Quarterly report [Sections 13 or 15(d)]

LEASES

v3.26.3
LEASES
 9 Months Ended
Sep. 30, 2026
Leases [Abstract]  
LEASES LEASES
Nature of Leases
The Company has operating leases on certain equipment with remaining lease durations in excess of one year. The Company recognizes a right-of-use asset and lease liability on the balance sheet for all leases with lease terms of greater than one year. Short-term leases that have an initial term of one year or less are not capitalized.
The Company enters into contracts for drilling rigs with varying terms with third parties to ensure operational continuity, cost control and rig availability in its operations.
The Company rents office space for its corporate headquarters, field locations and certain other equipment from third parties. These agreements are typically structured with non-cancelable terms of one year to five years. The Company has determined these agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. The Company has included any renewal options that it has determined are reasonably certain of exercise in the determination of the lease terms.
Discount Rate
As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date 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.
Future amounts due under operating lease liabilities as of September 30, 2026 were as follows (in thousands):
Remaining 2026 $ 3,056 
2027 12,817 
2028 7,066 
2029 1,101 
2030 1,136 
Thereafter 1,071 
Total lease payments $ 26,247 
Less: imputed interest (1,823)
Total $ 24,424 
Lease Commencements
During the three months ended September 30, 2026, the Company amended a drilling rig lease contract to extend the term by approximately two years and recognized an operating lease right-of-use asset and corresponding operating lease liability of $22.2 million. In addition, the Company commenced a new five year office lease, resulting in the recognition of an operating lease right-of-use asset and corresponding operating lease liability of $4.7 million.
Lease costs incurred consisted of the following (in thousands):
Three Months Ended September 30, 2026 Three Months Ended September 30, 2025
Operating lease cost $ 3,012  $ 209 
Variable lease cost —  — 
Short-term lease cost 8,122  6,736 
Total lease cost(1)
$ 11,134  $ 6,945 

Nine Months Ended September 30, 2026 Nine Months Ended September 30, 2025
Operating lease cost $ 3,430  $ 1,844 
Variable lease cost —  — 
Short-term lease cost 28,999  23,118 
Total lease cost(1)
$ 32,429  $ 24,962 
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(1)    The majority of the Company's total lease cost was capitalized to the full cost pool, and the remainder was included in either lease operating expenses or general and administrative expenses in the accompanying consolidated statements of operations.
The weighted average remaining lease term as of September 30, 2026 and 2025 was 2.4 years and 0.95 years, respectively. The weighted average discount rate used to determine the operating lease liability as of September 30, 2026 and 2025 was 6.06% and 6.10%, respectively.