LEASES
The Company leases certain drilling rigs, facilities, compression and other equipment.
As discussed in Note 2—Summary of Significant Accounting Policies, the Company adopted ASU 2016-02, ASU 2018-11 and ASU 2019-01 on January 1, 2019 using the optional transition method of adoption. The Company elected a package of practical expedients that together allows an entity to not reassess (i) whether a contract is or contains a lease, (ii) lease classification and (iii) initial direct costs. In addition, the Company elected the following practical expedients: (i) to not reassess
certain land easements; (ii) to not apply the recognition requirements under the standard to short-term leases; (iii) to not reassess lease terms on leases entered into prior to the effective date of adoption; and (iv) lessor accounting policy election to exclude lessor costs paid directly by the lessee.
For leases where the Company is the lessee, the Company recorded a total of $13 million in right-of-use assets and corresponding new lease liabilities in other on its Condensed Consolidated Balance Sheet representing the present value of its future operating lease payments. Adoption of the standards did not require an adjustment to the opening balance of retained earnings. The discount rate used to determine present value was based on the rate of interest that the Company estimated it would have to pay to borrow (on a collateralized-basis over a similar term) an amount equal to the lease payments in a similar economic environment as of January 1, 2019. The Company is required to reassess the discount rate for any new and modified lease contracts as of the lease effective date.
The right-of-use assets and lease liabilities recognized upon adoption of ASU 2016-02 were based on the lease classifications, lease commitment amounts and terms recognized under the prior lease accounting guidance. Leases with an initial term of twelve months or less are considered short-term leases and are not recorded on the balance sheet.
The following table summarizes operating lease costs for the year ended December 31, 2019:
|
| | | |
| Year Ended December 31, 2019 |
| (in millions) |
Operating lease costs | $ | 26 |
|
For the year ended December 31, 2019, cash paid for operating lease liabilities, and reported in cash flows provided by operating activities on the Company's Statement of Condensed Consolidated Cash Flows, was $26 million. During the year ended December 31, 2019, the Company recorded an additional $17 million of right-of-use assets in exchange for new lease liabilities.
The operating lease right-of-use assets were reported in other assets and the current and noncurrent portions of the operating lease liabilities were reported in other accrued liabilities and other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheet. As of December 31, 2019, the operating right-of-use assets were $15 million and operating lease liabilities were $15 million, of which $8 million was classified as current. As of December 31, 2019, the weighted average remaining lease term was 2.1 years and the weighted average discount rate was 8.2%.
Schedule of Operating Lease Liability Maturities. The following table summarizes undiscounted cash flows owed by the Company to lessors pursuant to contractual agreements in effect as of December 31, 2019:
|
| | | |
| As of December 31, 2019 |
| (in millions) |
2020 | $ | 9 |
|
2021 | 5 |
|
2022 | 2 |
|
2023 | — |
|
2024 | — |
|
Thereafter | — |
|
Total lease payments | 16 |
|
Less: interest | 1 |
|
Present value of lease liabilities | $ | 15 |
|
For leases in which the Company is the lessor, the Company (i) retained classification of our historical leases as we are not required to reassess classification upon adoption of the new standard, (ii) expensed indirect leasing costs in connection with new or extended tenant leases, the recognition of which would have been deferred under prior accounting guidance and (iii) aggregated revenue from our lease components and non-lease components (comprised of tenant expense reimbursements) into revenue from rental properties.