Accounts Receivable and Major Customers
|12 Months Ended|
Dec. 31, 2018
|Accounts Receivable and Major Customers||
Accounts Receivable and Major Customers
The following table summarizes our accounts receivable by type as of the dates presented:
For the year ended December 31, 2018, three customers accounted for $304.3 million, or approximately 69% of our consolidated product revenues. The revenues generated from these customers during 2018 were $173.0 million, $71.5 million and $59.8 million or 39%, 16%, and 14% of the consolidated total, respectively. As of December 31, 2018, $28.6 million, or approximately 48% of our consolidated accounts receivable from customers was related to these customers. For the year ended December 31, 2017, three customers accounted for $137.5 million, or approximately 86% of our consolidated product revenues. The revenues generated from these customers during 2017 were $94.1 million, $22.1 million and $21.3 million, or approximately 59%, 14% and 13% of the consolidated total, respectively. As of December 31, 2017, $32.1 million, or approximately 82% of our consolidated accounts receivable from customers was related to these customers. No significant uncertainties exist related to the collectability of amounts owed to us by any of these customers.
Revenue from Contracts with Customers
Adoption of ASC Topic 606
Effective January 1, 2018, we adopted ASC Topic 606 and have applied the guidance therein to our contracts with customers for the sale of commodity products (crude oil, NGLs and natural gas) as well as marketing services that we provide to our joint venture partners and other third parties. ASC Topic 606 provides for a five-step revenue recognition process model to determine the transfer of goods or services to consumers in an amount that reflects the consideration to which we expect to be entitled in exchange for such goods and services.
Upon the adoption of ASC Topic 606, we: (i) changed the presentation of our NGL product revenues from a gross basis to a net basis and changed the classification of certain natural gas processing costs associated with NGLs from a component of “Gathering, processing and transportation” (“GPT”) expense to a reduction of NGL product revenues as described in further detail below, (ii) wrote off $2.7 million of accounts receivable arising from natural gas imbalances accounted for under the entitlements method as a direct reduction to our beginning balance of retained earnings as of January 1, 2018, and (iii) adopted the sales method with respect to production imbalance transactions beginning after December 31, 2017.
The following table illustrates the impact of the adoption of ASC Topic 606 on our Condensed Consolidated Statement of Operations for the year ended December 31, 2018:
Transaction Prices, Contract Balances and Performance Obligations
Substantially all of our commodity product sales are short-term in nature with contract terms of one year or less. Accordingly, we have applied the practical expedient included in ASC Topic 606, which provides for an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.
Under our commodity product sales contracts, we bill our customers and recognize revenue when our performance obligations have been satisfied as described above. At that time, we have determined that payment is unconditional. Accordingly, our commodity sales contracts do not create contract assets or liabilities as those terms are defined in ASC Topic 606.
We record revenue in the month that our oil and gas production is delivered to our customers. As a result of the numerous requirements necessary to gather information from purchasers or various measurement locations, calculate volumes produced, perform field and wellhead allocations and distribute and disburse funds to various working interest partners and royalty owners, the collection of revenues from oil and gas production may take up to 60 days following the month of production. Therefore, we make accruals for revenues and accounts receivable based on estimates of our share of production. We record any differences, which historically have not been significant, between the actual amounts ultimately received and the original estimates in the period they become finalized.
The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef