Percentage of Completion Contracts

9 Months Ended

Sep. 30, 2016

Contractors [Abstract]

Percentage of Completion Contracts

Percentage-of-Completion Contracts

We account for our long-term early production facility construction contracts in Iraq under the percentage-of-completion method. In the third quarter of 2016 and in the nine months of 2016 we are break-even for our Zubair contract. Cumulative estimated loss from the Iraq contracts was $532 million as of September 30, 2016.

On May 26, 2016, we entered into an agreement with our customer containing the terms and conditions of the settlement on the Zubair contract. The settlement to be paid to us is a gross amount of $150 million, of which $62 million and $72 million was received in the second and third quarters of 2016, respectively. The settlement includes variation order requests, claims for extension of time, payments of remaining contract milestones and new project completion timelines that resulted in relief from the liquidated damages provisions. Of the remaining gross settlement, we expect to collect the last $16 million in the first quarter of 2017.

As of September 30, 2016, we have no claims revenue, and our percentage-of-completion project estimate includes a cumulative $25 million in approved change orders and $25 million of back charges. Our net billings in excess of costs as of September 30, 2016 were $46 million and are shown in the “Other Current Liabilities” line on the Consolidated Balance Sheet.

In the third quarter and the nine months ended September 30, 2015, we recognized estimated project losses of $44 million and $71 million, respectively, related to our long-term early production facility construction contracts in Iraq accounted for under the percentage-of-completion method. Cumulative estimated losses on these projects were $450 million at September 30, 2015. As of September 30, 2015, our percentage-of-completion project estimates included$144 million of claims revenue and $21 million of back charges. Our costs in excess of billings were $93 million and were included in the “Other Current Assets” line on the Consolidated Balance Sheet.