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Revenues from Contracts with Customers | 9 Months Ended
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Sep. 30, 2018
Revenue From Contract With Customer [Abstract] |
Revenues from Contracts with Customers | (5) REVENUES FROM CONTRACTS WITH CUSTOMERS Revenue Recognition Natural gas, NGLs and oil sales revenues are generally recognized at the point in time that control of the product is transferred to the customer and collectability is reasonably assured. See a more detailed summary of our product types below. Natural Gas and NGLs Sales Under our gas processing contracts, we deliver natural gas to a midstream processing entity at the wellhead or the inlet of the midstream processing entity’s system. The midstream processing entity processes the natural gas and remits proceeds to us for the resulting sales of NGLs and residue gas. In these scenarios, we evaluate whether we are the principal or the agent in the transaction. For those contracts that we have concluded that we are the principal, the ultimate third party is our customer and we recognize revenue on a gross basis, with gathering, compression, processing, and transportation fees presented as an expense. Alternatively, for those contracts that we have concluded that we are the agent, the midstream processing entity is our customer and we recognize revenue based on the net amount of the proceeds received from the midstream processing entity. In certain natural gas processing agreements, we may elect to take our residue gas and/or NGLs in-kind at the tailgate of the midstream entity’s processing plant and subsequently market the product on our own. Through the marketing process, we deliver product to the ultimate third party purchaser at a contractually agreed upon delivery point and receive a specified index price from the purchaser. In this scenario, we recognize revenue when control transfers to the purchaser at the delivery point based on the index price received from the purchaser. The gathering, processing and compression fees attributable to the gas processing contract, as well as any transportation fees incurred to deliver the product to the purchaser, are presented as transportation, gathering, processing and compression expense. Oil Sales Our oil sales contracts are generally structured in one of the following ways:
| • | We sell oil production at the wellhead and collect an agreed upon index price, net of transportation incurred by the purchaser (that is, a netback arrangement). In this scenario, we recognize revenue when control transfers to the purchaser at the wellhead at the net price received. |
| • | We deliver oil to the purchaser at a contractually agreed upon delivery point at which the purchaser takes custody, title, and risk of loss of the product. Under this arrangement, we pay a third party to transport the product and receive a specified index price from the purchaser with no deduction. In this scenario, we recognize revenue when control transfers to the purchaser at the delivery point based on the price received from the purchaser. The third party costs are recorded as transportation, gathering, processing and compression expense. |
Brokered Natural Gas, Marketing and Other We realize brokered margins as a result of buying natural gas or NGLs utilizing separate purchase transactions, generally with separate counterparties and subsequently selling that natural gas or NGLs under our existing contracts to fulfill our contract commitments or utilizing existing infrastructure contracts to economically utilize available capacity. In these arrangements, we take control of the natural gas purchased prior to delivery of that gas under our existing gas contracts with a separate counterparty. Revenues and expenses related to brokering natural gas are reported gross as part of revenues and expenses in accordance with applicable accounting standards. Our net brokered margin was a loss of $6.7 million in third quarter 2018 and a loss of $7.0 million in first nine months 2018. Disaggregation of Revenue We have identified three material revenue streams in our business: natural gas sales, NGLs sales and oil sales. Brokered revenue attributable to each product sales type is included here because the volume of product that we purchase is subsequently sold to separate counterparties in accordance with existing sales contracts under which we also sell our production. Revenue attributable to each of our identified revenue streams is disaggregated below (in thousands):
|  | Three Months Ended September 30, 2018 |  |  |  | Nine Months Ended September 30, 2018 |
Natural gas sales (a) | $ | 500,194 |  |  | $ | 1,449,148 |
NGLs sales (b) |  | 278,410 |  |  |  | 706,673 |
Oil sales |  | 67,212 |  |  |  | 206,077 |
Total | $ | 845,816 |  |  | $ | 2,361,898 |
(a) | Natural gas sales revenue reported above for the third quarter includes $105.8 million of brokered revenues and $3.7 million of marketing revenue. The nine months includes $255.1 million of brokered revenues and $11.4 million of marketing revenue.
(b) | NGLs sales revenue reported above for the third quarter includes ($153,000) of brokered revenues and for nine months includes $880,000 of brokered revenues.
Principal versus Agent We engage in various types of transactions in which midstream entities process our wet gas and, in some scenarios, subsequently market the resulting NGLs and residue gas to third-party customers on our behalf. These types of transactions require judgment to determine whether we are the principal or the agent in the contract and, as a result, whether revenues are recorded gross or net. Transaction Price Allocated to Remaining Performance Obligations A significant number of our product sales are short-term in nature with a contract term of one year or less. For those contracts, we have utilized the practical expedient allowed in the new revenue accounting standard that exempts us from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. For our product sales that have a contract term greater than one year, we have also utilized the practical expedient that states that we are not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. Currently, our product sales that have a contractual term greater than one year have no long-term fixed consideration. Contract Balances Under our sales contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our product sales contracts do not give rise to contract assets or liabilities. Accounts receivable attributable to our revenue contracts with customers was $354.4 million at September 30, 2018 and $305.7 million at December 31, 2017. Prior−Period Performance Obligations We record revenue in the month production is delivered to the purchaser. However, settlement statements for certain gas and NGLs sales may be received for 30 to 90 days after the date production is delivered, and as a result, we are required to estimate the amount of production that was delivered to the purchaser and the price that will be received for the sale of the product. We record the differences between our estimates and the actual amounts for product sales in the month that payment is received from the purchaser. We have internal controls in place for our estimation process and any identified differences between our revenue estimates and actual revenue received historically have not been significant. For the three months and the nine months ended September 30, 2018, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

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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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