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Revenues | 9 Months Ended
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Sep. 30, 2018
Revenues [Abstract] |
Revenues | Note 9. Revenues We classify our revenues into sales of products and midstream services. Product sales relate primarily to our various marketing activities whereas midstream services represent our other integrated businesses (i.e., gathering, processing, transportation, fractionation, storage and terminaling). The following table presents our revenues by business segment, and further by revenue type, for the periods indicated:
|  | For the Three Months Ended September 30, |  |  | For the Nine Months Ended September 30, |
|  | 2018 (1) |  |  | 2017 (2) |  |  | 2018 (1) |  |  | 2017 (2) |
NGL Pipelines & Services: |  |  |  |  |  |  |  |  |  |  |  |
Sales of NGLs and related products |  | $ | 3,898.2 |  |  | $ | 2,415.3 |  |  | $ | 9,324.5 |  |  | $ | 7,460.5 |
Midstream services |  |  | 724.7 |  |  |  | 499.0 |  |  |  | 1,985.4 |  |  |  | 1,420.2 |
Total |  |  | 4,622.9 |  |  |  | 2,914.3 |  |  |  | 11,309.9 |  |  |  | 8,880.7 |
Crude Oil Pipelines & Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales of crude oil |  |  | 2,209.0 |  |  |  | 1,589.0 |  |  |  | 8,082.9 |  |  |  | 4,912.7 |
Midstream services |  |  | 285.9 |  |  |  | 207.7 |  |  |  | 764.1 |  |  |  | 590.8 |
Total |  |  | 2,494.9 |  |  |  | 1,796.7 |  |  |  | 8,847.0 |  |  |  | 5,503.5 |
Natural Gas Pipelines & Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales of natural gas |  |  | 589.0 |  |  |  | 568.9 |  |  |  | 1,681.5 |  |  |  | 1,673.5 |
Midstream services |  |  | 261.2 |  |  |  | 227.7 |  |  |  | 766.3 |  |  |  | 670.5 |
Total |  |  | 850.2 |  |  |  | 796.6 |  |  |  | 2,447.8 |  |  |  | 2,344.0 |
Petrochemical & Refined Products Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales of petrochemicals and refined products |  |  | 1,408.9 |  |  |  | 1,194.2 |  |  |  | 4,111.6 |  |  |  | 3,519.4 |
Midstream services |  |  | 209.0 |  |  |  | 185.1 |  |  |  | 635.6 |  |  |  | 567.3 |
Total |  |  | 1,617.9 |  |  |  | 1,379.3 |  |  |  | 4,747.2 |  |  |  | 4,086.7 |
Total consolidated revenues |  | $ | 9,585.9 |  |  | $ | 6,886.9 |  |  | $ | 27,351.9 |  |  | $ | 20,814.9 |
(1) Revenues are accounted for under ASC 606 upon implementation at January 1, 2018. (2) Revenues are accounted for under ASC 605 for historical periods prior to January 1, 2018. |
Substantially all of our revenues are derived from contracts with customers as defined within ASC 606. In total, product sales and midstream services accounted for 85% and 15%, respectively, of our consolidated revenues for the three and nine months ended September 30, 2018. During the three and nine months ended September 30, 2017, product sales and midstream services accounted for 84% and 16%, respectively, of our consolidated revenues. Apart from the following information regarding natural gas processing, the description of our significant revenue streams by business segment found under Note 3 of the 2017 Form 10-K have not changed in connection with the adoption of ASC 606.
|  | Natural gas processing utilizes service contracts that are either fee-based, commodity-based or a combination of the two. Our commodity-based contracts include keepwhole, margin-band, percent-of-liquids, percent-of-proceeds and contracts featuring a combination of commodity and fee-based terms. When a cash fee for natural gas processing services is stipulated by a contract, we record revenue as a producer’s natural gas has been processed.
Under ASC 605, our natural gas processing business did not recognize revenue in connection with non-cash consideration (the “equity NGL volumes”) it received under percent-of-liquids and similar arrangements. We recognized revenue when the associated NGLs were delivered and sold to downstream customers under NGL marketing product sales contracts. Under ASC 606, our natural gas processing business recognizes the value of the equity NGL volumes it receives from customers as a form of midstream service revenue. The value assigned to this non-cash consideration and related inventory is based on the market value of the equity NGLs we are entitled to when the services are performed. We also recognize revenue, along with a corresponding cost of sales, when the NGLs are delivered and sold to downstream customers under NGL marketing product sales contracts. The additional service revenue recognized for the non-cash consideration increased our total revenues by approximately 2% for the nine months ended September 30, 2018 when compared to the amount of revenues we would have recognized under ASC 605 for the quarter. Given the rapid turnover of our inventories of NGL products each month, we do not expect a significant change in our gross operating margin from natural gas processing and related NGL marketing activities as a result of the changes required by ASC 606. Unbilled Revenue and Deferred Revenue The following table provides information regarding our contract assets and contract liabilities at September 30, 2018:
Contract Asset | Location |  | Balance |
Unbilled revenue (current amount) | Prepaid and other current assets |  | $ | 188.6 |
Unbilled revenue (noncurrent) | Other assets |  |  | -- |
Total |  |  | $ | 188.6 |
Contract Liability | Location |  | Balance |
Deferred revenue (current amount) | Other current liabilities |  | $ | 94.4 |
Deferred revenue (noncurrent) | Other long-term liabilities |  |  | 191.2 |
Total |  |  | $ | 285.6 |
The following table presents significant changes in our unbilled revenue and deferred revenue balances during the nine months ended September 30, 2018:
|  | Unbilled Revenue |  |  | Deferred Revenue |
Balance at January 1, 2018 (upon adoption of ASC 606) |  | $ | -- |  |  | $ | 224.7 |
Amount included in opening balance transferred to other accounts during period (1) |  |  | -- |  |  |  | (83.5 | )
Amount recorded during period |  |  | 224.1 |  |  |  | 334.3 |
Amounts recorded during period transferred to other accounts (1) |  |  | (37.7 | ) |  |  | (189.9 | )
Amount recorded in connection with business combination |  |  | 2.2 |  |  |  | -- |
Balance at September 30, 2018 |  | $ | 188.6 |  |  | $ | 285.6 |
(1) Unbilled revenues are transferred to accounts receivable once we have an unconditional right to consideration from the customer. Deferred revenues are recognized as revenue upon satisfaction of our performance obligation to the customer. |
Remaining Performance Obligations The following table presents estimated fixed consideration from contracts with customers that contain minimum volume commitments, deficiency and similar fees and the term of the contracts exceeds one year. These amounts represent the revenues we expect to recognize in future periods from these contracts at September 30, 2018. For a significant portion of our revenue, we bill customers a contractual rate for the services provided multiplied by the amount of volume handled in a given period. We have the right to invoice the customer in the amount that corresponds directly with the value of our performance completed to date. Therefore, we are not required to disclose information about the variable consideration of remaining performance obligations as we recognize revenue equal to the amount that we have the right to invoice.
Remainder of 2018 |  |  | 2019 |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | Thereafter |  |  | Total |
$ | 816.6 |  |  | $ | 3,361.4 |  |  | $ | 3,036.9 |  |  | $ | 2,528.8 |  |  | $ | 2,050.0 |  |  | $ | 8,718.0 |  |  | $ | 20,511.7 |
Impact of Change in Accounting Policy – ASC 606 Transition Disclosures The following information and tables are provided to summarize the material impacts of adopting ASC 606 on our consolidated financial statements for the three and nine months ended September 30, 2018. As noted previously, additional service revenue and related inventory is now recognized in connection with the equity NGL volumes (a form of non-cash consideration) we receive under natural gas processing agreements. When the inventory is sold through our NGL marketing activities, we reflect additional cost of sales amounts within our operating costs and expenses. Unbilled revenues have historically been presented as a component of accounts receivable on our consolidated balance sheets. Upon implementation of ASC 606, we reclassified these amounts to “Prepaid and other current assets” since these amounts represent conditional rights to consideration. Once we have an unconditional right to consideration, the amount is transferred to accounts receivable. Historically, amounts received from customers as CIACs related to pipeline construction activities and production well tie-ins have been netted against property, plant and equipment on our consolidated balance sheets and presented as a cash inflow within the investing activities section of our statements of consolidated cash flows. Upon implementation of ASC 606, these amounts are now recognized as a component of midstream service revenue on our statement of operations and are a component of cash provided by operating activities as presented on our statements of consolidated cash flows. Unaudited Condensed Consolidated Balance Sheet Information at September 30, 2018
|  | Impact of change in accounting policy |
|  | Balances without adoption of ASC 606 |  |  | Impact of adoption of ASC 606 |  |  | As Reported |
Assets |  |  |  |  |  |  |  |  |
Accounts receivable – trade, net |  | $ | 4,411.5 |  |  | $ | (188.6 | ) |  | $ | 4,222.9 |
Prepaid and other current assets |  | $ | 421.3 |  |  | $ | 188.6 |  |  | $ | 609.9 |
Property, plant and equipment, net |  | $ | 37,727.7 |  |  | $ | 75.2 |  |  | $ | 37,802.9 |
Other assets |  | $ | 260.6 |  |  | $ | -- |  |  | $ | 260.6 |
Liabilities and Equity |  |  |  |  |  |  |  |  |  |  |  |
Other long-term liabilities |  | $ | 679.3 |  |  | $ | 67.9 |  |  | $ | 747.2 |
Partners' equity |  | $ | 23,065.8 |  |  | $ | 7.3 |  |  | $ | 23,073.1 |
The impact of adoption of ASC 606 includes the reclassification of unbilled revenue amounts of $188.6 million from accounts receivable to other current assets. Unaudited Condensed Consolidated Statement of Operations Information for the Three Months Ended September 30, 2018
|  | Impact of change in accounting policy |
|  | Balances without adoption of ASC 606 |  |  | Impact of adoption of ASC 606 |  |  | As Reported |
Revenues |  | $ | 9,367.6 |  |  | $ | 218.3 |  |  | $ | 9,585.9 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |
Operating costs and expenses: |  | $ | 7,786.1 |  |  | $ | 215.8 |  |  | $ | 8,001.9 |
Unaudited Condensed Consolidated Statement of Operations Information for the Nine Months Ended September 30, 2018
|  | Impact of change in accounting policy |
|  | Balances without adoption of ASC 606 |  |  | Impact of adoption of ASC 606 |  |  | As Reported |
Revenues |  | $ | 26,853.2 |  |  | $ | 498.7 |  |  | $ | 27,351.9 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |
Operating costs and expenses: |  | $ | 23,285.2 |  |  | $ | 491.4 |  |  | $ | 23,776.6 |
The impact of adopting ASC 606 on revenues for the three and nine months ended September 30, 2018 includes the recognition of $215.8 million and $491.4 million, respectively, of revenues from non-cash consideration (i.e., equity NGLs) earned when providing natural gas processing services and $2.5 million and $7.3 million, respectively, recognized in connection with CIACs. Operating costs and expenses for the three and nine months ended September 30, 2018 includes $215.8 million and $491.4 million, respectively, attributable to cost of sales recognized when the equity NGL products are sold and delivered to customers. Unaudited Condensed Consolidated Statement of Cash Flows Information for the Nine Months Ended September 30, 2018
|  | Impact of change in accounting policy |
|  | Balances without adoption of ASC 606 |  |  | Impact of adoption of ASC 606 |  |  | As Reported |
Operating activities: |  |  |  |  |  |  |  |  |
Net income |  | $ | 2,926.0 |  |  | $ | 7.3 |  |  | $ | 2,933.3 |
Net effect of changes in operating accounts |  | $ | (329.8 | ) |  | $ | 67.9 |  |  | $ | (261.9 | )
Investing activities: |  |  |  |  |  |  |  |  |  |  |  |
Contributions in aid of construction costs |  | $ | 67.9 |  |  | $ | (67.9 | ) |  | $ | -- |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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