Construction Contracts
Century Plant. The Company constructed the Century Plant for a contract price of $796.3 million, which included agreed upon change orders and scope revisions, that Occidental paid to the Company through periodic cost reimbursements based upon the percentage of the project completed. Upon substantial completion of construction in late 2012, Occidental took ownership and began operating the plant for the purpose of separating and removing CO2 from the delivered natural gas stream and the Company recognized construction contract revenue and costs equal to the revised contract price of $796.3 million, which are included in the accompanying statement of operations for the year ended December 31, 2012. The Company recorded additions totaling $180.0 million to its oil and natural gas properties for costs incurred in excess of contract amounts during the construction period. Costs in excess of billings and contract loss of $4.1 million at December 31, 2013, representing costs incurred in the final stages of construction, are reported as a current asset in the accompanying consolidated balance sheet. Billings and contract loss in excess of costs of $15.5 million at December 31, 2012 are reported as a current liability in the accompanying consolidated balance sheet.
Pursuant to a 30-year treating agreement executed simultaneously with the construction agreement, but accounted for separately, Occidental will remove CO2 from the Company’s delivered natural gas production volumes. Under this agreement, the Company is required to deliver certain minimum CO2 volumes annually, and is required to compensate Occidental to the extent such requirements are not met. See Note 15 for additional discussion of the treating agreement. The Company retains all methane gas from the natural gas it delivers to the Century Plant.
Transmission Expansion Projects. In the second quarter of 2013, the Company substantially completed the construction of a series of electrical transmission expansion and upgrade projects in northern Oklahoma for a third party. The Company constructed these projects for a contract price of $23.3 million, which included agreed upon change orders. Upon substantial completion of the contract, the Company recognized construction contract revenue and costs equal to the revised contract price of $23.3 million, which are included in the accompanying consolidated statement of operations for the year ended December 31, 2013. Costs in excess of billings on these projects of $11.2 million at December 31, 2012 are included in current assets in the accompanying consolidated balance sheet. All costs had been billed as of December 31, 2013.
