

NOTE 4	REVENUE

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 year ended December 31, 2018, as a result of the adoption of ASC 606.

Revenue recognition before the adoption of ASC 606

Prior to the adoption of ASC 606, revenue was recognized from oil and gas production when title was passed to the customer, which occurred when the product was shipped. Where oil was shipped by tanker, title passed when the tanker was loaded or product was received by the customer, depending on the shipping terms. This process occasionally caused a difference between actual production in a reporting period and sales volumes that had been recognized as revenue. Revenues from the production of oil and gas properties in which Occidental had an interest with other producers was recognized on the basis of Occidental’s net revenue interest.

Revenue from chemical product sales was recognized when the product was shipped and title had passed to the customer. Certain incentive programs may have provided for payments or credits to be made to customers based on the volume of product purchased over a defined period. Total customer incentive payments over a given period were estimated and recorded as a reduction to revenue ratably over the contract period. Such estimates were evaluated and revised as warranted.

Revenue from marketing activities was recognized on net settled transactions upon completion of contract terms and, for physical deliveries, upon title transfer. For unsettled transactions, contracts were recorded at fair value and changes in fair value were reflected in net sales. Revenue from all marketing activities was reported on a net basis.

Occidental recorded revenue net of any taxes, such as sales taxes, that are assessed by governmental authorities on Occidental's customers.

Revenue recognition after 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, 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 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 expenses. Sales of hydrocarbons and chemicals to customers are invoiced and settled on a monthly basis. Occidental is not usually subject to obligations for warranties, rebates, 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.

Oil and Gas Segment

Revenue from oil and gas production is recognized 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

Revenue from pipeline and gas processing is recognized upon the completion of the transportation or processing service. Revenue from power sales is recognized upon delivery. Net marketing revenue is included in net sales, but excluded from revenue from customers in the table below. Net marketing revenue is recognized upon completion of contract terms that are a prerequisite to payment and upon title transfer for physical deliveries. Unless the normal purchases and sales exception has been elected, net marketing revenue 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:



For the year ended December 31, (in millions)	2018

Revenue from customers	$	15,560
All other revenues ^(a)	2,264
Total net sales	$	17,824

^(a) Includes net marketing revenue and chemical exchange contracts.

The following table presents Occidental's revenue from customers by segment, product and geographical area. The oil and gas segment typically sells its oil, gas and NGL at the lease or concession area. Chemical revenues are shown by geographic area based on the location of the sale. Excluding net marketing revenue, Midstream revenues are shown by the location of sale:



For the year ended December 31, 2018 (in millions)
Revenue by Product	United States		Middle East		Latin America		Other International		Eliminations			Total

Oil and Gas Segment
Oil	$	5,125	$	3,405	$	715	$	—	$	—		$	9,245
NGL	430		261		—		—		—			691
Gas	185		294		16		—		—			495
Other	7		3		—		—		—			10
Segment Total	$	5,747	$	3,963	$	731	$	—	$	—		$	10,441

Chemical Segment	$	4,363	$	—	$	205	$	80	$	—		$	4,648

Midstream Segment
Gas Processing	557		425		—		—		—			982
Pipelines	311		—		—		—		—			311
Power and Other	108		—		—		—		—			108
Segment Total	$	976	$	425	$	—	$	—	$	—		$	1,401

Eliminations	$	—	$	—	$	—	$	—	$	(930	)	$	(930	)

Consolidated	$	11,086	$	4,388	$	936	$	80	$	(930	)	$	15,560