Leases
Magnolia’s leases primarily consist of real estate, vehicles, and field equipment. The Company’s leases have remaining lease terms of up to three years, some of which include options to renew or terminate the lease. The exercise of lease renewal options is at the Company’s sole discretion. Magnolia’s lease agreements do not contain any restrictive covenants or material residual value guarantees.
As most of Magnolia’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
| | | | | | | | | | | |
| (In thousands) | December 31, 2025 | | December 31, 2024 |
| Operating Leases | | | |
| Operating lease assets | $ | 25,954 | | | $ | 17,056 | |
| | | |
| Operating lease liabilities - current | $ | 18,212 | | | $ | 12,210 | |
| Operating lease liabilities - long-term | 8,097 | | | 5,591 | |
| Total operating lease liabilities | $ | 26,309 | | | $ | 17,801 | |
| | | |
| Weighted average remaining lease term (in years) | 1.6 | | 1.5 |
| Weighted average discount rate | 6.6% | | 7.1% |
For the years ended December 31, 2025 and 2024, the Company incurred $20.4 million and $12.5 million, respectively, of lease costs for operating leases included on the Company’s consolidated balance sheet, and $55.7 million and $58.2 million, respectively, for short-term lease costs. For the years ended December 31, 2025 and 2024, the Company did not incur any material expenses for variable lease costs. Cash paid for lease liabilities included in operating cash flows for the years ended December 31, 2025 and 2024 are $20.8 million and $12.9 million, respectively.
Maturities of lease liabilities as of December 31, 2025 under the scope of ASC 842 are as follows:
| | | | | |
| (In thousands) | |
| Maturity of Lease Liabilities | Operating Leases |
| 2026 | $ | 19,704 | |
| 2027 | 7,584 | |
| 2028 | 2,279 | |
| 2029 | 198 | |
| 2030 | — | |
| After 2030 | — | |
| Total lease payments | $ | 29,765 | |
| Less: Interest | (3,456) | |
| Present value of lease liabilities | $ | 26,309 | |
At December 31, 2025, the Company had additional minimum lease payments of $37.1 million, which are expected to commence beginning in 2026 with lease terms of two to twelve years.
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.