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Recently Issued Accounting Standards (Policies)
9 Months Ended
Sep. 30, 2018
Accounting Changes and Error Corrections [Abstract]  
Revenue
The changes in revenues and operating costs and expenses are due to certain marketing and transportation costs determined to have occurred after transfer of control to the purchaser. Accordingly, under ASC 606 these marketing and transportation costs are reported as a deduction to revenues.

The Company does not disclose the value 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 our remaining performance obligations is not required.

Performance obligations for the sale of oil, natural gas liquids and natural gas are satisfied at a point in time because the customer obtains control and title of the asset when the oil, natural gas liquids and natural gas is delivered to the designated sales point. Because the Company's performance obligations have been satisfied and an unconditional right to consideration exists as of the balance sheet date, the Company has recognized amounts due from contracts with customers of $150.1 million and $131.9 million at September 30, 2018 and December 31, 2017, respectively, as accounts receivable within the consolidated balance sheets.

Revenues are predominantly derived from the sale of oil, natural gas liquids and natural gas. Revenues are recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of the promised goods or services in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenue on these contracts is recognized in accordance with the five-step revenue recognition model prescribed under ASC 606. Payment is generally made on these oil, natural gas liquids and natural gas sales contracts within 30 days of the end of the calendar month in which product is delivered. The sale of oil, natural gas liquids and natural gas as presented on the consolidated statements of operations represents the Company's share of revenues net of royalties and excludes revenue interests owned by others. When selling oil, natural gas liquids and natural gas on behalf of royalty owners or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis. Taxes are not included in the transaction costs.




In accordance with ASC 606, the Company disaggregates revenues from contracts with customers by product type.
Recently Adopted Accounting Standards and Recently Issued But Not Yet Adopted Accounting Standards
Recently Adopted Accounting Standards
In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2018-02, Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendment is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted. The Company adopted this amendment for its postretirement plans with respect to the disproportionate effect of the Tax Cuts and Jobs Act to clear the effect as of January 1, 2018 that otherwise would not be cleared under current guidance until the postretirement plans have terminated. The Company had an associated $286,000 decrease to retained earnings for the adoption of this amendment.

In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendment is effective for annual periods beginning after December 15, 2017, and interim periods within those annual years. The adoption of this amendment did not impact the Company’s financial position or results of operations.

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this update require that the service cost component of net periodic postretirement benefit expense be presented in the same statement of operations line item as other employee compensation costs, while the remaining components of net periodic postretirement benefit expense are to be presented outside operating income. The amendment is effective for annual periods beginning after December 15, 2017, and interim periods within those annual years. The adoption of this amendment did not have a material impact to the Company’s financial position or results of operations.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments. This update apples to all entities that are required to present a statement of cash flows. This update provides guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. This update was effective for financial statements issued for fiscal years beginning after December 31, 2017, including interim periods within those fiscal years with early adoption permitted. This update was applied using the retrospective transition method. The adoption of this standard did not impact the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which makes a number of changes meant to simplify and improve accounting for share-based payments. The amendment was effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of this ASU effective January 1, 2017 did not have a material impact on our consolidated financial statements. Upon adoption of this new guidance, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in our consolidated statements of operations as a discrete item in the reporting period in which they occur. The presentation requirements for cash flows related to employee taxes paid for withheld shares were adjusted retrospectively. These cash outflows, which were historically presented as an operating activity, were classified as a financing activity under taxes paid for shares withheld on the consolidated statements of cash flows. The Company also had an approximate $170,000 decrease to retained earnings associated with our election to recognize forfeitures as they occur.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, ASC 606, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This update is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The Company adopted this standard as of January 1, 2018 using the modified retrospective approach, which only applies to contracts that were not complete as of the date of initial application. Adoption of this standard did not require an adjustment to beginning retained earnings. See Note 11, Revenue Recognition, for further discussion of the impact of the adoption of ASC 606 on the Company’s consolidated financial statements and the Company’s revenue recognition policies.

Recently Issued But Not Yet Adopted Accounting Standards
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update requires lessees to recognize a lease liability and a right-of-use (ROU) asset for all leases with a term greater than 12 months on the balance sheet. This standard is not applicable to oil and natural gas leases. This ASU modifies the definition of a lease and outlines the recognition, measurement, presentation and disclosure of leasing arrangement by both lessees and lessors. The Company plans to make certain elections allowing the Company not to reassess contracts that commenced prior to adoption, to continue applying its current accounting policy for land easements until adoption and not to recognize ROU assets or lease liabilities for short-term leases. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, which would allow entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in the consolidated financial statements. The ASU will allow entities to continue to apply the legacy guidance in Topic 840, including its disclosure requirements, in the comparative periods presented in the year the new leases standard is adopted. Entities that elect this option would still adopt the new leases standard using a modified retrospective transition method, but would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The Company will adopt ASU No. 2016-02 on January 1, 2019 using the modified retrospective transition method.

In preparation for adoption, we have substantially completed a process to identify a complete population of our leases, including the review of various contracts to identify whether such arrangements convey the right to control the use of an identified asset. Based on our portfolio of leases as of September 30, 2018, we estimate the impact of the adoption to be an increase in lease-related assets and liabilities of approximately $5 million on Energen’s consolidated balance sheet with no material impact on the results of operations, equity or cash flows. The impact to our consolidated financial statements will depend on the population of leases in effect at the date of adoption. We have additionally begun implementing new business processes and developing new controls and the expanded disclosures of our leasing arrangements.