The Company leases various facilities and vehicles under noncancelable operating lease agreements. The remaining lease terms for our leases range from 1 month to 14 years. These leases often include options to extend the term of the lease which may be for periods of up to 5 years. When it is reasonably certain that the option will be exercised, the impact of the renewal term is included in the lease term for purposes of determining total future lease payments and measuring the ROU asset and lease liability. We apply the short-term lease policy election, which allows us to exclude from recognition leases with an original term of 12 months or less. We have not entered into any finance leases as of March 31, 2026.

For the three months ended March 31, 2026, the components of the Company’s lease expense were as follows (in thousands):


	Three months ended March 31,
	2026		2025
Operating lease cost	$	1,723	$	1,739
Short-term lease cost		32		31
Variable lease cost		152		109
Total Lease Cost	$	1,907	$	1,879

Supplemental balance sheet information related to leases was as follows (in thousands):


	2026			2025
Weighted-average remaining lease term (in years)		7.74			7.15
Weighted average discount rate		8.22	%		7.73	%

Future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2026 were as follows (in thousands):



2026	$	4,689
2027		5,107
2028		4,458
2029		3,684
2030		3,518
Thereafter		12,764
Total lease payments	$	34,220
Less: imputed interest		(9,254	)
Present value of lease liabilities	$	24,966

The Company leases downhole drilling tools to companies in the oil and natural gas industry. Such leases are accounted for in accordance with ASC 842. For the three months ended March 31, 2026 and 2025, tool rental revenue was approximately $28.9 million and $34.5 million, respectively. Our lease contract periods are short-term in nature and are typically daily, monthly, per well, or footage based. Due to the short term nature of the contracts, no maturity table is presented.

NOTE 13 – LEASES