Revenue from Contracts with Customers

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customer [Text Block]

Note 2 - Revenue from Contracts with Customers

The Company recognizes its share of revenue from the sale of produced oil, gas, and NGLs in its Midland Basin and South Texas assets. Following the divestiture of the Company’s remaining assets in the Rocky Mountain region during the first half of 2018, there has been no production revenue from this region after the second quarter of 2018. Oil, gas, and NGL production revenue presented within the accompanying statements of operations is reflective of the revenue generated from contracts with customers.

The tables below present the oil, gas, and NGL production revenue by product type for each of the Company’s operating regions for the years ended December 31, 2019, 2018, and 2017:

	For the year ended December 31, 2019
	Midland Basin			South Texas			Total
	(in thousands)
Oil production revenue	$	1,119,786		$	63,426		$	1,183,212
Gas production revenue	75,827			186,702			262,529
NGL production revenue	123			139,886			140,009
Total	$	1,195,736		$	390,014		$	1,585,750
Relative percentage	75		%	25		%	100		%

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Note: Amounts may not calculate due to rounding.

	For the year ended December 31, 2018
	Midland Basin			South Texas			Rocky Mountain			Total
	(in thousands)
Oil production revenue	$	938,004		$	72,821		$	54,851		$	1,065,676
Gas production revenue	125,603			227,252			1,595			354,450
NGL production revenue	1,000			214,441			790			216,231
Total	$	1,064,607		$	514,514		$	57,236		$	1,636,357
Relative percentage	65		%	32		%	3		%	100		%

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Note: Amounts may not calculate due to rounding.

	For the year ended December 31, 2017
	Midland Basin			South Texas			Rocky Mountain			Total
	(in thousands)
Oil production revenue	$	419,732		$	82,674		$	151,844		$	654,250
Gas production revenue	61,781			301,780			5,849			369,410
NGL production revenue	547			226,031			3,545			230,123
Total	$	482,060		$	610,485		$	161,238		$	1,253,783
Relative percentage	38		%	49		%	13		%	100		%

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Note: Amounts may not calculate due to rounding.

The Company recognizes oil, gas, and NGL production revenue at the point in time when control of the product transfers to the purchaser, which differs depending on the applicable contractual terms. Transfer of control drives the presentation of transportation, gathering, processing, and other post-production expenses (“fees and other deductions”) within the accompanying statements of operations. Fees and other deductions incurred by the Company prior to control transfer are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. When control is transferred at or near the wellhead, sales are based on a wellhead market price that is impacted by fees and other deductions incurred by the purchaser subsequent to the transfer of control. In general, the Company generates production revenue from a combination of the following types of contracts:

• The Company sells oil and gas production at or near the wellhead and receives an agreed-upon market price from the purchaser. Under this type of arrangement, control transfers at or near the wellhead.

• The Company has certain processing arrangements that include the delivery of unprocessed gas to the inlet of a midstream processor’s facility for processing. Upon completion of processing, the midstream processor purchases the NGLs and redelivers residue gas back to the Company in-kind. For the NGLs extracted during processing, the midstream processor remits payment to the Company based on the proceeds the processor realizes from selling the NGLs to third parties. For the residue gas taken in-kind, the Company has separate sales contracts where control transfers at points downstream of the processing facility. Given the structure of these arrangements and where control transfers, the Company separately recognizes fees and other deductions incurred prior to control transfer. These fees are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations.

Significant judgments made in applying the guidance in ASC Topic 606, Revenue from Contracts with Customers, relate to the point in time when control transfers to customers in gas processing arrangements with midstream processors. The Company does not believe that significant judgments are required with respect to the determination of the transaction price, including amounts that represent variable consideration, as volume and price carry a low level of estimation uncertainty given the precision of volumetric measurements and the use of index pricing with generally predictable differentials. Accordingly, the Company does not consider estimates of variable consideration to be constrained.

The Company’s performance obligations arise upon the production of hydrocarbons from wells in which the Company has an ownership interest. The performance obligations are considered satisfied upon control transferring to a purchaser at the wellhead, inlet, or tailgate of the midstream processor’s processing facility, or other contractually specified delivery point. The time period between production and satisfaction of performance obligations is generally less than one day; thus, there are no material unsatisfied or partially unsatisfied performance obligations at the end of the reporting period.

Revenue is recorded in the month when performance obligations are satisfied. However, settlement statements from the purchasers of hydrocarbons and the related cash consideration are received 30 to 90 days after production has occurred. As a result, the Company must estimate the amount of production delivered to the customer and the consideration that will ultimately be received for sale of the product. Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying balance sheets until payment is received. The accounts receivable balances from contracts with customers within the accompanying balance sheets as of December 31, 2019, and 2018, were $146.3 million and $107.2 million, respectively. To estimate accounts receivable from contracts with customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates. Differences between estimates and actual amounts received for product sales are recorded in the month that payment is received from the purchaser.