Note 9 — Leases
Leases
We determine if an arrangement is a lease at inception. Our lease agreements are primarily for real estate, equipment, storage, dock space, and automobiles and are included within “Other assets”, “Other current liabilities”, and “Other liabilities” on our Consolidated Balance Sheets. In connection with the Diamond Transaction, the Company assumed several leases entered into by Diamond consisting of operating leases for corporate and shorebases offices, office and information technology equipment, employee housing, onshore storage yards, and certain rig equipment and tools as well as finance leases for well control equipment used on the drillships. The finance leases commenced in 2016 and also include an option to purchase the leased equipment at the end of the respective lease term. During the third quarter of 2025, the right-of-use assets and finance lease liabilities related to certain of our finance leases were remeasured to include the potential purchase price.
As most of our leases do not provide an explicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Certain of our lease agreements include options to extend or terminate the lease, which we do not include in our minimum lease terms unless management is reasonably certain to exercise.
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | | | | |
| | December 31, 2025 | | December 31, 2024 |
| Operating leases | | | | |
| Right-of-use assets | | $ | 59,964 | | | $ | 78,993 | |
Current lease liabilities | | $ | 13,905 | | | $ | 14,844 | |
| Long-term lease liabilities | | $ | 51,954 | | | $ | 65,981 | |
| Weighted average remaining lease term (years) | | 8.53 | | 7.49 |
| Weighted average discount rate | | 6.7 | % | | 6.6 | % |
| | | | |
| Finance leases | | | | |
| Right-of-use assets | | $ | 99,767 | | | $ | 34,346 | |
Current lease liabilities | | $ | 93,382 | | | $ | 22,722 | |
| Long-term lease liabilities | | $ | — | | | $ | 11,270 | |
| Weighted average remaining lease term (years) | | 0.45 | | 1.47 |
| Weighted average discount rate | | 5.1 | % | | 5.8 | % |
The components of lease cost were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | Year Ended | | Year Ended |
| | December 31, 2025 | | December 31, 2024 | | December 31, 2023 |
| Operating lease cost | | $ | 54,869 | | | $ | 31,162 | | | $ | 12,615 | |
| Finance lease cost: | | | | | | |
| Amortization of right-of-use assets | | 19,188 | | | 7,766 | | | — | |
| Interest on lease liabilities | | 2,344 | | | 734 | | | — | |
| Short-term lease cost | | 1,640 | | | 3,819 | | | 6,185 | |
| Variable lease cost | | 442 | | | 675 | | | 928 | |
| Total lease cost | | $ | 78,483 | | | $ | 44,156 | | | $ | 19,728 | |
Supplemental cash flow information related to leases was as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended | | Year Ended | | Year Ended |
| | December 31, 2025 | | December 31, 2024 | | December 31, 2023 |
| Operating leases | | | | | | |
| Operating cash flows used | | $ | 18,235 | | | $ | 20,857 | | | $ | 13,369 | |
Right-of-use assets obtained in exchange for a lease liability (1) | | 12,377 | | | 45,313 | | | 9,614 | |
| | | | | | |
| Finance leases | | | | | | |
| Operating cash flows used | | $ | 2,344 | | | $ | 560 | | | $ | — | |
| Financing cash flows used | | 23,936 | | | 6,064 | | | — | |
Right-of-use assets obtained in exchange for a lease liability (1) | | 98,911 | | | 42,113 | | | — | |
(1)Includes right-of-use assets acquired in business combinations.
Maturities of lease liabilities as of December 31, 2025, were as follows:
| | | | | | | | | | | | | | |
| | Operating Leases | | Finance Leases |
| 2026 | | $ | 16,846 | | | $ | 95,037 | |
| 2027 | | 14,610 | | | — | |
| 2028 | | 10,276 | | | — | |
| 2029 | | 6,268 | | | — | |
| 2030 | | 3,770 | | | — | |
| Thereafter | | 38,555 | | | — | |
| Total lease payments | | 90,325 | | | 95,037 | |
| Less: Interest | | (24,466) | | | (1,655) | |
| Present value of lease liability | | $ | 65,859 | | | $ | 93,382 | |
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.