Leases

6 Months Ended

Jun. 30, 2026

Note 4 — Leases

The Company has operating leases principally for office space, drilling rigs and other equipment necessary to support the Company’s operations. Costs associated with the Company’s leases are either expensed or capitalized depending on how the underlying asset is utilized. Additionally, the Company has a finance lease and the right-of-use (“ROU”) asset was capitalized and included in proved properties and is being depleted as part of the full cost pool.

The lease costs described below are presented on a gross basis and do not represent the Company’s net proportionate share of such amounts. A portion of these costs have been or may be billed to other working interest owners. The Company’s share of these costs is included in property and equipment, lease operating expense or general and administrative expense, as applicable. The components of lease costs were as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2026			2025			2026			2025
Finance lease costs - interest on lease liabilities	$	2,385		$	2,848		$	4,863		$	5,775
Operating lease costs, excluding short-term leases(1)		903			1,081			1,806			2,156
Short-term lease costs(2)		791			29,995			35,897			70,108
Variable lease costs(3)		670			667			1,340			1,334
Variable and fixed sublease income		(403	)		(396	)		(800	)		(793	)
Total lease costs	$	4,346		$	34,195		$	43,106		$	78,580

(1)

Operating lease costs reflect a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a straight-line basis.

(2)

Short-term lease costs are reported at gross amounts and primarily represent costs incurred for drilling rigs and well intervention vessels, most of which are short-term contracts not recognized as a ROU asset and lease liability on the Condensed Consolidated Balance Sheets. The short-term operating lease costs incurred during the periods presented are not necessarily indicative of the Company’s future short-term lease costs and obligations, as it routinely executes short-term contracts for the use of drilling rigs to support its drilling activities. Short-term lease costs for drilling rigs can vary significantly based on the timing of the drilling program. Market conditions can also contribute to the volatility and variability of short-term drilling rig lease costs.

(3)

Variable lease costs primarily represent differences between minimum payment obligations and actual operating charges incurred by the Company related to its long-term leases.

The present value of the fixed lease payments recorded as the Company’s ROU asset and lease liability, adjusted for initial direct costs and incentives were as follows (in thousands):


	June 30, 2026		December 31, 2025
Operating leases:
Operating lease assets	$	8,345	$	9,214

Current portion of operating lease liabilities	$	3,872	$	3,657
Operating lease liabilities		10,051		11,956
Total operating lease liabilities	$	13,923	$	15,613

Finance leases:
Proved properties	$	166,261	$	166,261

Other current liabilities	$	22,472	$	21,473
Other long-term liabilities		78,641		90,169
Total finance lease liabilities	$	101,113	$	111,642

The table below presents the supplemental cash flow information related to leases (in thousands):


	Six Months Ended June 30,
	2026		2025
Operating cash outflow from finance leases	$	4,863	$	5,775
Operating cash outflow from operating leases	$	2,611	$	2,969

Subsequent Event — On July 1, 2026, the Company entered into a 365-day minimum commitment vessel contract for approximately $160.0 million. The Company plans to utilize the vessel for certain Deepwater drilling and completion operations commencing in mid-2027. Other joint owners, to the extent they elect to participate, will be billed for their working interest share of such costs.