Leases
At contract inception, the Company determines whether or not an arrangement contains a lease in accordance with ASC 842. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Upon determination that a contract meets the definition of a lease subject to ASC 842, a right-of-use asset and related lease liability are recorded based on the present value of the future lease payments over the lease term. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make future lease payments arising from the lease. Since the implicit rate in the lease is
generally not available, the Company utilizes its incremental borrowing rate as the discount rate for determining the present value of lease payments. Right-of-use assets also include any lease payments made prior to commencement, excluding any lease incentives received.
We may enter into lease agreements for various purposes including drilling rig contracts, wellhead and surface equipment, rights-of-way and easements, and office space and equipment. For agreements that contain both lease and non-lease components, we have elected to combine and account for these as a single lease component. As of December 31, 2025, our lease agreements have remaining lease terms ranging from one month to 15 years; some of our agreements include options to extend the lease term and some of our agreements include options to early terminate at our sole discretion. These options are considered in determining the lease term and are included in the present value of future payments that are recorded for leases when we are reasonably certain to exercise the option. None of our lease agreements contain any material residual value guarantees or material restrictive covenants.
Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. Lease expense for operating leases recorded on our consolidated balance sheets is recognized on a straight-line basis over the lease term. Variable lease payments for leases that are not recorded on our consolidated balance sheets are recognized in the period in which they are incurred, which primarily relate to our office space and equipment leases.
The following table provides additional information related to our lease right-of-use assets and liabilities as of December 31, 2025, 2024 and 2023:
| | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| Weighted-average discount rate | 9.0 | % | | 9.0 | % | | 9.1 | % |
| Weighted-average remaining lease term (years) | 9.7 | | 9.4 | | 13.0 |
For the years ended December 31, 2025, 2024 and 2023, lease expense, including operating leases related to our office space, of $0.4 million, $0.3 million and $0.2 million, respectively, was included within general and administrative expenses within our consolidated statements of operations.
Payments due under our long-term operating lease liabilities by fiscal year as of December 31, 2025, are as follows:
| | | | | |
| | Operating Leases |
| (in thousands) | |
| 2026 | $ | 277 | |
| 2027 | 277 | |
| 2028 | 221 | |
| 2029 | 185 | |
| 2030 | 91 | |
| Thereafter | 705 | |
| Total lease payments | 1,756 | |
| Less: imputed interest | (609) | |
| Present value of lease liabilities | $ | 1,147 | |