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Leases
 6 Months Ended
Jun. 30, 2021
Leases [Abstract]  
Leases Leases
    We have cancellable and non-cancellable finance and operating lease liabilities for the lease of land, vehicles, office space, retail facilities, and other facilities used in the storage and transportation of crude oil and refined products. Most of our leases include one or more options to renew, with renewal terms that can extend the lease term from one to 30 years or more. There are no material lease arrangements where we are the lessor and no material residual value guarantees associated with any of our leases.
    The following table provides information on the amounts (in thousands, except lease term and discount rates) of our right-of-use assets (“ROU assets”) and liabilities as of June 30, 2021 and December 31, 2020 and their placement within our condensed consolidated balance sheets:
Lease typeBalance Sheet LocationJune 30, 2021December 31, 2020
Assets
FinanceProperty, plant, and equipment$19,722 $14,998 
FinanceAccumulated amortization(7,437)(6,486)
FinanceProperty, plant, and equipment, net$12,285 $8,512 
OperatingOperating lease right-of-use assets413,292 357,166 
Total right-of-use assets$425,577 $365,678 
Liabilities
Current
FinanceOther accrued liabilities$1,383 $1,491 
OperatingOperating lease liabilities55,507 56,965 
Long-term
FinanceFinance lease liabilities7,049 7,925 
OperatingOperating lease liabilities362,494 304,355 
Total lease liabilities$426,433 $370,736 
Weighted-average remaining lease term (in years)
Finance6.566.97
Operating11.3110.52
Weighted-average discount rate
Finance7.91 %7.93 %
Operating6.81 %7.59 %
The following table summarizes the lease costs recognized in our condensed consolidated statements of operations (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
Lease cost type2021202020212020
Finance lease cost
Amortization of finance lease ROU assets$460 $534 $950 $1,014 
Interest on lease liabilities149 164 323 331 
Operating lease cost23,367 27,160 45,744 54,130 
Variable lease cost1,633 1,855 3,405 4,550 
Short-term lease cost174 643 203 842 
Net lease cost$25,783 $30,356 $50,625 $60,867 
    The following table summarizes the supplemental cash flow information related to leases as follows (in thousands):
Six Months Ended June 30,
Lease type20212020
Cash paid for amounts included in the measurement of liabilities
Financing cash flows from finance leases$1,874 $819 
Operating cash flows from finance leases325 322 
Operating cash flows from operating leases44,023 51,179 
Non-cash supplemental amounts
ROU assets obtained in exchange for new finance lease liabilities1,102 1,915 
ROU assets obtained in exchange for new operating lease liabilities87,331 4,557 
ROU assets terminated in exchange for release from operating lease liabilities113 7,738 
    The table below includes the estimated future undiscounted cash flows for finance and operating leases as of June 30, 2021 (in thousands):
For the year ending December 31, Finance leasesOperating leasesTotal
2021 (1)$996 $43,256 $44,252 
20221,919 76,015 77,934 
20231,912 62,160 64,072 
20241,601 52,232 53,833 
20251,362 50,896 52,258 
2026894 46,392 47,286 
Thereafter2,318 236,641 238,959 
Total lease payments11,002 567,592 578,594 
Less amount representing interest(2,570)(149,591)(152,161)
Present value of lease liabilities$8,432 $418,001 $426,433 
_________________________________________________________
(1)Represents the period from July 1, 2021 to December 31, 2021.
    Additionally, we have $6.3 million in future undiscounted cash flows for operating leases that have not yet commenced. These leases are expected to commence when the lessor has made the equipment or location available to us to operate or begin construction, respectively.
Sale-Leaseback Transactions
On February 11, 2021, PHL and Par Hawaii Property Company, LLC (collectively, the “Sellers”), both our wholly owned subsidiaries, entered into a Purchase Agreement and Escrow Instructions with MDC Coast HI 1, LLC, a subsidiary of
Realty Income Corporation (the “Buyer”), and Fidelity National Title Insurance Company, pursuant to which the Sellers and Buyer agreed to consummate sale-leaseback transactions (the “Sale-Leaseback Transactions”). Under the terms of the Purchase Agreement, the Sellers agreed to sell to the Buyer a total of twenty-two (22) retail convenience store/fuel station properties located in Hawaii (the “Sale-Leaseback Properties”) for an aggregate cash purchase price of $112.8 million, net of transaction fees.
On February 23, 2021, the Sellers and Buyer closed the Sale-Leaseback Transactions with respect to twenty-one (21) Sale-Leaseback Properties for an aggregate cash purchase price of approximately $107.0 million, net of transaction fees. On March 12, 2021, the Sellers and Buyer closed the sale of one additional property for an aggregate cash purchase price of approximately $5.8 million, net of transaction fees. We recognized a gain of $63.9 million as a result of these transactions, which is included in Loss (gain) on sale of assets, net on our condensed consolidated statements of operations for the six months ended June 30, 2021.
Upon the closings of the sales of the Sale-Leaseback Properties, PHL entered into a Master Land and Building Lease Agreement (the “Lease Agreement”) with the Buyer, pursuant to which, among other things, PHL leased the Sale-Leaseback Properties from the Buyer, on a commercial triple-net basis, for 15 years, unless earlier terminated. The initial lease term may be extended for up to four five-year renewal terms in accordance with the terms of the Lease Agreement. Under the terms of the Lease Agreement, PHL is responsible for monthly rent and all expenses related to the leased facilities, including, but not limited to, insurance premiums, taxes, and other expenses, such as utilities. As a result of the Sale-Leaseback Transactions, we recorded operating ROU assets and lease liabilities of $81.3 million. Certain of the Sale-Leaseback Properties were treated as failed sale-leaseback transactions based on the terms of the lease. As such, we retained the book value of the assets and recognized a finance liability of $12.4 million included in Other accrued liabilities and Other liabilities on our condensed consolidated balance sheet.
In connection with PHL’s entry into the Lease Agreement, Par Petroleum, LLC, our wholly owned subsidiary, entered into a guaranty agreement in favor of the Buyer, pursuant to which, among other things, Par Petroleum, LLC guaranteed the payment when due of the monthly rent, and all other additional rent, interest, and charges payable by PHL to the Buyer under the Lease Agreement, and the performance by PHL of all the material terms, conditions, covenants, and agreements of the Lease Agreement.
Leases Leases
    We have cancellable and non-cancellable finance and operating lease liabilities for the lease of land, vehicles, office space, retail facilities, and other facilities used in the storage and transportation of crude oil and refined products. Most of our leases include one or more options to renew, with renewal terms that can extend the lease term from one to 30 years or more. There are no material lease arrangements where we are the lessor and no material residual value guarantees associated with any of our leases.
    The following table provides information on the amounts (in thousands, except lease term and discount rates) of our right-of-use assets (“ROU assets”) and liabilities as of June 30, 2021 and December 31, 2020 and their placement within our condensed consolidated balance sheets:
Lease typeBalance Sheet LocationJune 30, 2021December 31, 2020
Assets
FinanceProperty, plant, and equipment$19,722 $14,998 
FinanceAccumulated amortization(7,437)(6,486)
FinanceProperty, plant, and equipment, net$12,285 $8,512 
OperatingOperating lease right-of-use assets413,292 357,166 
Total right-of-use assets$425,577 $365,678 
Liabilities
Current
FinanceOther accrued liabilities$1,383 $1,491 
OperatingOperating lease liabilities55,507 56,965 
Long-term
FinanceFinance lease liabilities7,049 7,925 
OperatingOperating lease liabilities362,494 304,355 
Total lease liabilities$426,433 $370,736 
Weighted-average remaining lease term (in years)
Finance6.566.97
Operating11.3110.52
Weighted-average discount rate
Finance7.91 %7.93 %
Operating6.81 %7.59 %
The following table summarizes the lease costs recognized in our condensed consolidated statements of operations (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
Lease cost type2021202020212020
Finance lease cost
Amortization of finance lease ROU assets$460 $534 $950 $1,014 
Interest on lease liabilities149 164 323 331 
Operating lease cost23,367 27,160 45,744 54,130 
Variable lease cost1,633 1,855 3,405 4,550 
Short-term lease cost174 643 203 842 
Net lease cost$25,783 $30,356 $50,625 $60,867 
    The following table summarizes the supplemental cash flow information related to leases as follows (in thousands):
Six Months Ended June 30,
Lease type20212020
Cash paid for amounts included in the measurement of liabilities
Financing cash flows from finance leases$1,874 $819 
Operating cash flows from finance leases325 322 
Operating cash flows from operating leases44,023 51,179 
Non-cash supplemental amounts
ROU assets obtained in exchange for new finance lease liabilities1,102 1,915 
ROU assets obtained in exchange for new operating lease liabilities87,331 4,557 
ROU assets terminated in exchange for release from operating lease liabilities113 7,738 
    The table below includes the estimated future undiscounted cash flows for finance and operating leases as of June 30, 2021 (in thousands):
For the year ending December 31, Finance leasesOperating leasesTotal
2021 (1)$996 $43,256 $44,252 
20221,919 76,015 77,934 
20231,912 62,160 64,072 
20241,601 52,232 53,833 
20251,362 50,896 52,258 
2026894 46,392 47,286 
Thereafter2,318 236,641 238,959 
Total lease payments11,002 567,592 578,594 
Less amount representing interest(2,570)(149,591)(152,161)
Present value of lease liabilities$8,432 $418,001 $426,433 
_________________________________________________________
(1)Represents the period from July 1, 2021 to December 31, 2021.
    Additionally, we have $6.3 million in future undiscounted cash flows for operating leases that have not yet commenced. These leases are expected to commence when the lessor has made the equipment or location available to us to operate or begin construction, respectively.
Sale-Leaseback Transactions
On February 11, 2021, PHL and Par Hawaii Property Company, LLC (collectively, the “Sellers”), both our wholly owned subsidiaries, entered into a Purchase Agreement and Escrow Instructions with MDC Coast HI 1, LLC, a subsidiary of
Realty Income Corporation (the “Buyer”), and Fidelity National Title Insurance Company, pursuant to which the Sellers and Buyer agreed to consummate sale-leaseback transactions (the “Sale-Leaseback Transactions”). Under the terms of the Purchase Agreement, the Sellers agreed to sell to the Buyer a total of twenty-two (22) retail convenience store/fuel station properties located in Hawaii (the “Sale-Leaseback Properties”) for an aggregate cash purchase price of $112.8 million, net of transaction fees.
On February 23, 2021, the Sellers and Buyer closed the Sale-Leaseback Transactions with respect to twenty-one (21) Sale-Leaseback Properties for an aggregate cash purchase price of approximately $107.0 million, net of transaction fees. On March 12, 2021, the Sellers and Buyer closed the sale of one additional property for an aggregate cash purchase price of approximately $5.8 million, net of transaction fees. We recognized a gain of $63.9 million as a result of these transactions, which is included in Loss (gain) on sale of assets, net on our condensed consolidated statements of operations for the six months ended June 30, 2021.
Upon the closings of the sales of the Sale-Leaseback Properties, PHL entered into a Master Land and Building Lease Agreement (the “Lease Agreement”) with the Buyer, pursuant to which, among other things, PHL leased the Sale-Leaseback Properties from the Buyer, on a commercial triple-net basis, for 15 years, unless earlier terminated. The initial lease term may be extended for up to four five-year renewal terms in accordance with the terms of the Lease Agreement. Under the terms of the Lease Agreement, PHL is responsible for monthly rent and all expenses related to the leased facilities, including, but not limited to, insurance premiums, taxes, and other expenses, such as utilities. As a result of the Sale-Leaseback Transactions, we recorded operating ROU assets and lease liabilities of $81.3 million. Certain of the Sale-Leaseback Properties were treated as failed sale-leaseback transactions based on the terms of the lease. As such, we retained the book value of the assets and recognized a finance liability of $12.4 million included in Other accrued liabilities and Other liabilities on our condensed consolidated balance sheet.
In connection with PHL’s entry into the Lease Agreement, Par Petroleum, LLC, our wholly owned subsidiary, entered into a guaranty agreement in favor of the Buyer, pursuant to which, among other things, Par Petroleum, LLC guaranteed the payment when due of the monthly rent, and all other additional rent, interest, and charges payable by PHL to the Buyer under the Lease Agreement, and the performance by PHL of all the material terms, conditions, covenants, and agreements of the Lease Agreement.