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REVENUE RECOGNITION
3 Months Ended
Mar. 31, 2020
Revenue Recognition [Abstract]  
REVENUE RECOGNITION

NOTE 5—REVENUE RECOGNITION

Remaining Performance Obligations (“RPOs”)

Our RPOs, attributable to continuing operations, by segment, were as follows:

 

 

March 31, 2020

 

 

December 31, 2019

 

 

(Dollars in millions)

 

NCSA

$

5,527

 

 

 

34

%

 

$

6,250

 

 

 

35

%

EARC

 

2,830

 

 

 

17

%

 

 

3,089

 

 

 

17

%

MENA

 

5,507

 

 

 

33

%

 

 

5,890

 

 

 

33

%

APAC

 

1,230

 

 

 

8

%

 

 

1,450

 

 

 

8

%

Storage Solutions

 

1,281

 

 

 

8

%

 

 

1,340

 

 

 

7

%

Total

$

16,375

 

 

 

100

%

 

$

18,019

 

 

 

100

%

 

Of the March 31, 2020 RPOs, we expect to recognize revenues as follows:

 

 

2020

 

 

2021

 

 

Thereafter

 

 

(In millions)

 

Total RPOs

$

5,854

 

 

$

5,766

 

 

$

4,755

 

RPOs associated with our discontinued operations as of March 31, 2020 and December 31, 2019 were $610 million and $619 million, respectively.

 

Revenue Disaggregation

Our revenue, attributable to continuing operations, by product offering, contract types and revenue recognition methodology was as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

 

 

(In millions)

 

Revenue by product offering:

 

 

 

 

 

 

 

 

Offshore and subsea

 

$

821

 

 

$

605

 

LNG

 

 

419

 

 

 

421

 

Downstream

 

 

522

 

 

 

714

 

Power

 

 

144

 

 

 

323

 

Total

 

$

1,906

 

 

$

2,063

 

 

 

 

 

 

 

 

 

 

Revenue by contract type:

 

 

 

 

 

 

 

 

Fixed price

 

$

1,572

 

 

$

1,599

 

Reimbursable

 

 

117

 

 

 

286

 

Hybrid

 

 

145

 

 

 

109

 

Unit-basis and other

 

 

72

 

 

 

69

 

Total

 

$

1,906

 

 

$

2,063

 

 

 

 

 

 

 

 

 

 

Revenue by recognition methodology:

 

 

 

 

 

 

 

 

Over time

 

$

1,885

 

 

$

2,043

 

At a point in time

 

 

21

 

 

 

20

 

Total

 

$

1,906

 

 

$

2,063

 

Intercompany amounts have been eliminated in consolidation.

Other

For the three months ended March 31, 2020, we recognized approximately $2 million of revenues resulting from changes in transaction prices associated with performance obligations satisfied in prior periods, primarily in our NCSA segment. For the three months ended March 31, 2019, we recognized approximately $22 million of revenues resulting from changes in transaction prices associated with performance obligations satisfied in prior periods, primarily in our NCSA segment.

Revenues recognized during the three months March 31, 2020, with respect to amounts included in our Advance billings on contracts balance as of December 31, 2019, were approximately $663 million.

 

Unapproved Change Orders, Claims and Incentives

Unapproved Change Orders and Claims—As of March 31, 2020, we had unapproved change orders and claims included in transaction prices for our projects aggregating to approximately $170 million, of which approximately $65 million was included in our RPO balance.

As of December 31, 2019, we had unapproved change orders and claims included in transaction prices for our projects aggregating to approximately $231 million, of which approximately $60 million was included in our RPO balance.

Incentives—As of March 31, 2020, we had incentives included in transaction prices for our projects aggregating to approximately $312 million, primarily associated with our Cameron LNG project, of which approximately $18 million was included in our RPO balance. Approximately $165 million related to the Cameron LNG incentives has been collected as of March 31, 2020.

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.

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, which 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 as of March 31, 2020 and December 31, 2019 was approximately $131 million and $124 million, respectively.

In addition to loss projects previously reported in the 2019 Form 10-K, our ethane cracker project for a subsidiary of Total S.A., located in Port Arthur, Texas (the “Total ethane cracker project”), our Tyra Redevelopment EPCI project for another subsidiary of Total S.A., in the Danish sector of the North Sea (the “Total Tyra redevelopment project”), and our subsea field development project for Reliance Industries Ltd., off the east coast of India (the “Reliance subsea field development project”), were each in a substantial loss position as of March 31, 2020, due to increases in costs primarily driven by schedule prolongations caused by the COVID-19 pandemic.

Summary information for our significant ongoing loss projects as of March 31, 2020 is as follows:

Cameron LNG―At March 31, 2020, our U.S. LNG export facility project in Hackberry, Louisiana for Cameron LNG (being performed by our NCSA operating group) was approximately 94% complete on a post-Combination basis (approximately 98% on a cumulative basis) and had an accrued provision for estimated losses of approximately $20 million. In the first quarter of 2020, project operating margin was positively impacted by recognition of approximately $100 million of incentives related to the projected achievement of progress milestones. This improvement was partially offset by increases in cost estimates of approximately $12 million, primarily resulting from poor labor productivity and increases in construction and subcontractor costs, partially driven by schedule prolongations caused by the COVID-19 pandemic.

Freeport LNG―At March 31, 2020, 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 98.6% complete on a post-Combination basis (approximately 99.6% on a cumulative basis) and had an accrued provision for estimated losses of approximately $4 million. During the three months ended March 31, 2020, the project was negatively impacted by $13 million due to changes in cost estimates resulting from increases in construction and subcontractor costs.

Total ethane cracker project―At March 31, 2020, this project (being performed by our NCSA operating group) was approximately 86% complete and had an accrued provision for estimated losses of approximately $8 million. During the first quarter of 2020, the project was negatively impacted by changes in cost estimates of $47 million, partially driven by schedule prolongations caused by the COVID-19 pandemic.

Total Tyra redevelopment project―At March 31, 2020, this project (being performed by our EARC operating group) was approximately 62% complete and had an accrued provision for estimated losses of approximately $19 million. During the first quarter of 2020, the project was negatively impacted by changes in cost estimates of $9 million, primarily resulting from poor labor productivity and increases in construction and subcontractor costs driven by the impacts of the COVID-19 pandemic.

Reliance subsea field development project―At March 31, 2020, this project (being performed by our APAC operating group) was approximately 74% complete and had an accrued provision for estimated losses of approximately $11 million. During the first quarter of 2020, the project was negatively impacted by changes in cost estimates of $13 million, primarily resulting from poor labor productivity and increases in construction and subcontractor costs driven by the impacts of the COVID-19 pandemic.

Rota 3 pipeline project―At March 31, 2020, 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 75% complete and had an accrued provision for estimated losses of approximately $20 million. During the first quarter of 2020, the project was negatively impacted by charges of $8 million, due to changes in cost estimates ($6 million) and foreign exchange losses ($2 million). The project is expected to be completed in the second quarter of 2020.

Summary information for our significant loss projects previously reported in the 2019 Form 10-K that are substantially complete as of March 31, 2020 is as follows:

Asheville power plant project―As of March 31, 2020, our power project located in Arden, North Carolina (being performed by our NCSA operating group) was approximately 99% complete, and the remaining accrued provision for estimated losses was not significant.

Line 1 and Line 10―As of March 31, 2020, 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 the remaining accrued provision for estimated losses was not significant.