8. Leases

Our lease contracts consist of office leases, a land lease and various pipeline right-of-way contracts. For these contracts, a right-of-use (“ROU”) asset and lease liability was established based on our assumptions of the term, inflation rates and incremental borrowing rates. At inception, contracts are reviewed to determine whether the agreement contains a lease. To the extent an arrangement is determined to include a lease, it is classified as either an operating or a finance lease, which dictates the pattern of expense recognition in the income statement. All of these lease contracts are operating leases.

During 2020, we terminated the existing office lease and executed a new lease on separate office space. The term of the previous office lease ended in December 2020. The term of the new office lease extends to February 2032 and has the option to renew for up to another 10 years. During 2019, various pipeline rights-of-way contracts and a land lease were acquired, assumed, renewed or otherwise entered into, primarily in conjunction with acquiring the Mobile Bay Properties. The term of each pipeline right-of-way contract is 10 years with various effective dates, and each has an option to renew for up to another ten years. It is expected renewals beyond 10 years can be obtained as renewals were granted to the previous lessees. The land lease has an option to renew every five years extending to 2085. The expected term of the rights-of way and land leases was estimated to approximate the life of the related reserves. We recorded ROU assets and lease liabilities using a discount rate of 9.75% for the office lease and 10.75% for the other leases due to their longer expected term.

The amounts disclosed herein primarily represent costs associated with properties operated by the Company that are presented on a gross basis and do not reflect the Company’s net proportionate share of such amounts. A portion of these costs have been or will be billed to other working interest owners. The Company’s share of these costs is included in property and equipment, lease operating expense or general and administrative expense, as applicable. The components of lease costs were as follows (in thousands):

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The present value of the fixed lease payments recorded as the Company’s right-of-use asset and liability, adjusted for initial direct costs and incentives are as follows (in thousands):

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The table below presents the weighted average remaining lease term and discount rate related to leases (in thousands):

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The table below presents the supplemental cash flow information related to leases (in thousands):

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Undiscounted future minimum payments as of December 31, 2021 are as follows (in thousands):

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