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REVENUE RECOGNITION
12 Months Ended
Dec. 31, 2019
Revenue Recognition [Abstract]  
REVENUE RECOGNITION

NOTE 5—REVENUE RECOGNITION

Remaining Performance Obligations (“RPOs”)  

Our RPOs by segment were as follows:

 

 

December 31, 2019

 

 

December 31, 2018

 

 

(Dollars in millions)

 

NCSA

$

7,070

 

 

 

38

%

 

$

5,649

 

 

 

52

%

EARC

 

3,415

 

 

 

18

%

 

 

1,378

 

 

 

12

%

MENA

 

6,047

 

 

 

33

%

 

 

1,834

 

 

 

17

%

APAC

 

1,487

 

 

 

8

%

 

 

1,420

 

 

 

13

%

Technology

 

619

 

 

 

3

%

 

 

632

 

 

 

6

%

Total

$

18,638

 

 

 

100

%

 

$

10,913

 

 

 

100

%

 

Of the December 31, 2019 RPOs, we expect to recognize revenues as follows:

 

 

2020

 

 

2021

 

 

Thereafter

 

 

(In millions)

 

Total RPOs

$

9,512

 

 

$

4,959

 

 

$

4,167

 

 

Revenue Disaggregation

Our revenue by product offering, contract types and revenue recognition methodology was as follows:

 

 

 

Year ended December 31,

 

 

 

2019 (2)

 

 

2018 (2)

 

 

2017 (2)

 

 

 

(In millions)

 

Revenue by product offering:

 

 

 

 

 

 

 

 

 

 

 

 

Offshore and subsea

 

$

2,845

 

 

$

2,289

 

 

$

2,985

 

LNG

 

 

1,445

 

 

 

1,309

 

 

 

-

 

Downstream (1)

 

 

3,173

 

 

 

2,224

 

 

 

-

 

Power

 

 

968

 

 

 

883

 

 

 

-

 

 

 

$

8,431

 

 

$

6,705

 

 

$

2,985

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by contract type:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price

 

$

6,835

 

 

$

5,239

 

 

$

2,895

 

Reimbursable

 

 

926

 

 

 

1,004

 

 

 

-

 

Hybrid

 

 

485

 

 

 

260

 

 

 

-

 

Unit-basis and other

 

 

185

 

 

 

202

 

 

 

90

 

 

 

$

8,431

 

 

$

6,705

 

 

$

2,985

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by recognition methodology:

 

 

 

 

 

 

 

 

 

 

 

 

Over time

 

$

8,283

 

 

$

6,628

 

 

$

2,985

 

At a point in time

 

 

148

 

 

 

77

 

 

 

-

 

 

 

$

8,431

 

 

$

6,705

 

 

$

2,985

 

(1)

Includes the results of our Technology operating group.

(2)

Intercompany amounts have been eliminated in consolidation.

Other

During 2019, we recognized approximately $144 million of revenues resulting from changes in transaction prices associated with performance obligations satisfied in prior periods, primarily in our NCSA segment. Revenues reported for 2019 include a $121 million settlement of claims on a substantially complete project.

During 2018, we recognized $81 million of revenues primarily resulting from changes in transaction prices during the first half of 2018 associated with performance obligations satisfied in prior periods, mainly in our APAC and MENA segments. The change in transaction prices primarily related to reimbursement of costs incurred in prior periods.

Revenues recognized during 2019 with respect to amounts included in our Advance billings on contracts balance as of December 31, 2018 were approximately $1.6 billion.

Unapproved Change Orders, Claims and Incentives

Unapproved Change Orders, Claims and Incentives—As of December 31, 2019, we had unapproved change orders and claims included in transaction prices aggregating to approximately $231 million, of which approximately $60 million was included in our RPO balance. As of December 31, 2018, we had unapproved change orders and claims included in transaction prices for our projects aggregating to approximately $428 million, of which approximately $130 million was included in our RPO balance.

Incentives—As of December 31, 2019, we had incentives included in transaction prices for our projects aggregating to approximately $218 million, primarily associated with our Cameron LNG project, of which approximately $28 million was included in our RPO balance. As of December 31, 2018, we did not have any material incentives included in transaction prices for our projects.

The amounts recorded in contract prices and recognized as revenues reflect our best estimates of recovery; however, the ultimate resolution and amounts received could differ from these estimates and could have a material adverse effect on our results of operations, financial position and cash flow.

Loss Projects

Our accrual of provisions for estimated losses on active uncompleted contracts as of December 31, 2019 was $124 million and included $45 million related to the Cameron LNG project. Our accrual of provisions for estimated losses on active uncompleted contracts as of December 31, 2018 was $266 million and primarily related to the Cameron LNG, Freeport LNG Trains 1 & 2, Calpine and Abkatun-A2 projects. Our Freeport LNG Train 3 project is not anticipated to be in a loss position.

Our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico for Pemex (“Line 1 and Line 10”), Asheville power plant project for a unit of Duke Energy Corp. and pipeline design and EPCI project for Rota 3 gas export system in Brazil (“Rota 3 pipeline project”) were also determined to be in substantial loss positions as of December 31, 2019, as discussed further below. The Abkatun-A2 project was substantially completed as of December 31, 2019.

For purposes of the discussion below, when we refer to a percentage of completion on a cumulative basis, we are referring to the cumulative percentage of completion, which includes progress made prior to the Combination Date. In accordance with U.S. GAAP, as of the Combination Date, we reset the progress to completion for all of CB&I’s projects then in progress to 0% for accounting purposes based on the remaining costs to be incurred as of that date.

Summary information for our significant ongoing loss projects as of December 31, 2019 is as follows:

Cameron LNG―At December 31, 2019, our U.S. LNG export facility project in Hackberry, Louisiana for Cameron LNG (being performed by our NCSA operating group) was approximately 87% complete on a post-Combination basis (approximately 96% on a cumulative basis) and had an accrued provision for estimated losses of approximately $45 million. During 2019, we recognized approximately $180 million of increases in cost estimates on this project, primarily resulting from poor labor productivity and increases in construction and subcontractor costs. The impact of this charge was offset by recognition in 2019 of $200 million of incentives related to the projected achievement of progress milestones.

Freeport LNG―At December 31, 2019, Trains 1 & 2 of our U.S. LNG export facility project in Freeport, Texas for Freeport LNG (being performed by our NCSA operating group) were approximately 97% complete on a post-Combination basis (approximately 99% on a cumulative basis) and had an accrued provision for estimated losses of approximately $8 million. During 2019, the project was negatively impacted by $127 million of increases in cost estimates, primarily resulting from increases in construction and subcontractor costs. During 2019, we also recognized approximately $5 million of incentive revenues on this project.

During 2019, Freeport LNG Train 3 was negatively impacted by $8 million of changes in cost estimates and remained in the profitable position as of December 31, 2019.

During 2019, the Freeport LNG project, as a whole, had an overall negative $130 million impact on operating margin.

Rota 3 pipeline project―As of December 31, 2019, our project in Brazil involving the design and detailed engineering, procurement, construction and installation of a rigid concrete coated gas pipeline export system (being performed by our NCSA operating group) was approximately 66% complete and had an accrued provision for estimated losses of approximately $26 million. During the third and fourth quarters of 2019, the project was negatively impacted by charges of $78 million, primarily due to changes in cost estimates and additional charges associated with equipment downtime. The project is expected to be completed in the second quarter of 2020.

Asheville power plant project―As of December 31, 2019, our power project located in Arden, North Carolina (being performed by our NCSA operating group) was approximately 98% complete and had an accrued provision for estimated losses of approximately $1 million. During 2019, the project was negatively impacted by charges of $97 million, net, primarily due to increases in labor and subcontractor costs, partially offset by a settlement of a claim. The project is expected to be completed in the first quarter of 2020.

Line 1 and Line 10―As of December 31, 2019, our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico (being performed by our NCSA operating group) was approximately 99% complete and had an accrued provision for estimated losses of approximately $1 million. During 2019, the project was negatively impacted by $32 million of changes in cost estimates associated with unexpected schedule extensions, resulting in additional vessel and labor costs. The project is expected to be completed in the first quarter of 2020.