Kinetik Holdings Inc

4. REVENUE RECOGNITION

The following table presents a disaggregation of the Company’s revenue:

There have been no significant changes to the Company’s contracts with customers during the years ended December 31, 2023, 2022, and 2021. Contracts with customers acquired through the Transaction had similar structures as the Company’s existing contracts with customers. For the years ended December 31, 2023, 2022, and 2021 the Company recognized revenues from producer MVC short falls of $1.6 million, $4.0 million and $2.5 million, respectively.

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenues as of December 31, 2023:

Our contractually committed revenue, for purposes of the tabular presentation above, is limited to customer contracts that have fixed pricing and fixed volume terms and conditions, generally including contracts with payment obligations associated with MVCs.

Contract Liabilities

The following provides information about contract liabilities from contracts with customers:

Contract liabilities relate to payments received in advance of satisfying performance obligations under a contract, which result from contribution in aid of construction payments. Current and noncurrent contract liabilities are included in “Other Current Liabilities” and “Contract Liabilities”, respectively, of the Consolidated Balance Sheets.

Contract liabilities balance as of December 31, 2023 increased $2.9 million compared to that as of December 31, 2022. Higher contract liabilities balance reflected new projects started during 2023 that included provisions for customer capital reimbursements.

Contract Cost Assets

The Company has capitalized certain costs incurred to obtain a contract or additional contract dedicated acreage or volumes that would not have been incurred if the contract or associated acreage and volumes had not been obtained. These costs are recovered through the net cash flows of the associated contract. As of December 31, 2023 and 2022, the Company had contract cost assets of $71.2 million and $17.8 million, respectively. Current and noncurrent contract cost assets are included in “Prepaid and Other Current Assets” and “Deferred Charges and Other Assets”, respectively, of the Consolidated Balance Sheets. The Company amortizes these assets as cost of sales on a straight-line basis over the life of the associated long-term customer contract. For the years ended December 31, 2023, 2022, and 2021, the Company recognized cost of sales associated with these assets of $6.6 million, $1.8 million and $1.8 million, respectively.

Contract cost assets balance as of December 31, 2023 increased $53.4 million compared to that as of December 31, 2022. The increase was primarily related to the $60.0 million consideration paid for the incentive and acceleration agreement the Company entered into along with the midstream infrastructure assets acquisition consummated in first quarter of 2023. See further discussion in Note 3—Business Combinations in the Notes to our Consolidated Financial Statements in this Annual Report.