REVENUE FROM CONTRACTS WITH CUSTOMERS

12 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE FROM CONTRACTS WITH CUSTOMERS

Our revenue streams are reported under our three segments: oil and natural gas, contract drilling, and mid-stream. This is our disaggregation of revenue and how our segment revenue is reported (as reflected in Note 23 – Industry Segment Information). Revenue from the oil and natural gas segment is derived from sales of our oil and natural gas production. Revenue from the contract drilling segment is derived by contracting with upstream companies to drill an agreed-on number of wells or provide drilling rigs and services over an agreed-on period. Revenue from the Mid-Stream segment is derived from gathering, transporting, and processing natural gas production and selling those commodities.

We satisfy the performance obligation under each segment's contracts as follows:

•contract drilling and mid-stream contracts - satisfy the performance obligations over the agreed-on time;

•oil and natural gas contracts - satisfy the performance obligation with each volume delivery.

For oil and natural gas contracts, as it is more feasible, we account for these deliveries monthly.

Per the contracts for all segments, customers pay for the services/goods received monthly within an agreed number of days following the end of the month. Other than the mid-stream demand fees and shortfall fees discussed further below, there were no other contract assets or liabilities falling within the scope of this accounting pronouncement.

Oil and Natural Gas Revenues

Typical types of revenue contracts entered into by our oil and gas segment are Oil Sales Contracts, North American Energy Standards Board (NAESB) Contracts, Gas Gathering and Processing Agreements, and revenues earned as the non-operated party with the operator serving as an agent on our behalf under joint operating agreements. Consideration received is variable and settled monthly while contract terms can range from a single month or evergreen to terms of a decade or more. Revenues from oil and natural gas sales are recognized when the customer obtains control of the sold product which typically occurs at the point of delivery to the customer.

Certain costs, as either a deduction from revenue or as an expense, are determined based on when control of the commodity is transferred to our customer, which would affect our total revenue recognized, but will not affect gross profit. For example, gathering, processing and transportation costs are included as part of the contract price with the customer on transfer of control of the commodity are included in the transaction price, while costs incurred while we are in control of the commodity represent operating costs.

Contract Drilling Revenues

Contract drilling revenues and expenses are primarily recognized as services are performed and collection is reasonably assured. Payments for mobilization and demobilization activities do not related to a distinct good or service within the contract, but are recognized as revenue when received as deferral for ratable recognition over the contract term is not material to the consolidated financial statements. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred and any reimbursements received for out-of-pocket expenses are recorded as both revenues and direct costs.

Most of our drilling contracts have a term of one year or less and the remaining performance obligations under the contracts without a fixed term are not material.

Mid-Stream Contracts Revenues

Revenues are generated from the fees earned for gas gathering and processing services provided to a customer or by selling of hydrocarbons to other mid-stream companies. The typical revenue contracts used by this segment are gas gathering and processing agreements as well as product sales. We recognize sales revenue at the point in time when control transfers to the purchaser, typically at a specified delivery point, based on the contractually agreed upon fixed or index-based price received.

Contracts for gas gathering and processing services may include terms for demand fees or shortfall fees. Demand fees or shortfall fees exist in arrangements where a customer agrees to pay a fixed fee for a contractually agreed upon pipeline capacity or shortfall fees for any minimum volumes not utilized, which create performance obligations for each individual period of reservation. Revenue for these fees is recognized once the services have been completed, the customer no longer has access to the contracted capacity, or the likelihood of the customer exercising all or a portion of their remaining rights becomes remote.

The table below shows the changes in our contract asset and contract liability balances during periods presented which are primarily associated with demand fees and the impact to gas gathering and processing revenues:

		Successor		Successor
	Classification on the Consolidated Balance Sheets	December 31, 2021		December 31, 2020		Change
		(In thousands)
Assets
Current contract assets	Prepaid expenses and other	$	174	$	6,084	$	(5,910)
Non-current contract assets	Other assets	—		173		(173)
Total contract assets		$	174	$	6,257	$	(6,083)
Liabilities
Current contract liabilities	Current portion of other long-term liabilities	$	1,588	$	2,583	$	(995)
Non-current contract liabilities	Other long-term liabilities	200		1,589		(1,389)
Total contract liabilities		1,788		4,172		(2,384)
Contract assets (liabilities), net		$	(1,614)	$	2,085	$	(3,699)

Included below is the adjustment to demand fees from adopting ASC 606 over the remaining term of the contracts as of December 31, 2021.

Contract	Remaining Term of Contract	2022		2023 and beyond		Total Remaining Impact to Revenue
		(In thousands)
Demand fee contracts	1 - 10 months	$	1,374	$	—	$	1,374