Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.23.3
Leases
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Leases Leases
Lessee Accounting

The Company recognizes a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases with a term in excess of 12 months. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term, while finance leases include both an operating expense and an interest expense component. For all leases with a term of 12 months or less, the Company has elected the practical expedient to not recognize lease assets and liabilities and recognizes lease expense for these short-term leases on a straight-line basis over the lease term.

The Company’s operating leases are primarily for rail cars, real estate, and equipment and its finance leases are primarily for machinery and equipment. Generally, the Company does not include renewal or termination options in its assessment of the leases unless extension or termination of certain assets is deemed to be reasonably certain. The accounting for some of the Company’s leases may require significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rates to utilize in the net present value calculation of lease payments for lease agreements which do not provide an implicit rate and assessing the likelihood of renewal or termination options. Lease agreements that contain a lease and non-lease component are generally accounted for as a single lease component. 

The rate implicit in the Company’s leases is not readily determinable. Therefore, the Company uses its incremental borrowing rate based on information available at the commencement date of its leases in determining the present value of lease payments. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
Lease expense consisted of the following for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Operating lease expense $ 1,928  $ 1,668  $ 5,568  $ 5,189 
Short-term lease expense 37  14  476  72 
Finance lease expense:
Amortization of right-of-use assets 445  447  1,579  1,252 
Interest on lease liabilities 38  44  135  138 
Total lease expense $ 2,448  $ 2,173  $ 7,758  $ 6,651 

Supplemental balance sheet information related to leases as of September 30, 2023 and December 31, 2022 is as follows (in thousands):
September 30, December 31,
2023 2022
Operating leases:
Operating lease right-of-use assets $ 11,147  $ 10,656 
Current operating lease liability 6,081  5,447 
Long-term operating lease liability 4,912  4,913 
Finance leases:
Property, plant and equipment, net $ 4,133  $ 7,267 
Accrued expenses and other current liabilities 1,863  4,003 
Other liabilities 1,989  2,602 

Other supplemental information related to leases for the three and nine months ended September 30, 2023 and 2022 and as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 1,826  $ 1,416  $ 5,419  $ 5,011 
Operating cash flows from finance leases 38  44  135  138 
Financing cash flows from finance leases 869  456  3,547  1,365 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 1,338  $ 339  $ 5,554  $ 3,158 
Finance leases 201  —  507  — 
September 30, December 31,
2023 2022
Weighted-average remaining lease term:
Operating leases 2.5 years 2.9 years
Finance leases 2.4 years 2.0 years
Weighted-average discount rate:
Operating leases 8.2  % 4.1  %
Finance leases 4.6  % 4.3  %

Maturities of lease liabilities as of September 30, 2023 are as follows (in thousands):
Operating Leases Finance Leases
Remainder of 2023 $ 1,986  $ 880 
2024 6,185  1,316 
2025 2,725  809 
2026 725  1,067 
2027 174  — 
Thereafter 450  — 
Total lease payments 12,245  4,072 
Less: Present value discount 1,252  220 
Present value of lease payments $ 10,993  $ 3,852 

Lessor Accounting

Certain of the Company’s agreements with its customers for drilling services, aviation services and remote accommodation services contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer obtains substantially all of the economic benefits of the identified assets throughout the period of use and (iii) the customer directs the use of the identified assets throughout the period of use. The Company has elected to apply the practical expedient provided to lessors to combine the lease and non-lease components of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component.
    
The Company’s lease agreements are generally short-term in nature and lease revenue is recognized over time based on a monthly, daily or hourly rate basis. The Company does not provide an option for the lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets. The Company recognized lease revenue of $0.8 million and $0.7 million during the three months ended September 30, 2023 and 2022, respectively, and $2.4 million for each of the nine months ended September 30, 2023 and 2022, respectively, which is included in “services revenue” and “services revenue - related parties” on the unaudited condensed consolidated statements of comprehensive (loss) income.
Leases Leases
Lessee Accounting

The Company recognizes a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases with a term in excess of 12 months. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term, while finance leases include both an operating expense and an interest expense component. For all leases with a term of 12 months or less, the Company has elected the practical expedient to not recognize lease assets and liabilities and recognizes lease expense for these short-term leases on a straight-line basis over the lease term.

The Company’s operating leases are primarily for rail cars, real estate, and equipment and its finance leases are primarily for machinery and equipment. Generally, the Company does not include renewal or termination options in its assessment of the leases unless extension or termination of certain assets is deemed to be reasonably certain. The accounting for some of the Company’s leases may require significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rates to utilize in the net present value calculation of lease payments for lease agreements which do not provide an implicit rate and assessing the likelihood of renewal or termination options. Lease agreements that contain a lease and non-lease component are generally accounted for as a single lease component. 

The rate implicit in the Company’s leases is not readily determinable. Therefore, the Company uses its incremental borrowing rate based on information available at the commencement date of its leases in determining the present value of lease payments. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
Lease expense consisted of the following for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Operating lease expense $ 1,928  $ 1,668  $ 5,568  $ 5,189 
Short-term lease expense 37  14  476  72 
Finance lease expense:
Amortization of right-of-use assets 445  447  1,579  1,252 
Interest on lease liabilities 38  44  135  138 
Total lease expense $ 2,448  $ 2,173  $ 7,758  $ 6,651 

Supplemental balance sheet information related to leases as of September 30, 2023 and December 31, 2022 is as follows (in thousands):
September 30, December 31,
2023 2022
Operating leases:
Operating lease right-of-use assets $ 11,147  $ 10,656 
Current operating lease liability 6,081  5,447 
Long-term operating lease liability 4,912  4,913 
Finance leases:
Property, plant and equipment, net $ 4,133  $ 7,267 
Accrued expenses and other current liabilities 1,863  4,003 
Other liabilities 1,989  2,602 

Other supplemental information related to leases for the three and nine months ended September 30, 2023 and 2022 and as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 1,826  $ 1,416  $ 5,419  $ 5,011 
Operating cash flows from finance leases 38  44  135  138 
Financing cash flows from finance leases 869  456  3,547  1,365 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 1,338  $ 339  $ 5,554  $ 3,158 
Finance leases 201  —  507  — 
September 30, December 31,
2023 2022
Weighted-average remaining lease term:
Operating leases 2.5 years 2.9 years
Finance leases 2.4 years 2.0 years
Weighted-average discount rate:
Operating leases 8.2  % 4.1  %
Finance leases 4.6  % 4.3  %

Maturities of lease liabilities as of September 30, 2023 are as follows (in thousands):
Operating Leases Finance Leases
Remainder of 2023 $ 1,986  $ 880 
2024 6,185  1,316 
2025 2,725  809 
2026 725  1,067 
2027 174  — 
Thereafter 450  — 
Total lease payments 12,245  4,072 
Less: Present value discount 1,252  220 
Present value of lease payments $ 10,993  $ 3,852 

Lessor Accounting

Certain of the Company’s agreements with its customers for drilling services, aviation services and remote accommodation services contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer obtains substantially all of the economic benefits of the identified assets throughout the period of use and (iii) the customer directs the use of the identified assets throughout the period of use. The Company has elected to apply the practical expedient provided to lessors to combine the lease and non-lease components of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component.
    
The Company’s lease agreements are generally short-term in nature and lease revenue is recognized over time based on a monthly, daily or hourly rate basis. The Company does not provide an option for the lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets. The Company recognized lease revenue of $0.8 million and $0.7 million during the three months ended September 30, 2023 and 2022, respectively, and $2.4 million for each of the nine months ended September 30, 2023 and 2022, respectively, which is included in “services revenue” and “services revenue - related parties” on the unaudited condensed consolidated statements of comprehensive (loss) income.
Leases Leases
Lessee Accounting

The Company recognizes a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases with a term in excess of 12 months. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term, while finance leases include both an operating expense and an interest expense component. For all leases with a term of 12 months or less, the Company has elected the practical expedient to not recognize lease assets and liabilities and recognizes lease expense for these short-term leases on a straight-line basis over the lease term.

The Company’s operating leases are primarily for rail cars, real estate, and equipment and its finance leases are primarily for machinery and equipment. Generally, the Company does not include renewal or termination options in its assessment of the leases unless extension or termination of certain assets is deemed to be reasonably certain. The accounting for some of the Company’s leases may require significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rates to utilize in the net present value calculation of lease payments for lease agreements which do not provide an implicit rate and assessing the likelihood of renewal or termination options. Lease agreements that contain a lease and non-lease component are generally accounted for as a single lease component. 

The rate implicit in the Company’s leases is not readily determinable. Therefore, the Company uses its incremental borrowing rate based on information available at the commencement date of its leases in determining the present value of lease payments. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
Lease expense consisted of the following for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Operating lease expense $ 1,928  $ 1,668  $ 5,568  $ 5,189 
Short-term lease expense 37  14  476  72 
Finance lease expense:
Amortization of right-of-use assets 445  447  1,579  1,252 
Interest on lease liabilities 38  44  135  138 
Total lease expense $ 2,448  $ 2,173  $ 7,758  $ 6,651 

Supplemental balance sheet information related to leases as of September 30, 2023 and December 31, 2022 is as follows (in thousands):
September 30, December 31,
2023 2022
Operating leases:
Operating lease right-of-use assets $ 11,147  $ 10,656 
Current operating lease liability 6,081  5,447 
Long-term operating lease liability 4,912  4,913 
Finance leases:
Property, plant and equipment, net $ 4,133  $ 7,267 
Accrued expenses and other current liabilities 1,863  4,003 
Other liabilities 1,989  2,602 

Other supplemental information related to leases for the three and nine months ended September 30, 2023 and 2022 and as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 1,826  $ 1,416  $ 5,419  $ 5,011 
Operating cash flows from finance leases 38  44  135  138 
Financing cash flows from finance leases 869  456  3,547  1,365 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 1,338  $ 339  $ 5,554  $ 3,158 
Finance leases 201  —  507  — 
September 30, December 31,
2023 2022
Weighted-average remaining lease term:
Operating leases 2.5 years 2.9 years
Finance leases 2.4 years 2.0 years
Weighted-average discount rate:
Operating leases 8.2  % 4.1  %
Finance leases 4.6  % 4.3  %

Maturities of lease liabilities as of September 30, 2023 are as follows (in thousands):
Operating Leases Finance Leases
Remainder of 2023 $ 1,986  $ 880 
2024 6,185  1,316 
2025 2,725  809 
2026 725  1,067 
2027 174  — 
Thereafter 450  — 
Total lease payments 12,245  4,072 
Less: Present value discount 1,252  220 
Present value of lease payments $ 10,993  $ 3,852 

Lessor Accounting

Certain of the Company’s agreements with its customers for drilling services, aviation services and remote accommodation services contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer obtains substantially all of the economic benefits of the identified assets throughout the period of use and (iii) the customer directs the use of the identified assets throughout the period of use. The Company has elected to apply the practical expedient provided to lessors to combine the lease and non-lease components of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component.
    
The Company’s lease agreements are generally short-term in nature and lease revenue is recognized over time based on a monthly, daily or hourly rate basis. The Company does not provide an option for the lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets. The Company recognized lease revenue of $0.8 million and $0.7 million during the three months ended September 30, 2023 and 2022, respectively, and $2.4 million for each of the nine months ended September 30, 2023 and 2022, respectively, which is included in “services revenue” and “services revenue - related parties” on the unaudited condensed consolidated statements of comprehensive (loss) income.