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Revenue Recognition
 12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition

4. REVENUE RECOGNITION

 

The Company’s revenues are primarily derived from its non-operated interest in the sales of oil and natural gas production. The sales of oil and natural gas are made under contracts that operators of the wells have negotiated with third-party customers. The Company receives payment from the sale of oil and natural gas production between one to three months after delivery. At the end of each period when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in oil and natural gas sales receivable in the consolidated balance sheets. Variances between the Company’s estimated revenue and actual payments are recorded in the month the payment is received; however, differences have been and are insignificant. Accordingly, the variable consideration is not constrained. As a non-operator of its oil and natural gas properties, the Company records its share of the revenues and expenses based upon the information provided by the operators within the revenue statements.

 

The Company’s oil and natural gas production is typically sold at delivery points to various purchasers under contract terms that are common in the oil and natural gas industry. Regardless of the contract type, the terms of these contracts compensate the well operators for the value of the oil and natural gas at specified prices, and then the well operators remit payment to the Company for its share in the value of the oil and natural gas sold.

 

During the year ended December 31, 2020, the Company acquired operated oil and gas producing properties. The Company sells its oil production at the delivery point specified in the contract and collects an agreed-upon index price, net of pricing differentials. The purchaser takes custody, title and risk of loss of the oil at the delivery point; therefore, control passes at the delivery point. The Company recognizes revenue at the net price received when control transfers to the purchaser. Natural gas and natural gas liquid (“NGL”) are sold at the lease location, which is generally when control of the natural gas and NGL transfers to the purchaser, and revenue is recognized as the amount received from the purchaser.

 

The Company does not disclose the values of unsatisfied performance obligations under its contracts with customers as it applies the practical exemption in accordance with ASC 606. The exemption applies to variable consideration that is recognized as control of the product is transferred to the customer. Since each unit of product represents a separate performance obligation, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to the remaining performance obligations is not required.

 

The Company reports revenue as the gross amount received from the well operators before taking into account production taxes and transportation costs. Production taxes are reported separately and transportation costs are included in lease operating expense in the accompanying consolidated statements of operations. The revenue and costs in the consolidated statements of operations were reported gross for the years ended December 31, 2020 and 2019, as the gross amounts were known.

 

The Company disaggregates revenues from its share of revenue from the sale of oil and natural gas and liquids by state. The Company does not disaggregate revenues further by operated revenues and non-operated revenues because operated revenues accounted for only 6.1% of total revenues in 2020. The Company’s revenues in its North Dakota, Texas and other regions for the years ended December 31, 2020 and 2019, are presented in the following table:

 

    Year Ended
December 31,		  
    2020     2019  
    (in thousands)  
Revenue:                
North Dakota                
Oil   $ 1,240     $ 2,449  
Natural gas and liquids     102       177  
Total     1,342       2,626  
                 
Texas                
Oil     875       3,700  
Natural gas and liquids     82       247  
Total     957       3,947  
                 
Other                
Oil     12       -  
Natural gas and liquids     19       -  
Total     31       -  
                 
Combined Total   $ 2,330     $ 6,573