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PROJECT CHANGES IN ESTIMATES
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
PROJECT CHANGES IN ESTIMATES

NOTE 6—PROJECT CHANGES IN ESTIMATES

Our RPOs for each of our operating groups generally consist of several hundred contracts, and our results may be impacted by changes in estimated margins. The following is a discussion of our most significant changes in cost estimates that impacted segment operating income for the three and nine months ended September 30, 2019 and 2018. For discussion of significant changes in estimates resulting from changes in transaction prices, see Note 5, Revenue Recognition.

Three and nine months ended September 30, 2019

Segment operating income for the three and nine months ended September 30, 2019 was impacted by unfavorable changes in cost estimates totaling approximately $354 million and $470 million, respectively, primarily in our NCSA and EARC segments, partially offset by favorable changes in cost estimates of $33 million and $68 million, respectively, in our MENA segment. Unfavorable changes in cost estimates in our APAC segment for the three and nine months ended September 30, 2019 were approximately $21 million and $22 million, respectively.

NCSA—Our segment results for the three and nine months ended September 30, 2019 were negatively impacted by net unfavorable changes in cost estimates, recognized during the periods, aggregating approximately $330 million and $485 million, respectively. The net unfavorable changes were due to cost increases on:

 

the Cameron LNG project - $170 million for both the three- and nine-month periods ended September 30, 2019, respectively;

 

the Freeport LNG project, as a whole - $51 million and $100 million for the three- and nine-month periods ended September 30, 2019, respectively;

 

Power projects - $53 million and $101 million for the three- and nine-month periods ended September 30, 2019, respectively;

 

Downstream petrochemical projects - $27 million and $20 million for the three- and nine-month periods ended September 30, 2019, respectively;

 

Calpine - $11 million and $22 million for the three- and nine-month periods ended September 30, 2019, respectively;

 

Abkatun-A2, Line 1 and Line 10 and Xanab projects for Pemex - $8 million of net favorable changes in the three months ended September 30, 2019 and $39 million of net unfavorable changes in nine months ended September 30, 2019; and

 

various other projects.

See Note 5, Revenue Recognition, for further discussion of our Freeport LNG Trains 1 & 2 and Train 3, Pemex Line 1 and Line 10 and Asheville power plant projects.

EARC—Our segment results for the three and nine months ended September 30, 2019 were negatively impacted by net unfavorable changes in cost estimates aggregating approximately $36 million and $31 million, primarily due to changes in costs estimates on the Tyra Redevelopment project.

Three and nine months ended September 30, 2018

Segment operating income for the three and nine months ended September 30, 2018 was positively impacted by net favorable changes in cost estimates totaling approximately $79 million and $200 million, respectively, primarily in our NCSA, MENA and APAC segments.

NCSA—Our segment results for the three and nine months ended September 30, 2018 were positively impacted by net favorable changes in cost estimates aggregating approximately $18 million, primarily due to cost savings on our ethane projects in Texas and Louisiana.

MENA—Our segment results for the three months and nine months ended September 30, 2018 were positively impacted by net favorable changes in cost estimates aggregating approximately $49 million and $118 million, respectively, primarily due to productivity improvements and cost savings on marine, fabrication and other activities on three of our projects in the Middle East.

APAC—Our segment results for the three months ended September 30, 2018 were positively impacted by net favorable changes in cost estimates aggregating approximately $9 million. The net favorable changes were due to savings upon substantial completion of the post lay campaign on the Greater Western Flank Phase 2 project in Australia. Our segment results for the nine months ended September 30, 2018 were positively impacted by net favorable changes in cost estimates aggregating approximately $64 million. The net favorable changes were due to reductions in costs to complete offshore campaigns and several other active projects, primarily two of our Australian projects, partially offset by additional costs associated with weather downtime on those two projects.