Note C – Revenue from Contracts with Customers

Nature of Goods and Services

The Company explores for and produces crude oil, natural gas and natural gas liquids (collectively oil and gas) in select basins around the globe. The Company’s revenue from sales of oil and gas production activities are primarily subdivided into three key geographic segments: the U.S., Canada, and Malaysia. Additionally, revenue from sales to customers is generated from three primary revenue streams: crude oil and condensate, natural gas liquids, and natural gas.

For operated oil and gas production where the non-operated working interest owner does not take-in-kind its proportionate interest in the produced commodity, the Company acts as an agent for the working interest owner and recognizes revenue only for its own share of the commingled production. The exception to this is the reporting of the noncontrolling interest in MP GOM as prescribed by ASC 810-10-45.

U.S.- In the United States, the Company primarily produces oil and gas from fields in the Eagle Ford Shale area of South Texas and in the Gulf of Mexico. Revenue is generally recognized when oil and gas are transferred to the customer at the delivery point and is net of transportation costs. Revenue recognized is largely index based with price adjustments for floating market differentials.

Canada- Primarily all long-term contracts in Canada, except for certain natural gas physical forward sales fixed-price contracts, are floating commodity index priced. For the Onshore business in Canada, the recorded revenue is net of transportation and any gain or loss on spot purchases made to meet committed volumes on sales contracts for the month. For the Offshore business in Canada, contracts are based on index prices and revenue is recognized at the time of vessel load based on the volumes on the bill of lading and point of custody transfer.

Malaysia- In Malaysia, the Company has interests in seven separate PSCs. The Company serves as the operator of all these areas except for the unitized Gumusut-Kakap field. Crude oil contracts in Malaysia share similar features of largely fixed cargo quantities and variable index-based pricing, and revenue is typically recognized as the same time of vessel load. Malaysia also has three long term Gas Sales Agreements (GSA) with terms until the end of the field life, economic life, or PSC term.

Note C – Revenue from Contracts with Customers (Contd.)

Disaggregation of Revenue

The Company reviews performance based on three key geographical segments and between onshore and offshore sources of Revenue within these geographies.

For the years ended December 31, 2018, 2017, and 2016 the Company recognized $2.6 billion, $2.1 billion, and 1.9 billion, respectively, from contracts with customers for the sales of oil, natural gas liquids and natural gas.


		For the Year Ended
		December 31,
(Thousands of dollars)		2018	2017	2016
Net crude oil and condensate revenue
United States – Onshore	$	778,198	644,023	508,045
– Offshore 1		403,523	208,984	172,022
Canada – Onshore		105,651	51,013	92,605
– Offshore		170,895	147,230	138,425
Malaysia – Sarawak		282,370	241,774	209,751
– Block K		406,653	378,401	403,912
Other		6,079	–	–
Total crude oil and condensate revenue		2,153,369	1,671,425	1,524,760

Net natural gas liquids revenue
United States – Onshore		53,335	43,804	28,316
– Offshore 1		10,269	6,894	5,781
Canada – Onshore		14,657	5,450	1,351
Malaysia – Sarawak		19,798	19,733	10,001
Total natural gas liquids revenue		98,059	75,881	45,449

Net natural gas revenue
United States – Onshore		28,335	27,460	24,281
– Offshore 1		14,525	10,480	10,839
Canada – Onshore		147,613	155,125	129,968
Malaysia – Sarawak		144,222	137,479	126,975
– Block K		504	698	619
Total natural gas revenue		335,199	331,242	292,682
Total revenue from contracts with customers		2,586,627	2,078,548	1,862,891

Gain (loss) on crude contracts		(41,975)	9,566	(63,412)
Other operating income		25,897	9,581	10,096
Gain on sale of assets		54	127,434	1,663
Total revenue	$	2,570,603	2,225,129	1,811,238

1 2018 includes revenue attributable to noncontrolling interest in MP GOM, effective November 30, 2018.

Contract Balances and Asset Recognition

As of December 31, 2018, and December 31, 2017, receivables from contracts with customers, net of royalties and associated payables, on the balance sheet, were $263.0 million and $203.4 million, respectively. Payment terms for the Company’s sales vary across contracts and geographical regions, with the majority of the cash receipts required within 30 days of billing. Based on historical collections and ability of customers to pay, the Company did not recognize any impairment losses on receivables or contract assets arising from customer contracts during the reporting periods.

Note C – Revenue from Contracts with Customers (Contd.)

The Company has not entered into any upstream oil and gas sale contracts that have financing components as of December 31, 2018.

The Company does not employ sales incentive strategies such as commissions or bonuses for obtaining sales contracts. For the periods presented, the Company did not identify any assets to be recognized associated with the costs to obtain a contract with a customer.

Performance Obligations

The Company recognizes oil and gas revenue when it satisfies a performance obligation by transferring control over a commodity to a customer and considers each unit of measure, of the specified commodity, to represent a distinct performance obligation. The pricing for the Company’s sales contracts is typically market or index-based based. The Company has elected the direct allocation exception and therefore the variable consideration is allocated to each single performance obligation in the contract. As a result, there is no price allocation to unsatisfied performance obligations for delivery of a commodity in subsequent periods.

The Company has applied the exemption to not report any unsatisfied performance obligation related to contracts with terms of less than one year.

As at December 31, 2018, the Company had the following sales contracts in place with terms greater than one year:


Current Long-Term Contracts Outstanding at December 31, 2018
Location	Commodity	End Date	Description	Approximate Volumes
U.S.	Oil	Q3 2019	Fixed quantity delivery in Eagle Ford	4,000 BOED
U.S.	Oil	Q4 2021	Fixed quantity delivery in Eagle Ford	17,000 BOED
U.S.	Gas and NGL	Q2 2026	Deliveries from dedicated acreage in Eagle Ford	As produced
Canada	Gas	Q4 2020	Contracts to sell natural gas at Alberta AECO fixed prices	59 MMCFD
Canada	Gas	Q4 2020	Contracts to sell natural gas at USD Index pricing	60 MMCFD
Canada	Gas	Q4 2024	Contracts to sell natural gas at USD Index pricing	30 MMCFD
Canada	Gas	Q4 2026	Contracts to sell natural gas at USD Index pricing	38 MMCFD