Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue Recognition

Revenue Recognition

Note 13 Revenue Recognition

We recognize revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. Contract drilling revenues are recorded over time utilizing the input method based on time elapsed. The measurement of progress considers the transfer of the service to the customer as we provide daily drilling services. We receive payment after the services have been performed by billing customers periodically (typically monthly). However, a portion of our revenues are recognized at a point-in-time as control is transferred at a distinct point in time such as with the sale of our top drives and other capital equipment. Within our drilling contracts, we have identified one performance obligation in which the transaction price is allocated.

Disaggregation of revenue

In the following table, revenue is disaggregated by geographical region. The table also includes a reconciliation of the disaggregated revenue with the reportable segments:

	Three Months Ended
	September 30, 2019
		U.S. Drilling		Canada Drilling		International Drilling		Drilling Solutions		Rig Technologies		Other		Total
	(In thousands)
Lower 48	$	256,978	$	—	$	—	$	41,459	$	40,082	$	—	$	338,519
U.S. Offshore Gulf of Mexico		37,365		—		—		2,935		—		—		40,300
Alaska		13,465		—		—		1,488		341		—		15,294
Canada		—		12,191		—		358		1,894		—		14,443
Middle East & Asia		—		—		197,095		11,167		14,481		—		222,743
Latin America		—		—		85,558		4,545		468		—		90,571
Europe, Africa & CIS		—		—		45,625		334		5,840		—		51,799
Eliminations & other		—		—		—		—		—		(15,593)		(15,593)
Total	$	307,808	$	12,191	$	328,278	$	62,286	$	63,106	$	(15,593)	$	758,076

	Nine Months Ended
	September 30, 2019
		U.S. Drilling		Canada Drilling		International Drilling		Drilling Solutions		Rig Technologies		Other		Total
	(In thousands)
Lower 48	$	784,638	$	—	$	—	$	132,156	$	144,983	$	—	$	1,061,777
U.S. Offshore Gulf of Mexico		117,572		—		—		9,945		—		—		127,517
Alaska		49,209		—		—		4,137		888		—		54,234
Canada		—		48,895		—		1,413		6,942		—		57,250
Middle East & Asia		—		—		570,142		31,095		38,344		—		639,581
Latin America		—		—		266,715		11,202		1,850		—		279,767
Europe, Africa & CIS		—		—		155,582		2,343		14,603		—		172,528
Eliminations & other		—		—		—		—		—		(63,532)		(63,532)
Total	$	951,419	$	48,895	$	992,439	$	192,291	$	207,610	$	(63,532)	$	2,329,122

	Three Months Ended
	September 30, 2018
		U.S. Drilling		Canada Drilling		International Drilling		Drilling Solutions		Rig Technologies		Other		Total
	(In thousands)
Lower 48	$	231,935	$	—	$	—	$	42,045	$	45,707	$	—	$	319,687
U.S. Offshore Gulf of Mexico		31,942		—		—		3,345		—		—		35,287
Alaska		10,119		—		—		1,248		209		—		11,576
Canada		—		26,645		—		1,081		3,483		—		31,209
Middle East & Asia		—		—		226,926		9,126		7,882		—		243,934
Latin America		—		—		94,048		3,399		1,604		—		99,051
Europe, Africa & CIS		—		—		56,151		679		4,756		—		61,586
Eliminations & other		—		—		—		—		—		(22,905)		(22,905)
Total	$	273,996	$	26,645	$	377,125	$	60,923	$	63,641	$	(22,905)	$	779,425

	Nine Months Ended
	September 30, 2018
		U.S. Drilling		Canada Drilling		International Drilling		Drilling Solutions		Rig Technologies		Other		Total
	(In thousands)
Lower 48	$	655,916	$	—	$	—	$	127,733	$	153,878	$	—	$	937,527
U.S. Offshore Gulf of Mexico		84,997		—		—		9,455		—		—		94,452
Alaska		38,480		—		—		2,691		553		—		41,724
Canada		—		75,974		—		4,797		17,096		—		97,867
Middle East & Asia		—		—		701,292		25,859		19,592		—		746,743
Latin America		—		—		265,738		11,048		5,181		—		281,967
Europe, Africa & CIS		—		—		156,926		1,847		13,331		—		172,104
Eliminations & other		—		—		—		—		—		(96,845)		(96,845)
Total	$	779,393	$	75,974	$	1,123,956	$	183,430	$	209,631	$	(96,845)	$	2,275,539

Contract balances

We perform our obligations under a contract with a customer by transferring goods or services in exchange for consideration from the customer. We recognize a contract asset or liability when we transfer goods or services to a customer and bill an amount which differs from the revenue allocated to the related performance obligations.

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on our condensed consolidated balance sheet. In general, we receive payments from customers based on dayrates as stipulated in our contracts (i.e. operating rate, standby rate). The invoices billed to the customer are based on the varying rates applicable to the operating status on each rig. Accounts receivable are recorded when the right to consideration becomes unconditional.

Dayrate contracts also may contain fees charged to the customer for up-front rig modifications, mobilization and demobilization of equipment and personnel. These fees are associated with contract fulfillment activities, and the related revenue (subject to any constraint on estimates of variable consideration) is allocated to a single performance obligation and recognized ratably over the initial term of the contract. Mobilization fees are generally billable to the customer in the initial phase of a contract and generate contract liabilities until they are recognized as revenue. Demobilization fees are generally received at the end of the contract and generate contract assets when they are recognized as revenue prior to becoming receivables from the customer.

We receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request. Reimbursable revenues are variable and subject to uncertainty as the amounts received and timing thereof are dependent on factors outside of our influence. Accordingly, these revenues are constrained and not recognized until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of the customer. We are generally considered a principal in these transactions and record the associated revenues at the gross amounts billed to the customer.

The opening and closing balances of our receivables, contract assets and current and long-term contract liabilities are as follows:

			Contract		Contract		Contract		Contract
	Contract		Assets		Assets		Liabilities		Liabilities
	Receivables		(Current)		(Long-term)		(Current)		(Long-term)
	(In millions)
As of December 31, 2018	$	791.2	$	55.8	$	32.3	$	116.7	$	69.7
As of September 30, 2019	$	647.2	$	38.1	$	32.3	$	72.0	$	67.6

Approximately 64% of the contract liability balance at the beginning of the period is expected to be recognized as revenue during 2019, of which 55% was recognized during the nine months ended September 30, 2019, and 23% is expected to be recognized during 2020. The remaining 13% of the contract liability balance at the beginning of the period is expected to be recognized as revenue during 2021 or thereafter.

Additionally, 60% of the contract asset balance at the beginning of the period is expected to be recognized as expense during 2019, of which 50% was recognized during the nine months ended September 30, 2019, and 17% is expected to be recognized during 2020. The remaining 23% of the contract asset balance at the beginning of the period is expected to be recognized as expense during 2021 or thereafter. This disclosure does not include variable consideration allocated entirely to a wholly unsatisfied performance obligation or promise to transfer a distinct good or service that forms part of a single performance obligation.