| Leases |
LEASES
Our leased assets consist primarily of (1) LNG vessel time charters (“vessel charters”), (2) tug vessels, (3) office space and facilities and (4) land sites, all of which are classified as operating leases except for our tug vessels at the Corpus Christi LNG terminal, which are classified as finance leases.
The following table shows the classification and location of our right-of-use assets and lease liabilities on our Consolidated Balance Sheets (in millions):
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Consolidated Balance Sheets Location |
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June 30, 2020 |
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December 31, 2019 |
Right-of-use assets—Operating |
Operating lease assets, net |
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$ |
520 |
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$ |
439 |
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Right-of-use assets—Financing |
Property, plant and equipment, net |
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55 |
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|
56 |
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Total right-of-use assets |
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$ |
575 |
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$ |
495 |
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Current operating lease liabilities |
Current operating lease liabilities |
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$ |
179 |
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$ |
236 |
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Current finance lease liabilities |
Other current liabilities |
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1 |
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1 |
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Non-current operating lease liabilities |
Non-current operating lease liabilities |
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347 |
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|
189 |
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Non-current finance lease liabilities |
Non-current finance lease liabilities |
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58 |
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|
58 |
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Total lease liabilities |
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$ |
585 |
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$ |
484 |
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The following table shows the classification and location of our lease cost on our Consolidated Statements of Operations (in millions):
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Consolidated Statements of Operations Location |
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2020 |
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2019 |
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2020 |
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2019 |
Operating lease cost (1) |
Operating costs and expenses (2) |
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$ |
98 |
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$ |
140 |
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$ |
239 |
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$ |
277 |
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Finance lease cost: |
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Amortization of right-of-use assets |
Depreciation and amortization expense |
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1 |
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1 |
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2 |
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2 |
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Interest on lease liabilities |
Interest expense, net of capitalized interest |
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3 |
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3 |
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5 |
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5 |
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Total lease cost |
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$ |
102 |
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$ |
144 |
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$ |
246 |
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$ |
284 |
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(1) |
Includes short-term lease costs of $16 million and $46 million during the three months ended June 30, 2020 and 2019, respectively, and $51 million and $93 million during the six months ended June 30, 2020 and 2019, respectively. Also includes variable lease costs paid to the lessor of $4 million and $8 million during the three months ended June 30, 2020 and 2019, respectively, and $9 million and $13 million during the six months ended June 30, 2020 and 2019, respectively.
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(2) |
Presented in cost of sales, operating and maintenance expense or selling, general and administrative expense consistent with the nature of the asset under lease. |
Future annual minimum lease payments for operating and finance leases as of June 30, 2020 are as follows (in millions):
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Years Ending December 31, |
Operating Leases (1) |
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Finance Leases |
2020 |
$ |
135 |
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$ |
5 |
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2021 |
121 |
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10 |
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2022 |
85 |
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10 |
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2023 |
71 |
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10 |
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2024 |
71 |
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10 |
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Thereafter |
221 |
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|
136 |
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Total lease payments |
704 |
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|
181 |
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Less: Interest |
(178 |
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(122 |
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Present value of lease liabilities |
$ |
526 |
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$ |
59 |
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(1) |
Does not include $1.7 billion of legally binding minimum lease payments primarily for vessel charters which were executed as of June 30, 2020 but will commence in future period primarily in the next two years and have fixed minimum lease terms of up to seven years.
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The following table shows the weighted-average remaining lease term and the weighted-average discount rate for our operating leases and finance leases:
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June 30, 2020 |
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December 31, 2019 |
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Operating Leases |
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Finance Leases |
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Operating Leases |
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Finance Leases |
Weighted-average remaining lease term (in years) |
8.6 |
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18.2 |
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8.4 |
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18.7 |
Weighted-average discount rate (1) |
7.4% |
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16.2% |
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5.2% |
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16.2% |
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(1) |
The finance leases commenced prior to the adoption of the current leasing standard under GAAP. In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying assets. |
The following table includes other quantitative information for our operating and finance leases (in millions):
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Six Months Ended June 30, |
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2020 |
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2019 |
Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases |
$ |
157 |
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$ |
174 |
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Operating cash flows from finance leases |
5 |
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5 |
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Right-of-use assets obtained in exchange for new operating lease liabilities |
246 |
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|
106 |
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LNG Vessel Subcharters
From time to time, we sublease certain LNG vessels under charter to third parties while retaining our existing obligation to the original lessor. As of June 30, 2020 and December 31, 2019, we had $1 million and $9 million in future minimum sublease payments to be received from LNG vessel subcharters, respectively, which will be recognized entirely within 2020. We recognized $23 million and $31 million of sublease income, including $8 million and $5 million of variable lease payments, during the three months ended June 30, 2020 and 2019, respectively, in other revenues on our Consolidated Statements of Operations. We recognized $75 million and $68 million of sublease income, including $23 million and $10 million of variable lease payments, during the six months ended June 30, 2020 and 2019, respectively, in other revenues on our Consolidated Statements of Operations.
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