W&T OFFSHORE INC Leases Disclosure
NOTE 10 — LEASES
The Company has entered into various non-cancellable operating leases for certain of the Company’s offices, land and various pipeline right-of-way contracts. The Company determines if an arrangement is a lease, or contains a lease, at inception and establishes a right-of-use (“ROU”) asset and lease liability based on the Company’s assumptions of the term, inflation rates and incremental borrowing rates. The Company has elected the short-term practical expedient to not apply the recognition requirements to short-term leases with a term of twelve months or less. The Company has also elected the practical expedient to not separate lease and nonlease components.
The Company’s operating leases include the lease term, at the Company’s discretion, for an additional to ten years. The Company is not, however, reasonably certain that it will exercise any of the options to extend these leases and as such, the options have not been included in the remaining lease terms.
The amounts disclosed herein primarily represent costs associated with properties operated by the Company that are presented on a gross basis and do not reflect the Company’s net proportionate share of such amounts. A portion of these costs have been or will be billed to other working interest owners where applicable. The Company’s share of these costs is included in oil and natural gas properties, lease operating expense or general and administrative expense, as applicable.
The components of lease costs were as follows (in thousands):
December 31, | |||||||||
| 2024 |
| 2023 |
| 2022 | ||||
Operating lease costs, excluding short-term leases | $ | 1,718 | $ | 1,670 | $ | 1,579 | |||
Short-term lease cost | 143 | 58 | 2,957 | ||||||
Variable lease cost (1) |
| 951 |
| 765 |
| 647 | |||
Total lease cost | $ | 2,812 | $ | 2,493 | $ | 5,183 | |||
(1) | Variable lease costs primarily represent differences between minimum lease payment obligations and actual operating charges incurred by the Company related to long-term operating leases. |
The present value of the fixed lease payments recorded as the Company’s ROU assets and operating lease liabilities, adjusted for initial direct costs and incentives, are as follows (in thousands):
| December 31, | |||||
2024 |
| 2023 | ||||
$ | 10,045 | $ | 10,515 | |||
Lease liability: |
|
|
|
| ||
$ | 1,522 | $ | 1,455 | |||
| 10,390 |
| 10,803 | |||
Total lease liability | $ | 11,912 | $ | 12,258 | ||
The weighted average remaining lease term and discount rate related to the Company’s operating leases are as follows (in thousands):
December 31, |
| ||||||
| 2024 |
| 2023 |
| 2022 |
| |
Weighted average remaining lease term | 11.5 years | 12.1 years | 13.1 years | ||||
Weighted average discount rate |
| 10.3 | % | 10.3 | % | 10.1 | % |
Supplemental cash flow information related to the Company’s operating leases are as follows (in thousands):
December 31, | |||||||||
| 2024 |
| 2023 |
| 2022 | ||||
Operating cash outflow from operating leases | $ | 1,595 | $ | 1,713 | $ | 1,224 | |||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | — | $ | 559 | $ | — | |||
As of December 31, 2024, the maturities of the liabilities related to the Company’s operating leases are as follows (in thousands):
2025 |
| $ | 2,164 |
2026 |
| 1,625 | |
2027 |
| 1,658 | |
2028 |
| 1,712 | |
2029 |
| 3,980 | |
Thereafter |
| 8,908 | |
Total lease payments |
| 20,047 | |
Less: imputed interest |
| (8,135) | |
Total | $ | 11,912 |
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.