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 has historically entered 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.

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 June 30, 2026 were as follows (in thousands):


Remaining 2026	$	144
2027	10
2028	—
2029	—
2030	—
Total lease payments	$	154
Less: imputed interest	(1)
Total	$	153

In May 2026, the Company executed a five-year lease agreement for office space with a commencement date of September 1, 2026. As the lease had not commenced as of June 30, 2026, no right-of-use asset or lease liability was recognized. Upon commencement, the Company expects to recognize an operating lease right-of-use asset and a corresponding lease liability of approximately $5 million.

In April 2026, the Company entered into an amended drilling rig lease agreement that extends the lease term approximately two years. As of June 30, 2026, the amended lease had not commenced, and therefore no right-of-use asset or lease liability had been recognized. Upon commencement in July 2026, the Company recognized an operating lease right-of-use asset and a corresponding lease liability of approximately $22 million.


	Three Months Ended June 30, 2026		Three Months Ended June 30, 2025
Operating lease cost	$	209	$	209
Variable lease cost	—		—
Short-term lease cost	9,982		7,472
Total lease cost(1)	$	10,191	$	7,681


	Six Months Ended June 30, 2026		Six Months Ended June 30, 2025
Operating lease cost	$	418	$	1,635
Variable lease cost	—		—
Short-term lease cost	20,877		16,382
Total lease cost(1)	$	21,295	$	18,017

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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.