Annual report pursuant to Section 13 and 15(d)

LEASES

v3.22.4
LEASES
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
LEASES LEASES
The Company has operating leases for our offices in Midland, Texas and The Woodlands, Texas. The Midland office is under a five-year lease which began January 1, 2021. The Midland office lease was amended effective October 1, 2022, with the revised five-year lease ending September 30, 2027. Beginning January 15, 2021, the Company entered into a five-and-a-half-year sub-lease for office space in The Woodlands, Texas. The future payments associated with these operating leases are reflected below. During the years ended December 31, 2020 and 2021 the Company had an operating lease with Arenaco, LLC for its Tulsa, Oklahoma office. The Tulsa lease was terminated as of March 31, 2021, with payments made until the end of February 2021. Refer to "Note 14 - RELATED PARTY TRANSACTIONS" for further details.
The Company has month to month leases for office equipment and compressors used in our operations on which the Company has elected to apply ASU 2016-02 (i.e. not capitalize). The office equipment and compressors are not subject to ASU 2016-02 based on the agreement and nature of use. These leases are for terms that are less than 12 months and the Company does not intend to continue to lease this equipment for more than 12 months. The lease costs associated with these leases is reflected in the short-term lease costs within Lease operating expenses, shown below.
The Company has financing leases for vehicles. These leases have a term of 36 months at the end of which the Company owns the vehicles. These vehicles are generally sold at the end of their term and the proceeds applied to a new vehicle.
Future lease payments associated with these operating and financing leases as of December 31, 2022 are as follows:
2023 2024 2025 2026 2027
Operating lease payments (1)
$ 474,464  $ 482,328  $ 494,692  $ 398,096  $ 216,000 
Financing lease payments (2)
793,723  727,451  379,421  —  — 
(1)The weighted average discount rate as of December 31, 2022 for operating leases was 4.50%. Based on this rate, the future lease payments above include imputed interest of $193,321. The weighted average remaining term of operating leases was 4.29 years.
(2)The weighted average discount rate as of December 31, 2022 for financing leases was 5.82%. Based on this rate, the future lease payments above include imputed interest of $138,463. The weighted average remaining term of financing leases was 2.41 years. The following table represents a reconciliation between the undiscounted future cash flows in the table above and the operating and financing lease liabilities disclosed in the Balance Sheets:
As of December 31,
2022 2021
Operating lease liability, current portion 398,362  290,766 
Operating lease liability, non-current portion 1,473,897  1,138,319 
Operating lease liability, total 1,872,259  1,429,085 
Total undiscounted future cash flows (sum of future operating lease payments) 2,065,580  1,577,786 
Imputed interest 193,321  148,701 
Undiscounted future cash flows less imputed interest 1,872,259  1,429,085 
Financing lease liability, current portion 709,653  316,514 
Financing lease liability, non-current portion 1,052,479  343,727 
Financing lease liability, total 1,762,132  660,241 
Total undiscounted future cash flows (sum of future financing lease payments) 1,900,595  692,091 
Imputed interest 138,463  31,850 
Undiscounted future cash flows less imputed interest 1,762,132  660,241 
The following table provides supplemental information regarding cash flows from operations:
2022
Operating lease costs $ 363,908 
Short-term lease costs (1)
$ 2,618,405 
Financing lease costs:
Amortization of financing lease assets (2)
$ 505,211 
Interest on lease liabilities (3)
$ 48,472 
(1)Amount included in Lease operating expenses
(2)Amount included in Depreciation, depletion and amortization
(3)Amount included in Interest expense