Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Leases

v3.19.2
Note 8 - Leases
 6 Months Ended
Jun. 30, 2019
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]
8.
Leases
 
ASU
2016
-
02
was effective for us on
January 1, 2019 
and we adopted the new standard using a modified retrospective approach.  Consequently, upon transition, we recognized an ROU asset and a lease liability with
no
retained earnings impact.
 
As provided for in subsequent accounting standards updates related to ASU
2016
-
02,
we are applying the following practical expedients which provide elections to:
 
 
•
not
apply the recognition requirements to short-term leases (a lease that at commencement date has a lease term of
12
months or less and does
not
contain a purchase option);
 
  •
not
reassess whether a contract contains a lease, lease classifications between operating and financing and accounting for initial direct costs related to leases;
 
  •
not
reassess certain land easements in existence prior to
January 1, 2019;
 
  •
use hindsight in determining the lease term and assessing impairment; and
 
  •
not
separate nonlease and lease components.
 
Based on the results of our implementation process, we identified
one
 operating lease in existence at
January 1, 2019
subject to ASU
2016
-
02,
which is our real estate lease for office space in Houston, Texas that terminates in
December 2022. 
In addition, a right-of-way arrangement related to a pipeline was renewed and paid for during the
six
months ended
June 30, 2019
and was recorded as an ROU.  The term of the right-of-way arrangement is
ten
years.  During the
six
months ended
June 30, 2019,
we incurred short-term lease costs related to drilling rigs of
$11.9
 million, net to our interest, of which the majority of such costs were recorded within
Oil and natural gas properties, net
, on the Condensed Consolidated Balance Sheet.  In exercising the practical expedient, we did
not
separate nonlease and lease components for these short-term leases.  We identified
no
finance leases.
 
Houston Office Lease.
Minimum future lease payments due under the lease as
of
June 30, 2019
are
as follows:
2019
-
$0.8
 million;
2020
-
$1.6
million;
2021
-
$1.6
million and
2022
-
$1.6
million.  Expense recognized related to the Houston office lease for the
six
months ended
June 30, 2019
and
2018
was
$1.3
 million during each period.
 
As of
June 30, 2019
, we recorded an ROU asset and a lease liability using a discount rate of
9.75%.
  The discount rate (or incremental borrowing rate) was determined using the interest rate of recently issued debt instruments that were issued at par and for a similar term as the term of our lease for the office space in Houston.
 
Amounts related to leases recorded within our Condensed Consolidated Balance Sheet are as follows (in thousands):
 
   
June 30, 2019
  
ROU:
        
Prepaid expenses and other current assets:
   $
1,132
  
Other assets
    
4,328
  
Total ROU
   $
5,460
  
         
Lease liability:
        
Accrued liabilities
   $
1,133
  
Other liabilities
    
3,557
  
Total lease liability
   $
4,690
  
         
Lease incentives:
        
Prepaid expenses and other current assets (contra-asset)
   $
(223
 )
Other assets (contra-asset)
    
(734
 )
Total lease incentives
   $
(957
 )
 
The adoption of the new standard did
not
impact our Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Cash Flows or Condensed Consolidated Statements of Changes in Shareholders’ Deficit.