REVENUE RECOGNITION

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018 using the modified retrospective method, which was applied to all contracts that were not completed as of that date. Prior period results were not adjusted and continue to be reported under the accounting standards in effect for the applicable period. The new standard did not affect the timing of our revenue recognition and did not impact net income; accordingly, we did not record an adjustment to the opening balance of retained earnings.

We derive substantially all of our revenue from sales of oil, natural gas and NGLs, with the remaining revenue generated from sales of electricity and marketing activities related to storage and managing excess pipeline capacity.

The following is a description of our principal activities from which we generate revenue. Revenues are recognized when control of promised goods is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods.

Commodity Sales Contracts

We recognize revenue from the sale of our oil, natural gas and NGL production when delivery has occurred and control passes to the customer. Our commodity contracts are short term, typically less than a year. We consider our performance obligations to be satisfied upon transfer of control of the commodity. In certain instances, transportation and processing fees are incurred by us prior to control being transferred to customers. These costs were previously offset against oil and natural gas sales. Upon adoption of ASC 606, we are recording these costs as a component of other expenses, net on our consolidated statements of operations.

Our commodity sales contracts are based on index prices. We recognize revenue in the amount that we expect to receive once we are able to adequately estimate the consideration (i.e., when market prices are known). Our contracts with customers typically require payment within 30 days following invoicing.

Electricity

The electrical output of the Elk Hills power plant that is not used in our operations is sold to the wholesale power market and to a utility under power purchase and sales agreements (PPAs) through December 2023, which include a monthly capacity payment plus a variable payment based on the quantity of power purchased each month. Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally, this occurs upon delivery of the electricity. We report electricity sales as other revenue on our consolidated statements of operations. Revenue is measured as the amount of consideration we expect to receive based on average index or California Independent System Operator market pricing with payment due the month following delivery. Payments under our PPAs are settled monthly. We consider our performance obligations to be satisfied upon delivery of electricity or as the contracted amount of energy is made available to the customer in the case of capacity payments.

Marketing, Trading and Other

Marketing, trading and other revenue primarily includes our activities associated with storing, transporting and marketing our production as well as third-party volumes.

To transport our natural gas as well as third-party volumes, we have entered into firm pipeline commitments. In addition, we may from time-to-time enter into natural gas purchase and sale agreements with third parties to take advantage of market dislocations. We consider our performance obligations to be satisfied upon transfer of control of the commodity.

We report our trading activities on a gross basis with purchases and costs reported in other expenses, net and sales recorded in other revenue on our consolidated statements of operations.

Disaggregation of Revenue

The following table provides disaggregated revenue for the years ended December 31, 2019, 2018 and 2017:



	2019			2018		2017
Oil and natural gas sales:	(in millions)
Oil	$	1,884		$	2,110	$	1,549
NGLs	179			260		210
Natural gas	207			220		177
	2,270			2,590		1,936
Other revenue:
Electricity	112			111		125
Marketing, trading and other	311			361		35
Interest income	—			1		—
	423			473		160
Net derivative (loss) gain from commodity contracts	(59		)	1		(90		)
Total revenues	$	2,634		$	3,064	$	2,006