Revenues

9 Months Ended

Sep. 30, 2020

Revenues

Revenues

Note 5—Revenues

Overview—The duration of our performance obligation varies by contract.  As of September 30, 2020, the drilling contract with the longest expected remaining duration, excluding unexercised options, extends through February 2028.  To obtain contracts with our customers, we incur pre-operating costs to prepare a rig for contract and deliver or mobilize the rig to the drilling location.  We defer such pre-operating costs and recognize the costs on a straight-line basis, consistent with the general pace of activity, in operating and maintenance costs over the estimated contract period.  In the three and nine months ended September 30, 2020, we recognized pre-operating costs of $16 million and $48 million, respectively.  In the three and nine months ended September 30, 2019, we recognized pre-operating costs of $4 million and $10 million, respectively.  At September 30, 2020 and December 31, 2019, the unrecognized pre-operating costs to obtain contracts was $23 million and $34 million, respectively, recorded in other assets.

In June 2020, we entered into a settlement and mutual release agreement with a customer, which provided for the final settlement of disputes related to performance obligations satisfied in prior periods.  In connection with the settlement, among other things, our customer agreed to pay us $185 million in four equal installments through January 15, 2023.  In the nine months ended September 30, 2020, we recognized revenues of $177 million, representing the discounted value of the future payments, and recorded corresponding accounts receivable and other assets of $89 million and $88 million, respectively, net of imputed interest, which we will recognize in interest income over the scheduled payment period.  In the nine months ended September 30, 2019, we recognized revenues of $10 million, recognized on a cash basis, for performance obligations satisfied for another customer in prior periods.

Disaggregation—We recognized revenues as follows (in millions):

	Three months ended September 30, 2020										Three months ended September 30, 2019
	U.S.		Norway		Brazil		Other		Total		U.S.		Norway		Brazil		Other		Total
Ultra-deepwater floaters	$	295	$	—	$	60	$	135	$	490	$	317	$	—	$	27	$	149	$	493
Harsh environment floaters		—		233		—		50		283		4		200		—		77		281
Deepwater floaters		—		—		—		—		—		—		—		—		—		—
Midwater floaters		—		—		—		—		—		—		—		—		10		10
Total revenues	$	295	$	233	$	60	$	185	$	773	$	321	$	200	$	27	$	236	$	784

	Nine months ended September 30, 2020										Nine months ended September 30, 2019
	U.S.		Norway		Brazil		Other		Total		U.S.		Norway		Brazil		Other		Total
Ultra-deepwater floaters	$	1,022	$	—	$	176	$	456	$	1,654	$	940	$	—	$	81	$	434	$	1,455
Harsh environment floaters		—		647		—		149		796		4		554		—		232		790
Deepwater floaters		—		—		—		—		—		—		—		6		1		7
Midwater floaters		—		—		—		12		12		—		—		—		44		44
Total revenues	$	1,022	$	647	$	176	$	617	$	2,462	$	944	$	554	$	87	$	711	$	2,296

Contract liabilities—We recognize contract liabilities, recorded in other current liabilities and other long-term liabilities, for mobilization, contract preparation, paid pre-operating standby time, capital upgrades and deferred revenues for declining dayrate contracts using the straight-line method over the remaining contract term.  Contract liabilities for our contracts with customers were as follows (in millions):

	September 30,		December 31,
	2020		2019
Deferred contract revenues, recorded in other current liabilities	$	138	$	100
Deferred contract revenues, recorded in other long-term liabilities		346		429
Total contract liabilities	$	484	$	529

Significant changes in contract liabilities were as follows (in millions):

	Nine months ended
	September 30,
	2020		2019
Total contract liabilities, beginning of period	$	529	$	486
Decrease due to recognition of revenues for goods and services		(153)		(83)
Increase due to goods and services transferred over time		108		102
Total contract liabilities, end of period	$	484	$	505