Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.22.2
LEASES
6 Months Ended
Jun. 30, 2022
LEASES  
LEASES

NOTE 3 – LEASES

The Company has operating leases for its offices in The Woodlands, Texas and Midland, Texas. The Midland office is under a five-year lease which began January 1, 2021. Also 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.

The Company also has month to month leases for office equipment and compressors used in its 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 new vehicles.

Future lease payments (undiscounted future cash flows) associated with these operating and financing leases as of June 30, 2022 are as follows:

    

2022

    

2023

    

2024

    

2025

    

2026

Operating lease payments(1)

$

174,563

$

356,991

$

376,855

$

384,719

$

110,096

Financing lease payments(2)

223,365

438,328

372,056

99,796

(1) The weighted average discount rate as of June 30, 2022 for operating leases was 4.50%. Based on this rate, the future lease payments above include imputed interest of $117,889. The weighted average remaining term of operating leases was 3.80 years.
(2) The weighted average discount rate as of June 30, 2022 for financing leases was 4.00%. Based on this rate, the future lease payments above include imputed interest of $59,058. The weighted average remaining term of financing leases was 2.66 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

    

June 30, 2022

    

December 31, 2021

Operating lease liability, current portion

$

301,339

$

290,766

Operating lease liability, non-current portion

 

983,995

 

1,138,319

Operating lease liability, total

$

1,285,334

$

1,429,085

Total undiscounted future cash flows

 

1,403,223

 

1,577,786

Imputed interest

 

117,889

 

148,701

Undiscounted future cash flows less imputed interest

$

1,285,334

$

1,429,085

Financing lease liability, current portion

$

407,031

$

316,514

Financing lease liability, non-current portion

 

667,456

 

343,727

Financing lease liability, total

$

1,074,487

$

660,241

Total undiscounted future cash flows

 

1,133,545

 

692,091

Imputed interest

 

59,058

 

31,850

Undiscounted future cash flows less imputed interest

$

1,074,487

$

660,241

The following table provides supplemental information regarding cash flows from operations for the three and six months ended:

Three months ended

Six months ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Operating lease costs

$

83,590

$

84,790

$

167,180

$

356,307

Short term lease costs (1)

581,799

1,046,025

1,297,602

1,938,514

Financing lease costs:

Amortization of financing lease assets (2)

110,850

68,625

227,465

104,464

Interest on lease liabilities (3)

7,280

4,078

13,793

9,006

(1) Amount included in Lease operating expenses
(2) Amount included in Depreciation, depletion and amortization
(3) Amount included in Interest expense