Commitments |
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments | Commitments Litigation
Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the Company’s financial condition, results of operations or liquidity as of December 31, 2023.
Prior to January 1, 2022, ad valorem taxes with respect to our historical royalty interests were paid directly by third parties pursuant to an existing arrangement. Since the completion of our Corporate Reorganization, we have received notice from a third party that they no longer intend to pay the ad valorem taxes related to such historical royalty interests. In order to protect the historical royalty interests from any potential tax liens for non-payment of ad valorem taxes, we have accrued and/or paid such ad valorem taxes since January 1, 2022. While we intend to seek reimbursement from the third party for such taxes, we are unable to estimate the amount and/or likelihood of such reimbursement, and accordingly, no loss recovery receivable has been recorded as of December 31, 2023.
Ongoing Arbitration with an Operator
As part of an ongoing arbitration between TPL and an operator with respect to underpayment of oil and gas royalties resulting from improper deductions of post-production costs by the operator for production periods before and through June 2023, the operator has agreed to pay $10.1 million to TPL, comprised of $8.7 million of unpaid oil and gas royalties, $0.9 million of interest and $0.5 million of damages. The full amount of $10.1 million has been recorded as a receivable, $8.7 million has been included in oil and gas royalty revenue and the remaining $1.4 million has been recorded as other income in the consolidated financial statements for the year ended December 31, 2023. The Company received payment from the operator for the full amount in January 2024.
Lease Commitments
As of December 31, 2023 and 2022, we have recorded right-of-use assets of $1.9 million and $2.5 million, respectively, and lease liabilities for $2.0 million and $2.8 million, respectively, primarily related to operating leases in connection with our administrative offices located in Dallas and Midland, Texas. The office lease agreements require monthly rent payments and expire in December 2025 and July 2027, respectively. Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease cost for each of the years ended December 31, 2023 and 2022 was $0.8 million.
While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations. There are no residual value guarantees in our lease commitments. The weighted-average lease term for our operating lease liabilities is approximately 33 months. The weighted average discount rate of our operating leases is 4.7%.
Future minimum lease payments were as follows as of December 31, 2023 (in thousands):
Rent expense for these lease agreements amounted to approximately $0.8 million for each of the years ended December 31, 2023, 2022 and 2021.
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| Commitments | Commitments Litigation
Management is not aware of any legal, environmental or other commitments or contingencies that would have a material effect on the Company’s financial condition, results of operations or liquidity as of December 31, 2023.
Prior to January 1, 2022, ad valorem taxes with respect to our historical royalty interests were paid directly by third parties pursuant to an existing arrangement. Since the completion of our Corporate Reorganization, we have received notice from a third party that they no longer intend to pay the ad valorem taxes related to such historical royalty interests. In order to protect the historical royalty interests from any potential tax liens for non-payment of ad valorem taxes, we have accrued and/or paid such ad valorem taxes since January 1, 2022. While we intend to seek reimbursement from the third party for such taxes, we are unable to estimate the amount and/or likelihood of such reimbursement, and accordingly, no loss recovery receivable has been recorded as of December 31, 2023.
Ongoing Arbitration with an Operator
As part of an ongoing arbitration between TPL and an operator with respect to underpayment of oil and gas royalties resulting from improper deductions of post-production costs by the operator for production periods before and through June 2023, the operator has agreed to pay $10.1 million to TPL, comprised of $8.7 million of unpaid oil and gas royalties, $0.9 million of interest and $0.5 million of damages. The full amount of $10.1 million has been recorded as a receivable, $8.7 million has been included in oil and gas royalty revenue and the remaining $1.4 million has been recorded as other income in the consolidated financial statements for the year ended December 31, 2023. The Company received payment from the operator for the full amount in January 2024.
Lease Commitments
As of December 31, 2023 and 2022, we have recorded right-of-use assets of $1.9 million and $2.5 million, respectively, and lease liabilities for $2.0 million and $2.8 million, respectively, primarily related to operating leases in connection with our administrative offices located in Dallas and Midland, Texas. The office lease agreements require monthly rent payments and expire in December 2025 and July 2027, respectively. Operating lease expense is recognized on a straight-line basis over the lease term. Operating lease cost for each of the years ended December 31, 2023 and 2022 was $0.8 million.
While certain of our lease agreements contain covenants governing the use of the leased assets or require us to maintain certain levels of insurance, none of our lease agreements include material financial covenants or limitations. There are no residual value guarantees in our lease commitments. The weighted-average lease term for our operating lease liabilities is approximately 33 months. The weighted average discount rate of our operating leases is 4.7%.
Future minimum lease payments were as follows as of December 31, 2023 (in thousands):
Rent expense for these lease agreements amounted to approximately $0.8 million for each of the years ended December 31, 2023, 2022 and 2021.
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