Note 8 — Leases
Operating Leases
The Company has operating leases, primarily for real estate and equipment, with terms that vary from one to nine years, included in operating lease costs in the table below. The operating leases are included in Short-term lease liability and Long-term lease liability in the Consolidated Balance Sheets.
Lease costs associated with yard and field offices are included in cost of services and executive offices are included in general and administrative costs in the Consolidated Statements of Operations. Lease costs and other information related to operating leases are as follows (in millions):
| | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2025 | | 2024 |
| Short-term lease costs | | $ | 13.8 | | | $ | 12.8 | |
| Operating lease costs | | $ | 3.1 | | | $ | 3.2 | |
| Operating cash outflows from operating leases | | $ | 3.4 | | | $ | 3.3 | |
| | | | |
| Weighted average remaining lease term | | 5.0 years | | 2.7 years |
| Weighted average discount rate | | 6.8 | % | | 8.1 | % |
As of December 31, 2025, aggregate future minimum lease payments under operating leases are as follows (in millions):
| | | | | | | | |
| For the years ending December 31, | | Total |
| 2026 | | $ | 4.3 | |
| 2027 | | 3.0 | |
| 2028 | | 1.5 | |
| 2029 | | 1.1 | |
| 2030 | | 1.1 | |
| Thereafter | | 3.0 | |
| Total future minimum lease payments | | 14.0 | |
| Less: amount representing interest | | (2.2) | |
| Present value of future minimum lease payments | | 11.8 | |
| Less: current portion of operating lease obligations | | (3.4) | |
| Long-term portion of operating lease obligations | | $ | 8.4 | |
On February 1, 2025 the Company entered into an agreement to sublease a 38,033 square foot property located in Midland, Texas. The sublease will cover the remaining term of the head lease for the property with no renewal options, ending September 30, 2027. Sublease income will be reported separately from the operating lease expense as part of other income. The Company recognized an impairment to the right of use asset associated with this operating lease of $0.4 million, in accordance with ASC 360-10 on February 1, 2025. The fair value of the right of use asset was measured as the present value of the future sublease cash flows using the Company’s incremental borrowing rate.
Certain of the Company’s customer agreements to construct and operate hybrid rigs (“ECHO Rigs”), contain an operating lease component under ASC 842, Leases. A contract is considered to contain a lease when (i) it specifies identified assets, (ii) the customer obtains substantially all of the economic benefits from those assets during the period of use, and (iii) the customer directs the use of the assets during the period of use. The Company has elected the lessor practical expedient to combine lease and non-lease components when (a) the revenue recognition pattern is the same and (b) the lease component, if
accounted for separately, would be classified as an operating lease. When non-lease component is the predominant element, the combined component is accounted for under ASC 606, Revenue from Contracts with Customers.
Finance Leases
The Company leases certain assets, primarily automobiles, under finance leases with terms that are generally three to five years. The assets and liabilities under finance leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets are amortized over the shorter of the estimated useful lives or over the lease term. The finance leases are included in Property and equipment, net, Short-term lease liability and Long-term lease liability in the Consolidated Balance Sheets.
As of December 31, 2025, lease costs and other information related to finance leases are as follows (in millions):
| | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2025 | | 2024 |
| Amortization of finance leases | | $ | 7.2 | | | $ | 5.7 | |
| Interest on lease liabilities | | $ | 2.3 | | | $ | 2.3 | |
| Financing cash outflows from finance leases | | $ | 6.6 | | | $ | 5.7 | |
| | | | |
| Weighted average remaining lease term | | 1.8 years | | 2.2 years |
| Weighted average discount rate | | 6.8 | % | | 6.5 | % |
As of the December 31, 2025, aggregate future minimum lease payments under finance leases are as follows (in millions):
| | | | | | | | |
| For the years ending December 31, | | 2025 |
| 2026 | | $ | 9.0 | |
| 2027 | | 5.8 | |
| 2028 | | 3.3 | |
| 2029 | | 0.3 | |
| | |
| | |
| Total future minimum lease payments | | 18.4 | |
| Less: amount representing interest and fees | | (2.1) | |
| Present value of future minimum lease payments | | 16.3 | |
| Less: current portion of finance lease obligations | | (7.9) | |
| Long-term portion of finance lease obligations | | $ | 8.4 | |