Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.22.2.2
Leases
9 Months Ended
Sep. 30, 2022
Leases [Abstract]  
Leases Leases
Operating Leases
Description of Lease
In March 2013, we entered into a ten year real estate lease contract (the "Real Estate Lease") with a commencement date of April 1, 2013, as part of the expansion of our equipment yard. During the nine months ended September 30, 2022 and 2021, the Company made lease payments of approximately $0.3 million and $0.3 million, respectively. The assets and liabilities under this contract are allocated between our operating segments. In addition to the contractual lease period, the contract includes an optional renewal of up to ten years, and in management's judgment the exercise of the renewal option is not reasonably assured. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Real Estate Lease does not contain variability in payments resulting from either an index change or rate change.
We accounted for our Real Estate Lease as an operating lease. This conclusion resulted from the existence of the right to control the use of the assets throughout the lease term. We did not account for the land separately from the building of the Real Estate Lease because we concluded that the accounting effect was insignificant. As of September 30, 2022, the weighted average discount rate and remaining lease term was approximately 6.7% and 0.5 years, respectively.
As part of our expansion of our hydraulic fracturing equipment maintenance program, we entered into a two year maintenance facility real estate lease contract (the "Maintenance Facility Lease") with a commencement date of March 14, 2022. During the nine months ended September 30, 2022, the Company made lease payments of approximately $0.2 million. In addition to the contractual lease period, the contract includes an optional renewal for three additional periods of one year each, and in management's judgment the exercise of the renewal option is not reasonably assured. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Maintenance Facility Lease does not contain variability in payments resulting from either an index change or rate change.
We accounted for our Maintenance Facility Lease as an operating lease. Our assumptions resulted from the existence of the right to control the use of the assets throughout the lease term. We did not account for the land separately from the building of the Maintenance Facility Lease because we concluded that the accounting effect was insignificant. As of September 30, 2022, the weighted average discount rate and remaining lease term was approximately 3.4% and 1.4 years, respectively.
In August 2022, we entered into a three year equipment lease (the "Electric Fleet Lease") for two fleets with 60,000 hydraulic horsepower ("HHP") per fleet. The lease has not yet commenced. We currently do not control the assets under the Electric Fleet Lease because they are currently being manufactured by the vendor and we have not taken possession of the assets. The manufacturing and delivery of the electric fleets is estimated to take up to ten months from the lease execution date. Given that the Company has not yet taken possession of the assets under the Electric Fleet Lease, the Company has not accounted for the right of use and lease obligation in its balance sheet as of September 30, 2022.
As of September 30, 2022, the total operating lease right-of-use asset cost was approximately $1.9 million, and accumulated amortization was approximately $1.3 million. As of December 31, 2021, our total operating lease right-of-use asset cost was approximately $1.2 million, and accumulated amortization was approximately $0.8 million. For the nine months ended September 30, 2022 and 2021, we recorded operating lease cost of approximately $0.4 million and $0.3 million, respectively, in our statement of operations.
Maturity Analysis of Lease Liabilities
The maturity analysis of liabilities and reconciliation to undiscounted and discounted remaining future lease payments for our operating lease as of September 30, 2022 are as follows:
($ in thousands) Totals
2022 $ 181 
2023 398 
2024 50 
Total undiscounted future lease payments 629 
Less: amount representing interest (15)
Present value of future lease payments (lease obligation) $ 614 
The total cash paid for amounts included in the measurement of our operating lease liability during the nine months ended September 30, 2022 was approximately $0.5 million. The non-cash lease obligation we recorded upon execution of the Maintenance Facility Lease was approximately $0.6 million. During the nine months ended September 30, 2021, total cash paid for amounts included in the measurement of our operating lease liability was approximately $0.3 million.
Short-Term Leases
We elected the practical expedient, consistent with ASC 842, to exclude leases with an initial term of twelve months or less ("short-term lease") from our balance sheet and continue to record short-term leases as a period expense. For the nine months ended September 30, 2022 and 2021 our short-term lease expense was approximately $0.6 million and $0.4 million, respectively.