Revenue Recognition Accounting Policy
Anadarko's natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies and natural-gas marketers. Oil and condensate are sold primarily to marketers, gatherers, and refiners. NGLs are sold primarily to direct end-users, refiners, and marketers. In 2011, 2010, and 2009, there were no sales to individual customers that exceeded 10% of Anadarko's total sales revenues.
Anadarko recognizes sales revenues for natural gas, oil and condensate, and NGLs based on the amount of each product sold to purchasers when delivery to the purchaser has occurred and title has transferred. This occurs when product has been delivered to a pipeline or a tanker lifting has occurred. Anadarko follows the sales method of accounting for natural-gas production imbalances. If Anadarko's sales volumes for a well exceed Anadarko's proportionate share of production from the well, a liability is recognized to the extent that Anadarko's share of estimated remaining recoverable reserves from the well is insufficient to satisfy this imbalance. No receivables are recorded for those wells on which Anadarko has taken less than its proportionate share of production.
Anadarko enters into buy/sell arrangements for a portion of its crude-oil production. Under these arrangements, barrels are sold at prevailing market prices at a location, and in an additional transaction entered into in contemplation of the sale transaction with the same third party, barrels are re-purchased at a different location at the market prices prevailing at that location. The barrels are then sold at prevailing market prices at the re-purchase location. These arrangements are often required by private transporters. In these transactions, the re-purchase price is more than the original sales price with the difference representing a transportation fee. Other buy/sell arrangements are entered in order to shift the ultimate sales point of Anadarko's production to a more liquid location, thereby avoiding potential marketing fees and other market-price reductions. In these transactions, the sales price in the field and the re-purchase price are each at prevailing market prices at the respective locations. Anadarko uses buy/sell arrangements in its marketing and trading activities and reports these transactions in the Consolidated Statements of Income on a net basis.
Anadarko provides gathering, processing, treating, and transportation services pursuant to a variety of contracts. Under these arrangements, Anadarko receives fees, or retains a percentage of products or a percentage of the proceeds from the sale of products and recognizes revenue at the time the services are performed or product is sold. These revenues are included in gathering, processing, and marketing sales.
Marketing margins related to Anadarko's production are included in natural-gas sales, oil and condensate sales, and NGLs sales. Marketing margins related to sales of commodities purchased from third parties, as well as realized and unrealized gains and losses on derivatives related to such marketing activities are included in gathering, processing, and marketing sales.
Source: Anadarko Petroleum Corp., Annual Report
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