Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Revenue from Contracts with Customers

2. Revenue from Contracts with Customers

The activities that primarily drive the revenue earned from our drilling contracts include (i) providing a drilling rig and the crew and supplies necessary to operate the rig, (ii) mobilizing and demobilizing the rig to and from the drill site and (iii) performing rig preparation activities and/or modifications required for the contract. We account for these integrated services provided within our drilling contracts as a single performance obligation satisfied over time and comprised of a series of distinct time increments in which we provide drilling services.

Dayrate and other revenue for activities that correspond to a distinct time increment within the contract term are recognized in the period in which the services are performed. Consideration for activities that are not distinct within the context of our contracts and do not correspond to a distinct time increment within the contract term is allocated across the single performance obligation and recognized ratably in proportion to the actual services performed over the initial term of the contract (which is the period we estimate to be benefited from the corresponding activities and generally ranges from two to 60 months). Such consideration may include mobilization, demobilization, contract preparation and capital modification revenue that is stipulated in our drilling contracts.  

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities from our contracts with customers (in thousands):

	September 30,			December 31,
	2019			2018
Trade receivables	$	185,934		$	160,463
Current contract assets (1)		8,638			6,832
Noncurrent contract assets (1)		—			2,107
Current contract liabilities (deferred revenue) (1)		(6,056	)		(2,803	)
Noncurrent contract liabilities (deferred revenue) (1)		(29,531	)		(17,723	)

^{(1) Contract assets and contract liabilities may reflect balances which have been netted together on a contract basis. Net current contract asset and liability balances are included in “Prepaid expenses and other current assets” and “Accrued liabilities,” respectively, and net noncurrent contract asset and liability balances are included in “Other assets” and “Other liabilities,” respectively, in our unaudited Condensed Consolidated Balance Sheets.}

Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands):  

	Net Contract
	Balances
Contract assets at January 1, 2019	$	8,939
Contract liabilities at January 1, 2019		(20,526	)
Net balance at January 1, 2019		(11,587	)
Decrease due to amortization of revenue included in the beginning contract liability balance		5,385
Increase due to cash received, excluding amounts recognized as revenue during the period		(20,444	)
Increase due to revenue recognized during the period but contingent on future performance		3,537
Decrease due to transfer to receivables during the period		(2,796	)
Adjustments		(1,044	)
Net balance at September 30, 2019	$	(26,949	)
Contract assets at September 30, 2019	$	8,638
Contract liabilities at September 30, 2019		(35,587	)

Transaction Price Allocated to Remaining Performance Obligations

The following table reflects the specified types of revenue expected to be recognized in the future related to unsatisfied performance obligations as of September 30, 2019 (in thousands):

	For the Years Ending December 31,
	2019 (1)		2020		2021		2022		Total
Mobilization and contract preparation revenue	$	714	$	2,270	$	632	$	124	$	3,740
Capital modification revenue		1,612		4,934		228		—		6,774
Blended rate revenue		—		21,410		7,007		—		28,417
Total	$	2,326	$	28,614	$	7,867	$	124	$	38,931

^{(1) Represents the three-month period beginning October 1, 2019.}

The revenue included above consists of expected fixed mobilization and upgrade revenue for both wholly and partially unsatisfied performance obligations as well as expected variable mobilization and upgrade revenue for partially unsatisfied performance obligations, which has been estimated for purposes of allocating across the entire corresponding performance obligations. Revenue expected to be recognized in the future related to the blending of rates when a contract has operating dayrates that decrease over the initial contract term is also included.  The amounts are derived from the specific terms within drilling contracts that contain such provisions, and the expected timing for recognition of such revenue is based on the estimated start date and duration of each respective contract based on information known at September 30, 2019. The actual timing of recognition of such amounts may vary due to factors outside of our control. We have applied the disclosure practical expedient in Topic 606 and have not included estimated variable consideration related to wholly unsatisfied performance obligations or to distinct future time increments within our contracts, including dayrate revenue.