Investments in Unconsolidated Entities

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Our investments in unconsolidated entities consisted of the following (in millions, except percentage data):


		Ownership Interest at September 30, 2020	Investment Balance
Entity (1)	Type of Operation		September 30, 2020		December 31, 2019
BridgeTex Pipeline Company, LLC	Crude Oil Pipeline	20%	$	422	$	431
Cactus II Pipeline LLC	Crude Oil Pipeline	65%	781		738
Capline Pipeline Company LLC	Crude Oil Pipeline (2)	54%	505		484
Diamond Pipeline LLC	Crude Oil Pipeline	50%	482		476
Eagle Ford Pipeline LLC	Crude Oil Pipeline	50%	375		382
Eagle Ford Terminals Corpus Christi LLC (“Eagle Ford Terminals”)	Crude Oil Terminal and Dock	50%	122		126
Red Oak Pipeline LLC (“Red Oak”)	Crude Oil Pipeline	50%	35		20
Saddlehorn Pipeline Company, LLC (“Saddlehorn”)	Crude Oil Pipeline	30%	199		234
STACK Pipeline LLC	Crude Oil Pipeline	50%	22		117
White Cliffs Pipeline, LLC	Crude Oil Pipeline	36%	194		196
Wink to Webster Pipeline LLC	Crude Oil Pipeline	16%	299		136
Other investments			307		343
Total investments in unconsolidated entities			$	3,743	$	3,683

(1)Except for Eagle Ford Terminals, which is reported in our Facilities segment, the financial results from the entities are reported in our Transportation segment.

(2)The Capline pipeline was taken out of service pending the reversal of the pipeline system.

Impairments

In March 2020, the partners of Red Oak announced they were deferring the Red Oak pipeline project and suspending actions that would require additional capital spending on the project, and that they would re-evaluate demand for the project in light of recent market developments. Subsequently, the partners determined that the project would not proceed as previously contemplated. We determined that there was an other-than-temporary impairment of our investment in Red Oak, and we wrote our investment in Red Oak down to the estimated residual value of our share of the net assets during the second quarter of 2020. In addition, during the first quarter of 2020, we recorded a write-down of certain of our investments included in “Other investments” in the table above due to an other-than-temporary impairment related to a decline in market conditions.

During the third quarter of 2020, we determined that there was an other-than-temporary impairment of our investment in STACK Pipeline LLC as a result of a continued decline of drilling activity and related volumes of crude oil in its area of operation. We wrote off the portion of the carrying amount of our investment that exceeded its fair value. The estimated fair value (which we consider a Level 3 measurement in the fair value hierarchy) was based on a discounted cash flow approach utilizing various assumptions and the application of a discount rate of approximately 14%, which represents our estimate of the cost of capital of a theoretical market participant. Such assumptions included (but were not limited to) (i) volumes (consistent with historical information and estimates of future drilling and completion activity), (ii) tariff rates, (iii) future commodity prices (based on relevant indices and applicable quality and location differentials), and (iv) estimated fixed and variable costs.

As a result of these write-downs, during the three and nine months ended September 30, 2020, we recognized losses of $91 million and $202 million, respectively. These losses are reflected in “Gain on/(impairment of) investments in unconsolidated entities, net” on our Condensed Consolidated Statement of Operations.

Divestitures

Saddlehorn. In February 2020, we sold a 10% ownership interest in Saddlehorn for proceeds of approximately $78 million and have retained a 30% ownership interest. We recorded a gain of approximately $21 million related to this sale, which is included in “Gain on/(impairment of) investments in unconsolidated entities, net” on our Condensed Consolidated Statement of Operations. We continue to account for our remaining interest under the equity method of accounting.