XML 22 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Business Segment and Geographic Information
 6 Months Ended
Jun. 30, 2017
Segment Reporting [Abstract]  
Business Segment and Geographic Information
Business Segment and Geographic Information

We operate under two divisions, which form the basis for the two operating segments we report: the Completion and Production segment and the Drilling and Evaluation segment. Intersegment revenue was immaterial. Our equity in earnings and losses of unconsolidated affiliates that are accounted for using the equity method of accounting are included within cost of services on our statements of operations, which is part of operating income of the applicable segment.

The following table presents information on our business segments.
 
Three Months Ended
June 30
Six Months Ended
June 30
Millions of dollars
2017
2016
2017
2016
Revenue:
 
 
 
 
Completion and Production
$
3,132

$
2,114

$
5,736

$
4,438

Drilling and Evaluation
1,825

1,721

3,500

3,595

Total revenue
$
4,957

$
3,835

$
9,236

$
8,033

Operating income (loss):
 
 
 
 
Completion and Production
$
397

$
(32
)
$
544

$
(2
)
Drilling and Evaluation
125

154

247

395

Total operations
522

122

791

393

Corporate and other (a)
(114
)
(3,579
)
(180
)
(4,163
)
Impairments and other charges
(262
)
(423
)
(262
)
(3,189
)
Total operating income (loss)
$
146

$
(3,880
)
$
349

$
(6,959
)
Interest expense, net of interest income
(121
)
(196
)
(363
)
(361
)
Other, net
(26
)
(31
)
(44
)
(78
)
Loss from continuing operations before income taxes
$
(1
)
$
(4,107
)
$
(58
)
$
(7,398
)

(a) Includes certain expenses not attributable to a particular business segment such as costs related to support functions and corporate executives, as well as merger-related costs and termination fee incurred during the three and six months ended June 30, 2016.
Receivables
As of June 30, 2017, 41% of our gross trade receivables were from customers in the United States and 9% were from customers in Venezuela. As of December 31, 2016, 28% of our gross trade receivables were from customers in the United States and 15% were from customers in Venezuela. Other than the United States and Venezuela, no other country or single customer accounted for more than 10% of our gross trade receivables at these dates.

We routinely monitor the financial stability of our customers, and employ an extensive process to evaluate the collectability of outstanding receivables. This process, which involves a high degree of judgment utilizing significant assumptions, includes analysis of our customers’ historical time to pay, financial condition and various financial metrics, debt structure, credit agency ratings, and production profile, as well as political and economic factors in countries of operations and other customer-specific factors.

Venezuela. Although we have continued to experience delays in collecting payments on our receivables from our primary customer in Venezuela, our outstanding receivables are not disputed, and we continue to believe that they are collectable. In assessing the collectability of these receivables, we considered our historical collection experience with this customer, including both payments received prior to this historical industry downturn and continued collections at reduced levels during the downturn, and the fact that we have not historically had material write-offs relating to this customer. We also took into account the continued importance to the Venezuelan economy of oil production, our strategic relationship with this customer, our current activity levels and our current intention to continue to provide services to this customer, and an evaluation of this customer’s financial solvency. We also incorporated assumptions regarding potential future events based on market pricing data points. We are actively managing our relationship with this customer, with ongoing dialogue between key executives of both companies, including discussions regarding this customer's intention to pay long-aged trade receivables.

In the second quarter of 2016, we exchanged $200 million of accounts receivables with our primary customer in Venezuela for an interest-bearing promissory note with a par value of the same amount. We recognized a pre-tax loss on the exchange of $148 million, representing the difference between the par value and fair market value of the note. We are accreting the carrying amount of the note to its par value, this customer has made all scheduled interest payments, and the carrying amount of this note is $98 million as of June 30, 2017. In addition, we currently expect to exchange an additional $375 million of outstanding accounts receivable with this customer for an interest-bearing promissory note with a par value of the same amount. As such, we recognized a pre-tax loss of $262 million in the second quarter of 2017 for a fair market value adjustment related to this expected exchange within "Impairments and other charges" on our condensed consolidated statements of operations. Although we recognized these fair value adjustments, we intend to hold both notes to maturity and collect the entire principal amounts. While we made a business decision during the second quarter of 2017 to convert certain accounts receivable to notes, we have the intent and ability to hold all remaining receivables in Venezuela until collection. We do not intend to accept further notes as payment if offered, and we will continue to monitor political and economic conditions in Venezuela.

We continue to believe our Venezuela receivables are collectable, with appropriate classification between short-term and long-term on our condensed consolidated balance sheets. While we have continued to experience delays in collecting payments on outstanding receivables in Venezuela, we have collected approximately $600 million on receivables in Venezuela since this historic industry downturn began in late 2014. We believe our collectability assumptions to be reasonable according to the current facts and circumstances. However, differences in actual experience or changes in facts and circumstances may materially affect our financial position or results of operations. Our assumptions and related judgments are sensitive to the political and economic conditions in Venezuela. If conditions in Venezuela worsen or if low commodity prices persist for an extended period of time, we may be required to record adjustments to our receivables balance. Our financial results can be affected by adjustments to these receivables, including any allowance for bad debts, actual write-offs of uncollectable amounts that differ from estimated amounts, fair value adjustments on existing receivables, and potential defaults on the promissory notes we hold.

Subsequent to the fair market value adjustment associated with the expected promissory note exchange, our total outstanding net trade receivables in Venezuela were $399 million as of June 30, 2017, compared to $610 million as of December 31, 2016. The majority of our Venezuela receivables are United States dollar-denominated receivables. Of the $399 million of receivables in Venezuela as of June 30, 2017, $186 million have been classified as long-term and included within “Other assets” on our condensed consolidated balance sheets. See Note 7 for additional information about the promissory notes and Part II, Item 1(a), “Risk Factors,” for additional information on risks associated with our operations in Venezuela, including recent sanctions imposed on a current employee of our primary customer in Venezuela which could delay or prevent our ability to execute the expected promissory note exchange.