liabilities under the scope of ASC 842 is as follows:
| As of December 31, 2021
| Operating |  | Financing
Year Ended December 31, | (in thousands)
2022 | $ | 1,292 |  |  | $ | 1,606 |
2023 | 666 |  |  | 1,887 |
2024 | 412 |  |  | 1,370 |
2025 | 18 |  |  | 633 |
2026 | 18 |  |  | 16 |
After 2026 | 24 |  |  | — |
Less: interest | (131) |  |  | (394) |
Present value of lease liabilities | $ | 2,299 |  |  | $ | 5,118 |
Leases | LeasesAdoption of ASC Topic 842, Leases On January 1, 2021, we adopted ASC Topic 842 using the modified retrospective method. We elected the package of practical expedients, including the hindsight and land easement expedients, upon transition which will retain the lease classification for leases and any unamortized initial direct costs that existed prior to the adoption of this standard. In accordance with the adoption of ASC Topic 842, we now record a net operating lease right-of-use ("ROU") asset and operating lease liability on the consolidated balance sheets for all operating leases with a lease term in excess of 12 months. Prior to the adoption of ASC Topic 842, these same leases were treated as operating leases under ASC Topic 840 and therefore were not recorded on the consolidated balance sheets as of December 31, 2020. There was no impact to retained earnings and no significant impact on the combined and consolidated statements of operations or the combined and consolidated statements of cash flows as a result of adopting ASC Topic 842. Lease Recognition We enter into contractual lease arrangements to rent buildings, compressors, drilling rigs, office and rental equipment and vehicles from third-party lessors. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make future lease payments arising from the lease. Operating lease ROU assets and liabilities are recorded at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. We use our incremental borrowing rate based on the information available at commencement date of the contract in determining the present value of future lease payments. The incremental borrowing rate is calculated using our collateralized incremental borrowing rate based on our debt structure. The operating lease ROU asset also includes any lease incentives received in the recognition of the present value of future lease payments. Certain of our leases may also include escalation clauses or options to extend or terminate the lease. These options are included in the present value recorded for the leases when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. If an arrangement is determined to be a lease, we record the resulting ROU asset on the consolidated balance sheets with offsetting liabilities at the commencement date. We recognize a lease in the financial statements when the arrangement either explicitly or implicitly involves property, plant or equipment ("PP&E"), the contract terms are dependent on the use of the PP&E, and we have the ability or right to control the PP&E or to direct others to control the PP&E and receive the majority of the economic benefits of the assets. The following tables show the presentation of the right-of-use assets and lease liabilities within our combined and consolidated financial statements:
| As of December 31, 2021
| (in thousands)
Field and other property and equipment, at cost |
Financing right-of-use asset | $ | 5,249 |
Other assets |
Operating right-of-use asset | 2,299 |
Other current liabilities |
Short-term operating lease liability | (1,292) |
Other liabilities |
Long-term operating lease liability | (1,007) |
| Year Ended December 31, 2021
| (in thousands)
Lease cost included in combined and consolidated statement of operations |
Operating lease cost | $ | 939 |
Financing lease cost - amortization of ROU assets | 20 |
Financing lease cost - interest on lease liabilities | 131
Administrative lease cost (1) | 100
Short-term lease cost (2) | 876
Total lease cost | $ | 2,066 |
(1) Costs related primarily to office equipment and IT solutions with lease terms of more than one month and less than one year. (2) Costs related primarily to generators, compressors and vehicle agreements with lease terms of more than one month and less than one year. Lease term and discount rate related to our leases are as follows:
| As of December 31, 2021
| Operating |  | Financing
Weighted-average remaining lease term (years) | 2.3 |  | 3.1
Weighted-average discount rate | 4.50% |  | 4.50%
As of December 31, 2021, the maturity analysis for our lease liabilities under the scope of ASC 842 is as follows:
| As of December 31, 2021
| Operating |  | Financing
Year Ended December 31, | (in thousands)
2022 | $ | 1,292 |  |  | $ | 1,606 |
2023 | 666 |  |  | 1,887 |
2024 | 412 |  |  | 1,370 |
2025 | 18 |  |  | 633 |
2026 | 18 |  |  | 16 |
After 2026 | 24 |  |  | — |
Less: interest | (131) |  |  | (394) |
Present value of lease liabilities | $ | 2,299 |  |  | $ | 5,118 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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