Revenue from Contracts with Customers

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer

REVENUE FROM CONTRACTS WITH CUSTOMERS

Our revenue streams are reported under three segments: oil and natural gas, contract drilling, and mid-stream. This is how we disaggregate our revenue and report our segment revenue (as reflected in Note 16 – Industry Segment Information). Revenue from the oil and natural gas segment is from sales of our oil and natural gas production. Revenue from the contract drilling segment comes from contracting with upstream companies to drill an agreed-on number of wells or provide drilling rigs and services over an agreed-on period. Revenue from the mid-stream segment is derived from gathering, transporting, and processing natural gas and NGLs and selling those commodities.

Oil and Natural Gas Revenues

Certain costs—as either a deduction from revenue or as an expense—are determined based on when control of the commodity is transferred to our customer, which would affect our total revenue recognized, but will not affect gross profit. For example, gathering, processing, and transportation costs included as part of the contract price with the customer on transfer of control of the commodity are included in the transaction price, while costs incurred while we are in control of the commodity represent operating costs.

Contract Drilling Revenues

Mobilization and de-mobilization charges from our drilling contracts do not relate to a distinct good or service. These revenues should be deferred and recognized ratably over the related contract term that drilling services are provided. We have continued to record these revenues as a distinct service and the impact to our financial statements was immaterial. As of March 31, 2021, we had six contract drilling contracts with terms ranging from two months to almost one year.

Most of our drilling contracts have an original term of less than one year. The remaining performance obligations under the contracts with a longer duration are not material.

Mid-stream Contracts Revenues

Revenues are generated from fees earned for gas gathering and processing services provided to a customer or by selling hydrocarbons to other mid-stream companies. The typical revenue contracts used by this segment are gas gathering and processing agreements as well as product sales.

Contracts for gas gathering and processing services may include terms for demand fees or shortfall fees. Demand fees represent an arrangement where a customer agrees to pay a fixed fee for a contractually agreed upon pipeline capacity, which results in performance obligations for each individual period of reservation. Once the services have been completed, or the customer no longer has access to the contracted capacity, revenue is recognized.

The table below shows the changes in our mid-stream contract asset and contract liability balances during periods presented associated with demand fees and the impact to gas gathering and processing revenues:

	Classification on the Consolidated Balance Sheets	March 31, 2021		December 31, 2020		Change
		(In thousands)
Assets
Current contract assets	Prepaid expenses and other	$	4,735	$	6,084	$	(1,349)
Non-current contract assets	Other assets	—		173		(173)
Total contract assets		$	4,735	$	6,257	$	(1,522)
Liabilities
Current contract liabilities	Current portion of other long-term liabilities	$	2,332	$	2,583	$	(251)
Non-current contract liabilities	Other long-term liabilities	1,130		1,589		(459)
Total contract liabilities		3,462		4,172		(710)
Contract assets (liabilities), net		$	1,273	$	2,085	$	(812)

Included below is the adjustment to demand fees from adopting ASC 606 over the remaining term of the contracts as of March 31, 2021.

Contract	Remaining Term of Contract	2021		2022		2023 and beyond		Total Remaining Impact to Revenue
		(In thousands)
Demand fee contracts	2 - 8 years	$	(2,689)	$	1,380	$	36	$	(1,273)