Equity Method Investments

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

For each of the following investments, we have the ability to exercise significant influence over these investments based on certain governance provisions and our participation in the significant activities and decisions that impact the management and economic performance of the investments.

Equity method investments comprise the following as of the dates indicated:


	June 30, 2019				December 31, 2018
	Ownership	Investment Amount		Ownership	Investment Amount
Amberjack – Series A / Series B	75.0% / 50.0%	$	441	75.0% / 50.0%	$	458
Mars	71.5%	162		71.5%	169
Bengal	50.0%	84		50.0%	82
Permian Basin	50.0%	79		50.0%	72
LOCAP	41.48%	8		41.48%	8
Explorer⁽¹⁾	38.59%	92		12.62%	—
Poseidon	36.0%	—		36.0%	—
Colonial ⁽¹⁾	16.125%	30		6.0%	—
Proteus	10.0%	16		10.0%	16
Endymion	10.0%	18		10.0%	18
		$	930		$	823

⁽¹⁾As part of the June 2019 Acquisition, these interests have been accounted for prospectively. See below for additional information.

We acquired an additional 25.97% interest in Explorer and an additional 10.125% interest in Colonial in the June 2019 Acquisition. As a result, these investments now qualify for equity method accounting as we have the ability to exercise significant influence over these investments as of the acquisition date. Prior to the acquisition date, Explorer and Colonial were accounted for as Other investments without readily determinable fair values and were therefore carried at cost. Upon acquisition, we added our Parent’s historical carrying value of the equity interests transferred as a transaction between entities under common control, totaling $90 million, to the basis of our previously held interests of $60 million as this is the date these investments qualified for equity method accounting. Subsequent to the June 2019 Acquisition date, we received second quarter distributions for Explorer and Colonial in the amounts of $23 million and $16 million, respectively. We recorded these distributions as reductions to the respective equity method investment balances for Explorer and Colonial as these amounts were no longer considered dividend income due to the change in the method of accounting. We recorded equity earnings for both Explorer and Colonial prospectively from the date of acquisition.

Unamortized differences in the basis of the initial investments and our interest in the separate net assets within the financial statements of the investees are amortized into net income over the remaining useful lives of the underlying assets. As of June 30, 2019 and December 31, 2018, the unamortized basis differences included in our equity investments are $97 million and $40 million, respectively. For the three and six months ended June 30, 2019 the net amortization expense was $1 million and $2 million, respectively, and for the three and six months ended June 30, 2018, the net amortization expense was $1 million and $2 million, respectively.

During the first quarter of 2018, the investment amount for Poseidon was reduced to zero due to distributions received that were in excess of our investment balance and we, therefore, suspended the equity method of accounting. Further, we have no commitments to provide further financial support to Poseidon. As such, we have recorded excess distributions in Other income of $9 million and $17 million for the three and six months ended June 30, 2019, respectively, and $9 million and $10 million for the three and six months ended June 30, 2018, respectively. Once our cumulative share of equity earnings becomes greater than the amount of distributions received, we will resume the equity method of accounting as long as the equity method investment balance remains greater than zero.

Earnings from our equity method investments were as follows during the periods indicated:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		2019		2018
Amberjack ⁽¹⁾	$	31	$	16	$	63	$	16
Mars	29		21		58		46
Bengal	5		6		10		10
Explorer ⁽²⁾	7		—		7		—
Colonial ⁽²⁾	4		—		4		—
Poseidon⁽³⁾	—		—		—		6
Other⁽⁴⁾	4		5		8		10
	$	80	$	48	$	150	$	88

⁽¹⁾We acquired an interest in Amberjack in May 2018. The acquisition of this interest has been accounted for prospectively.

⁽²⁾As stated above, we acquired additional interests in Explorer and Colonial in June 2019. The acquisition of these interests has been accounted for prospectively.

⁽³⁾As stated above, the equity method of accounting has been suspended for Poseidon and excess distributions are recorded in Other income.

⁽⁴⁾Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.

The adoption of the revenue standard for the majority of our equity method investments followed the non-public business entity adoption date of January 1, 2019 for their stand-alone financial statements, with the exception of Mars and Permian Basin which adopted on January 1, 2018. As a result of the adoption of the revenue standard on January 1, 2019, we recognized our proportionate share of Amberjack’s cumulative effect transition adjustments as a decrease to opening equity (deficit) in the amount of $9 million under the modified retrospective transition method. As a result of the adoption of the revenue standard on January 1, 2018, we recognized our proportionate share of Mars’ cumulative effect transition adjustments as a decrease to opening equity (deficit) in the amount of $7 million under the modified retrospective transition method.

Under the new lease standard (as defined in Note 8 - Leases), the adoption date for our equity method investments will follow the non-public business entity adoption date of January 1, 2020 for their stand-alone financial statements.

Summarized Financial Information

The following tables present aggregated selected unaudited income statement data for our equity method investments on a 100% basis. However, during periods in which an acquisition occurs, the selected unaudited income statement data is pro-rated based on the number of days in which the Partnership owned and accounted for the investment under the equity method of accounting.


	Three Months Ended June 30, 2019
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack	$	74	$	17	$	57	$	58
Mars	67		26		41		42
Bengal	19		9		10		10
Explorer⁽¹⁾	37		13		24		18
Colonial ⁽²⁾	88		44		44		27
Poseidon	34		8		26		23
Other ⁽³⁾	56		37		19		17

⁽¹⁾Our additional interest in Explorer was acquired on June 6, 2019. Explorer's total revenues, total operating expenses and operating income (on a 100% basis) were $133 million, $48 million and $85 million, respectively.

⁽²⁾Our additional interest in Colonial was acquired on June 6, 2019. Colonial's total revenues, total operating expenses and operating income (on a 100% basis) were $325 million, $164 million and $161 million, respectively.

⁽³⁾ Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.


	Six Months Ended June 30, 2019
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack	$	155	$	36	$	119	$	120
Mars	130		48		82		83
Bengal	37		16		21		21
Explorer ⁽¹⁾	37		13		24		18
Colonial⁽²⁾	88		44		44		27
Poseidon	65		17		48		43
Other⁽³⁾	86		55		31		26

⁽¹⁾Our additional interest in Explorer was acquired on June 6, 2019. Explorer's total revenues, total operating expenses and operating income (on a 100% basis) were $222 million, $94 million and $128 million, respectively.

⁽²⁾Our additional interest in Colonial was acquired on June 6, 2019. Colonial's total revenues, total operating expenses and operating income (on a 100% basis) were $696 million, $330 million and $366 million, respectively.

⁽³⁾ Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.


	Three Months Ended June 30, 2018
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack ⁽¹⁾	$	40	$	10	$	30	$	30
Mars	52		22		30		30
Bengal	18		7		11		11
Poseidon	27		8		19		17
Other⁽²⁾	39		15		24		21

⁽¹⁾Our interest in Amberjack was acquired on May 11, 2018. Amberjack’s total revenues, total operating expenses and operating income (on a 100% basis) were $70 million, $17 million and $53 million, respectively.

⁽²⁾Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.


	Six Months Ended June 30, 2018
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack ⁽¹⁾	$	40	$	10	$	30	$	30
Mars	109		43		66		66
Bengal	33		14		19		19
Poseidon	56		17		39		36
Other ⁽²⁾	75		30		45		40

⁽¹⁾Our interest in Amberjack was acquired on May 11, 2018. Amberjack’s total revenues, total operating expenses and operating income (on a 100% basis) were $132 million, $36 million and $96 million, respectively.

⁽²⁾Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.

Capital Contributions

We make capital contributions for our pro-rata interest in Permian Basin to fund capital and other expenditures. We have made capital contributions of $10 million during the first six months of 2019.