4. Revenue Recognition

On January 1, 2018, Occidental adopted ASC 606 using the modified retrospective method. Results for reporting periods beginning after January 1, 2018, are presented under ASC 606, while prior period amounts have not been adjusted. There was no impact of adopting ASC 606 to the opening balance of retained earnings. There was no impact to the timing or amount of revenue recognized in the six months ended June 30, 2018, as a result of the adoption of ASC 606.

Revenue from customers is recognized when obligations under the terms of a contract with our customer are satisfied; this generally occurs with the delivery of oil, gas, natural gas liquids ("NGL"), chemicals or services such as transportation. Revenue from customers is measured as the amount of consideration Occidental expects to receive in exchange for the delivery of goods or services. Contracts may last from one month to one year or more, and may have renewal terms that extend indefinitely at the option of either party. Price is typically based on market indexes. Volumes fluctuate due to production and, in certain cases, customer demand and transportation availability. Occidental records revenue net of certain taxes, such as sales taxes, that are assessed by governmental authorities on Occidental's customers. Occidental has elected a practical expedient under ASC 606 and will not disclose revenue recognizable in future periods for unsatisfied performance obligations because the consideration related to those performance obligations is based on volume or market prices, which are variable.

Occidental does not incur significant costs to obtain contracts. Incidental items that are immaterial in the context of the contract are recognized as expense. Sales of hydrocarbons and chemicals to customers are invoiced and settled on a monthly basis. Occidental is not usually subject to obligations for warranties, returns or refunds except in the case of customer incentive payments as discussed for the chemical segment below. Occidental does not typically receive payment in advance of satisfying its obligations under the terms of its sales contracts with customers; therefore, liabilities related to such payment are immaterial to Occidental. As of June 30, 2018, trade receivables, net, of $5.5 billion, represents rights to payment for which Occidental has satisfied its obligations under a contract and its right to payment is conditioned only on the passage of time.

Oil and Gas Segment

Revenue is recognized from oil and gas production when it is delivered and control passes to the customer. Revenues from the production of oil and gas properties in which Occidental has an interest with other producers are recognized on the basis of Occidental’s net revenue interest.

Chemical Segment

Revenue from chemical product sales is recognized when control passes to the customer. Certain incentive programs may provide for payments or credits to be made to customers based on the volume of product purchased over a defined period. Customer incentives are estimated and recorded as a reduction to revenue ratably over the contract period. Such estimates are evaluated and revised as warranted. Revenue from exchange contracts is excluded from revenue from customers.

Midstream and Marketing Segment

Pipeline and gas processing revenue is recognized upon the completion of the transportation or processing service. Revenue from power sales is recognized upon delivery. Net marketing margin is included in net sales, but excluded from revenue from customers. Net marketing margin is recognized upon completion of contract terms that are a prerequisite to payment and upon title transfer for physical deliveries. Unless normal sales treatment has been elected, net marketing margin is classified as a derivative, reported on a net basis, recorded at fair value and changes in fair value are reflected in net sales.

The following table shows a reconciliation of revenue from customers to total net sales (in millions):


	Three Months Ended June 30,		Six Months Ended June 30,
	2018		2018
Revenue from customers	$	3,831	$	7,556
All other revenues (a)		252		290
Total net sales	$	4,083	$	7,846

(a) Includes net marketing margin and chemical exchange contracts.

The following table presents Occidental's revenue from customers by segment, product, and geographical area. Because the oil and gas segment typically sells its hydrocarbons at the lease or concession area, oil, gas and NGL are assumed to be sold in the area where they are produced. Chemical and midstream revenues are shown by area based on the location of the sale (in millions):


For the three months ended June 30, 2018
	United				Latin		Other
Revenue by Product	States		Middle East		America		International		Total
Oil and Gas Segment
Oil	$	1,334	$	718	$	180	$	—	$	2,232
NGL		111		64		—		—		175
Gas		42		73		3		—		118
Other		4		1		1		—		6
Segment Total	$	1,491	$	856	$	184	$	—	$	2,531
Chemical Segment	$	1,102	$	—	$	51	$	17	$	1,170
Midstream Segment
Marketing and Trading	$	2	$	—	$	—	$	—	$	2
Gas Processing		131		104		—		—		235
Pipelines		101		—		—		—		101
Power and Other		19		—		—		—		19
Segment Total	$	253	$	104	$	—	$	—	$	357
Intersegment Eliminations	$	(227)	$	—	$	—	$	—	$	(227)
Consolidated	$	2,619	$	960	$	235	$	17	$	3,831


For the six months ended June 30, 2018
	United				Latin		Other
Revenue by Product	States		Middle East		America		International		Total
Oil and Gas Segment
Oil	$	2,581	$	1,491	$	350	$	—	$	4,422
NGL		200		115		—		—		315
Gas		94		138		7		—		239
Other		7		1		1		—		9
Segment Total	$	2,882	$	1,745	$	358	$	—	$	4,985
Chemical Segment	$	2,182	$	—	$	103	$	38	$	2,323
Midstream Segment
Marketing and Trading	$	8	$	—	$	—	$	—	$	8
Gas Processing		268		200		—		—		468
Pipelines		195		—		—		—		195
Power and Other		38		—		—		—		38
Segment Total	$	509	$	200	$	—	$	—	$	709
Intersegment Eliminations	$	(461)	$	—	$	—	$	—	$	(461)
Consolidated	$	5,112	$	1,945	$	461	$	38	$	7,556