Our revenue is derived from the sale of crude oil, NGL and natural gas production, primarily to crude oil refining companies, midstream marketing companies, marketers, industrial companies, electric utility companies, independent power producers and cogeneration facilities, among others. We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606), which we adopted on January 1, 2018 using the modified retrospective method. Under ASC 606, performance obligations are the unit of account and generally represent distinct goods or services that are promised to customers. For sales of crude oil, NGLs and natural gas, each unit sold is generally considered a distinct good and the related performance obligation is generally satisfied at a point in time. We recognize our sales revenues at a point in time and upon delivery to a customer at the contractually stated price and for the quantity of product delivered. In Israel, because our contracts are long-term arrangements, we recognize revenues from the sale of natural gas over the life of the contract based on the quantity of natural gas delivered.

ASC 606 provides additional clarification related to principal versus agent considerations. Under this guidance, we record revenue on a gross basis if we control a promised good or service before transferring it to a customer (acting as principal). For example, gathering, processing, transportation and fractionation costs incurred before transfer of control to the customer at the tailgate of a plant are accounted for as fulfillment costs and are presented as a component of gathering, transportation and processing expense in our consolidated statements of operations. On the other hand, we record revenue on a net basis if our role is to arrange for another entity to provide the goods or services (acting as agent). For example, costs incurred after control over the product has transferred to the customer, such as at the wellhead or inlet of a plant, are recorded as a reduction of the transaction price received within revenue.

ASC 606 adoption did not have an impact on the opening balance of retained earnings. The adoption impact on revenues and expenses for 2018 was less than $1 million and did not affect operating or net income or operating cash flows. The comparative information for the prior period has not been recast and continues to be reported under the accounting standards in effect for the period. Adoption of the new standard did not impact our financial position, and we do not expect that it will do so going forward. See Note 3. Segment Information for disaggregation of revenue by commodity and geographic location.

Changes to the presentation of commodity sales revenue and production expense resulted from our assessment of certain contractual arrangements under principal versus agent guidance and assessment of control under ASC 606. In particular, we have determined that the processor is our customer with regard to the sale of natural gas at the wellhead or the sale of NGLs at the tailgate. This is a change from previous conclusions reached under principal versus agent guidance per ASC 605, Revenue Recognition, where we previously determined that we retained control over our production until the sale to the end customer in the downstream markets. As such, effective January 1, 2018, revenues and expenses are presented on a net basis within revenues in our consolidated statements of operations at the time control over production is transferred to the processor under these arrangements.

Following the control model in ASC 606, we determined that we remain the principal in arrangements with end customers, such as when we take product in-kind at the tailgate and when we are directly responsible for the transportation and marketing of our production to downstream customers. In such arrangements, we record NGL and natural gas sales and production expense on a gross basis.

Our commodity sales contracts in the US are index-based and, thus, include variable consideration. In accordance with ASC 606, we allocate variable consideration (market price) to the distinct commodities transferred in the period, but not to the future obligations to deliver production. Such allocation represents the amount of consideration to which we are entitled for deliveries of our commodities to-date and represents the value of product delivered to the customer. Therefore, our revenue is recognized at the time of delivery and is the product of the volume delivered and the index-based price for the period.

Crude Oil Sale Arrangements – US We sell the majority of our US crude oil production under short-term contracts at market-based prices, adjusted for location, quality and transportation charges. Market-based pricing is based on the price index applicable for the location of the sale.

We sell our crude oil production either at the lease location or to downstream customers. Crude oil production at the lease location is sold through netback arrangements, under which we sell crude oil net of transportation costs incurred by the purchaser. We record revenue, net, at the lease location when the customer receives delivery of the product.

When we move our crude oil production from the lease location to the downstream markets in the US, we incur gathering and transportation costs, which we consider contract fulfillment activities. Such costs are reported as expense within gathering, transportation and processing expense in the consolidated statements of operations. Revenue from the sale of crude oil to downstream customers is recognized upon delivery, as specified in the contract, when control of the product has transferred to the customer.

Crude Oil Buy/Sell Transactions – US We enter into buy/sell arrangements that effect a change in location and/or grade with required repurchase of crude oil at a delivery point. The sale and repurchase of crude oil is settled at the same contractually fixed price (before application of transportation and grade deductions) on a net basis. We account for these transactions on a net basis, in accordance with ASC 845, Nonmonetary Transactions. We record the residual transportation fee as transportation expense within gathering, transportation and processing expense in the consolidated statements of operations.

Crude Oil Sale Arrangements – West Africa Our share of crude oil and condensate from the Aseng, Alen and Alba fields is sold at market-based prices to Glencore Energy UK Ltd. (Glencore Energy). Crude oil is priced at a Dated Brent FOB net realized price achieved by Glencore Energy and is adjusted by applicable fees, including transportation, insurance, and marketing. We recognize revenue on the sale of crude oil to Glencore Energy at the time crude oil cargo is loaded onto the

Natural Gas and NGLs Sale Arrangements – US Certain of our commodity contracts in the US are for the sale of natural gas to processors at prevailing market prices. We evaluate the contract terms of these arrangements to determine whether the processor is a service provider or a customer on a contract by contract basis. In arrangements where we determine that we sold our product to the processor, we treat the processor as a customer and record revenue when the processor takes physical possession of the natural gas and NGLs and in the amount of proceeds expected to be received, net of any fees or deductions charged by the processor.

In other natural gas processing arrangements, we receive natural gas and NGL products "in-kind" after processing at the tailgate of the plant. In these arrangements, we are responsible for the transportation, fractionation and marketing costs of our production. In such cases, where we have determined that the processor is a service provider, we record the sale of natural gas and NGLs and applicable gathering, processing, transportation and fractionation fees on a gross basis at the time the product is delivered to the end customer.

Natural Gas Purchase and Sale Arrangements – US We enter into purchase transactions and separate sale transactions with third parties at prevailing market prices to mitigate unutilized pipeline transportation commitments, primarily related to retained Marcellus Shale firm transportation contracts. Revenues and expenses from the sales and purchases are recorded on a gross basis, as we act as a principal in these transactions by assuming control of the purchased commodity before it is transferred to the customer.

Natural Gas Sale Arrangements – West Africa We sell our share of natural gas production from the Alba field under a long-term contract for $0.25 per MMBtu to a methanol plant, a liquefied petroleum gas (LPG) plant, a liquefied natural gas (LNG) plant and a power generation plant. We recognize revenue upon transfer of control of product to these processors.

Natural Gas Sale Arrangements – Israel Our natural gas sales in Israel are primarily based on long-term contracts with fixed volume commitments over the life of the arrangements. Our performance obligations for the sale of natural gas are satisfied over time using production output to measure progress. The nature of these contracts gives rise to several types of variable consideration, including index-based annual price escalations, commodity-based index pricing, tiered pricing and sales price discounts in periods of volume deficiencies. Additionally, the majority of our sales contracts contain take-or-pay provisions where the customers are required to purchase a contractual minimum over varying time periods. Where the variable consideration is related to market-based pricing or index-based escalations of a fixed base price, we have elected the variable consideration allocation exception pursuant to ASC 606. We record revenue related to the volumes delivered at the contract price at the time of delivery. To date, there have been no material impacts of variability in consideration due to tiered pricing, take-or-pay provisions and/or volume deficiency discounts. We believe that any variability due to future sales price adjustments associated with potential volume deficiencies will not have a significant impact on our financial position or results of operations.

Transaction Price Allocated to Remaining Performance Obligations – Israel Remaining performance obligations represent the transaction price of firm sales arrangements for which volumes have not been delivered. Pursuant to ASC 606, short and long-term interruptible contracts and long-term dedicated production agreements are excluded from the disclosure due to uncertainty associated with estimating future production volumes and future market prices. However, certain of our Tamar natural gas sales contracts in Israel have fixed annual sales volumes and fixed base pricing with annual index escalations. The following table includes estimated revenues based upon those certain agreements with fixed minimum take-or-pay sales volumes. Our actual future sales volumes under these agreements may exceed future minimum volume commitments.



(millions)	2019		2020		Total
Natural Gas Revenues ⁽¹⁾	$	137	$	169	$	306

Service Arrangements Our Midstream segment revenues are derived from fixed fee contract arrangements for gathering, transportation and storage services. We have determined that our performance obligations for the provision of such services are satisfied over time using volumes delivered as the measure of progress. ASC 606 adoption did not have an impact on the recognition, measurement and presentation of our midstream revenues and expenses.