Equity Method Investments

9 Months Ended

Sep. 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:


	September 30, 2019				December 31, 2018
	Ownership	Investment Amount		Ownership	Investment Amount
Amberjack – Series A / Series B	75.0% / 50.0%	$	433	75.0% / 50.0%	$	458
Mars	71.5%	162		71.5%	169
Bengal	50.0%	88		50.0%	82
Permian Basin	50.0%	81		50.0%	72
LOCAP	41.48%	9		41.48%	8
Explorer⁽¹⁾	38.59%	89		12.62%	—
Poseidon	36.0%	—		36.0%	—
Colonial ⁽¹⁾	16.125%	31		6.0%	—
Proteus	10.0%	15		10.0%	16
Endymion	10.0%	18		10.0%	18
		$	926		$	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. Since the June 2019 Acquisition, we record distributions from these investments as reductions to the respective equity method investment balances for Explorer and Colonial as these amounts are no longer considered dividend income due to the change in the method of accounting. We recognize 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 September 30, 2019 and December 31, 2018, the unamortized basis differences included in our equity investments are $94 million and $40 million, respectively. For the three and nine months ended September 30, 2019, the net amortization expense was $2 million and $4 million, respectively, and for the three and nine months ended September 30, 2018, the net amortization expense was $1 million and $3 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 $8 million and $25 million for the three and nine months ended September 30, 2019, respectively, and $7 million and $17 million for the three and nine months ended September 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 September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Amberjack ⁽¹⁾	$	31	$	33	$	94	$	49
Mars	35		30		93		76
Bengal	8		5		18		15
Explorer ⁽²⁾	20		—		27		—
Colonial ⁽²⁾	17		—		21		—
Poseidon⁽³⁾	—		—		—		6
Other⁽⁴⁾	4		5		12		15
	$	115	$	73	$	265	$	161

⁽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, 2021 or on January 1, 2020, if early adopted, 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 reflects activity from the date of the acquisition.


	Three Months Ended September 30, 2019
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack	$	80	$	18	$	62	$	62
Mars	82		32		50		50
Bengal	22		7		15		15
Explorer	122		51		71		55
Colonial	354		190		164		109
Poseidon	31		9		22		20
Other ⁽¹⁾	44		21		23		21

⁽¹⁾ Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.


	Nine Months Ended September 30, 2019
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack	$	235	$	54	$	181	$	182
Mars	212		80		132		133
Bengal	59		23		36		36
Explorer ⁽¹⁾	159		64		95		73
Colonial⁽²⁾	442		234		208		136
Poseidon	96		26		70		63
Other⁽³⁾	130		76		54		47

⁽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 $344 million, $145 million and $199 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 $1,050 million, $520 million and $530 million, respectively.

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


	Three Months Ended September 30, 2018
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack	$	83	$	18	$	65	$	65
Mars	69		26		43		43
Bengal	18		7		11		11
Poseidon	28		10		18		16
Other⁽¹⁾	37		18		19		17

⁽¹⁾Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.


	Nine Months Ended September 30, 2018
	Total revenues		Total operating expenses		Operating income		Net income
Statements of Income
Amberjack ⁽¹⁾	$	123	$	28	$	95	$	95
Mars	178		69		109		109
Bengal	51		21		30		30
Poseidon	84		27		57		52
Other ⁽²⁾	112		48		64		57

⁽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 $214 million, $54 million and $160 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. For the three and nine months ended September 30, 2019, we made capital contributions of $3 million and $13 million, respectively, and for the three and nine months ended September 30, 2018, we made capital contributions of $7 million and $21 million, respectively.