NOTE 11 — LEASES

The Company has operating leases consisting of an office lease, a hangar lease, a land lease and various pipeline right-of-way contracts. For these contracts, a right-of-use (“ROU”) asset and lease liability was established based on the Company’s assumptions of the term and incremental borrowing rates. At inception, contracts are reviewed to determine whether the agreement contains a lease. To the extent an arrangement is determined to include a lease, it is classified as either an operating or a finance lease, which dictates the pattern of expense recognition in the income statement.

The term of the office lease extends to February 2032 and has the option to extend, at the Company’s discretion, for up to an additional ten years. The term of the hangar lease extends to February 2025 and has the option to renew, at the Company’s discretion, for an additional two years. However, the Company is not reasonably certain that it will exercise any of the options to extend these leases and as such, they have not been included in the remaining lease terms. The term of each pipeline right-of-way contract is ten years with various effective dates, and each has an option to extend, at the Company’s discretion, for up to another ten years. It is expected renewals beyond ten years can be obtained as renewals were granted to the previous lessees. The land lease has an option to renew every five years extending to 2085. The expected term of the rights-of way and land leases was estimated to approximate the life of the related reserves. The expected term of the rights-of way and land leases was estimated to approximate the life of the related reserves at the inception of the lease.

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):

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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):

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The table below presents the weighted average remaining lease term and discount rate related to leases (in thousands):

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The table below presents the supplemental cash flow information related to leases (in thousands):

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Undiscounted future minimum payments as of December 31, 2023 are as follows (in thousands):

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