REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables provide information about disaggregated revenue by revenue streams, reportable segments, geographical region, and timing of revenue recognition for the three and nine months ended June 30, 2020 and 2019.



		Three months ended June 30, 2020
		Oil and natural gas		Contract drilling		Land investment		Other		Total
Revenue streams:
	Oil	$	624,000	$	—	$	—	$	—	$	624,000
	Natural gas	192,000		—		—		—		192,000
	Natural gas liquids	14,000		—		—		—		14,000
	Drilling and pump	—		3,040,000		—		—		3,040,000
	Other	—		—		—		113,000		113,000
	Total revenues before interest income	$	830,000	$	3,040,000	$	—	$	113,000	$	3,983,000
Geographical regions:
	United States	$	—	$	3,040,000	$	—	$	—	$	3,040,000
	Canada	830,000		—		—		113,000		943,000
	Total revenues before interest income	$	830,000	$	3,040,000	$	—	$	113,000	$	3,983,000
Timing of revenue recognition:
	Goods transferred at a point in time	$	830,000	$	—	$	—	$	113,000	$	943,000
	Services transferred over time	—		3,040,000		—		—		3,040,000
	Total revenues before interest income	$	830,000	$	3,040,000	$	—	$	113,000	$	3,983,000



		Three months ended June 30, 2019
		Oil and natural gas		Contract drilling		Land investment		Other		Total
Revenue streams:
	Oil	$	1,419,000	$	—	$	—	$	—	$	1,419,000
	Natural gas	152,000		—		—		—		152,000
	Natural gas liquids	117,000		—		—		—		117,000
	Drilling and pump	—		1,689,000		—		—		1,689,000
	Other	—		—		—		15,000		15,000
	Total revenues before interest income	$	1,688,000	$	1,689,000	$	—	$	15,000	$	3,392,000
Geographical regions:
	United States	$	—	$	1,689,000	$	—	$	—	$	1,689,000
	Canada	1,688,000		—		—		15,000		1,703,000
	Total revenues before interest income	$	1,688,000	$	1,689,000	$	—	$	15,000	$	3,392,000
Timing of revenue recognition:
	Goods transferred at a point in time	$	1,688,000	$	—	$	—	$	15,000	$	1,703,000
	Services transferred over time	—		1,689,000		—		—		1,689,000
	Total revenues before interest income	$	1,688,000	$	1,689,000	$	—	$	15,000	$	3,392,000



		Nine months ended June 30, 2020
		Oil and natural gas		Contract drilling		Land investment		Other		Total
Revenue streams:
	Oil	$	3,827,000	$	—	$	—	$	—	$	3,827,000
	Natural gas	821,000		—		—		—		821,000
	Natural gas liquids	233,000		—		—		—		233,000
	Drilling and pump	—		8,279,000		—		—		8,279,000
	Other	—		—		—		239,000		239,000
	Total revenues before interest income	$	4,881,000	$	8,279,000	$	—	$	239,000	$	13,399,000
Geographical regions:
	United States	$	—	$	8,279,000	$	—	$	7,000	$	8,286,000
	Canada	4,881,000		—		—		232,000		5,113,000
	Total revenues before interest income	$	4,881,000	$	8,279,000	$	—	$	239,000	$	13,399,000
Timing of revenue recognition:
	Goods transferred at a point in time	$	4,881,000	$	—	$	—	$	239,000	$	5,120,000
	Services transferred over time	—		8,279,000		—		—		8,279,000
	Total revenues before interest income	$	4,881,000	$	8,279,000	$	—	$	239,000	$	13,399,000



		Nine months ended June 30, 2019
		Oil and natural gas		Contract drilling		Land investment		Other		Total
Revenue streams:
	Oil	$	3,792,000	$	—	$	—	$	—	$	3,792,000
	Natural gas	650,000		—		—		—		650,000
	Natural gas liquids	402,000		—		—		—		402,000
	Drilling and pump	—		3,839,000		—		—		3,839,000
	Contingent residual payments	—		—		165,000		—		165,000
	Other	—		—		—		69,000		69,000
	Total revenues before interest income	$	4,844,000	$	3,839,000	$	165,000	$	69,000	$	8,917,000
Geographical regions:
	United States	$	—	$	3,839,000	$	165,000	$	1,000	$	4,005,000
	Canada	4,844,000		—		—		68,000		4,912,000
	Total revenues before interest income	$	4,844,000	$	3,839,000	$	165,000	$	69,000	$	8,917,000
Timing of revenue recognition:
	Goods transferred at a point in time	$	4,844,000	$	—	$	165,000	$	69,000	$	5,078,000
	Services transferred over time	—		3,839,000		—		—		3,839,000
	Total revenues before interest income	$	4,844,000	$	3,839,000	$	165,000	$	69,000	$	8,917,000

Contract Balances

The following table provides information about accounts receivables, contract assets and contract liabilities from contracts with customers:



	June 30, 2020		September 30, 2019
Accounts receivables from contracts with customers	$	2,017,000	$	1,322,000
Contract assets	324,000		344,000
Contract liabilities	1,638,000		1,633,000

Accounts receivables from contracts with customers are included in “Accounts and other receivables, net of allowance for doubtful accounts,” and contract assets, which includes costs and estimated earnings in excess of billings and retainage, are included in “Other current assets.” Contract liabilities, which includes billings in excess of costs and estimated earnings are included in “Other current liabilities” in the accompanying Condensed Consolidated Balance Sheets.

Retainage, included in contract assets, represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5% to 10% of the total invoice, up to contractually-specified maximums. The Company classifies as a current asset those retainages that are expected to be collected in the next twelve months.

Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. The Company’s rights are generally unconditional at the time its performance obligations are satisfied.

When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. Such deferred revenue typically results from billings in excess of costs and estimated earnings on uncompleted contracts. As of June 30, 2020 and September 30, 2019, the Company had $1,638,000 and $1,633,000, respectively, included in “Other current liabilities” on the balance sheets for those performance obligations expected to be completed in the next twelve months.

During the nine months ended June 30, 2020 and 2019, the amount of revenue recognized that was previously included in contract liabilities as of the beginning of the respective period was $707,000 and $25,000, respectively.

Contracts are sometimes modified for a change in scope or other requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the Company’s contract modifications are for goods and services that are not distinct from the existing performance obligations. The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis.

Performance Obligations

The Company’s remaining performance obligations for drilling and pump installation contracts (hereafter referred to as “backlog”) represent the unrecognized revenue value of the Company’s contract commitments. The Company’s backlog may vary significantly each reporting period based on the timing of major new contract commitments. In addition, our customers have the right, under some infrequent circumstances, to terminate contracts or defer the timing of the Company’s services and their payments to us. Nearly all of the Company's contract drilling segment contracts have original expected durations of one year or less. At June 30, 2020, the Company had three contract drilling jobs with original expected durations of greater than one year. For these contracts, approximately 21% of the remaining performance obligation of $2,427,000 is expected to be recognized in the next twelve months and the remaining, thereafter.

Contract Fulfillment Costs

Preconstruction costs, which include costs such as set-up and mobilization, are capitalized and allocated across all performance obligations and deferred and amortized over the contract term on a progress towards completion basis. As of June 30, 2020 and September 30, 2019, the Company had $216,000 and $296,000, respectively, in unamortized preconstruction costs related to contracts that were not completed. During the three and nine months ended June 30, 2020, the amortization of preconstruction costs related to contracts were not material and were included in the accompanying Condensed Consolidated Statements of Operations. During the three and nine months ended June 30, 2019, the amortization of preconstruction costs related to contracts was $80,000 and $129,000, respectively. Additionally, no impairment charges in connection with the Company’s preconstruction costs were recorded during the three and nine months ended June 30, 2020 and 2019.

Water Well Re-drill

In the quarter ended December 31, 2019, the Company experienced the failure of a hole opener which broke apart leaving pieces in the bottom of a water well being drilled in Hawaii. Efforts to remove the items from the well were unsuccessful through the quarter ended March 31, 2020 and subsequently, the Company determined that the well should be abandoned and a new well drilled at no incremental cost to the customer as per the terms of the contract. Accordingly, all the costs to drill and abandon the first well, which are all wasted costs, were excluded from the measurement of progress toward contract completion and all such costs were fully accrued in the quarter ended March 31, 2020, as this contract was determined to be a loss job. As a result, $733,000 of revenue previously recognized was reversed in the nine months ended June 30, 2020 and the Company recognized a decrease of approximately $670,000 in the estimated margin of this contract in the nine months ended June 30, 2020.