BATTALION OIL CORP Leases Disclosure
3. LEASES
The Company leases equipment and office space pursuant to operating leases. The Company determines if an arrangement is or contains a lease at inception and combines lease and nonlease components, when fixed, for all lease contracts. Nonlease components include common area maintenance charges on office leases and, when applicable, services associated with equipment leases. Operating leases with a lease term greater than 12 months where the Company is the lessee are included in “Operating lease right of use assets” and “Operating lease liabilities” on the consolidated balance sheets and recorded based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments. The Company does not recognize right of use assets and lease liabilities for short-term leases that have a lease term of 12 months or less, but rather recognizes the lease payments associated with its short-term leases when incurred.
Payments due under the lease contracts include fixed payments plus, in some instances, variable payments. Variable lease payments, if applicable, associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments, when applicable, are presented as “Gathering and other” or “General and administrative” in the consolidated statements of operations in the same line item as the expense arising from the fixed lease payments on the operating leases.
The table below summarizes the Company’s leases for the periods indicated (in thousands, except years and discount rate):
Years Ended December 31, | ||||||||
2025 | | 2024 | | |||||
Lease cost | ||||||||
Operating lease costs | $ | 719 | $ | 668 | ||||
Short-term lease costs | 4,088 | 4,319 | ||||||
Total lease costs | $ | 4,807 | $ | 4,987 | ||||
Other information | ||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows from operating leases | $ | 729 | $ | 688 | ||||
Weighted-average remaining lease term - operating leases | 1.2 | years | 1.0 | years | ||||
Weighted-average discount rate - operating leases | 12.35 | % | 12.17 | % | ||||
The “Operating lease right of use assets” outstanding on the consolidated balance sheet as of December 31, 2025 and 2024 resulted from two operating leases initially entered into during the year ended December 31, 2023 with lease terms at inception of 1.9 years and 2.7 years. Both operating leases were extended during 2025 with one lease having an
extension of 18 months with an effective date of June 27, 2025 and the other extended for 12 months beyond its original expiration of July 1, 2026.
Future minimum lease payments associated with the Company’s non-cancellable operating leases for office space and equipment as of December 31, 2025, are presented in the table below (in thousands):
December 31, 2025 | |||
2026 | $ | 829 | |
2027 | 107 | ||
Total operating lease payments | 936 | ||
Less: discount to present value | (68) | ||
Total operating lease liabilities | 868 | ||
Less: current operating lease liabilities | 764 | ||
Noncurrent operating lease liabilities | $ | 104 | |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 23, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 7, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 25, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.