Note 7—Investments in Unconsolidated Entities

Investments in entities over which we have significant influence but not control are accounted for by the equity method. We do not consolidate any part of the assets or liabilities of our equity investees. Our share of net income or loss is reflected as one line item on our Consolidated Statements of Operations entitled “Equity earnings in unconsolidated entities” and will increase or decrease, as applicable, the carrying value of our investments in unconsolidated entities on our Consolidated Balance Sheets. In addition, as applicable, we include a proportionate share of our equity method investees’ unrealized gains and losses in other comprehensive income on our Consolidated Balance Sheets. We also adjust our investment balances in these investees by the like amount. We evaluate our equity investments for impairment in accordance with FASB guidance with respect to the equity method of accounting for investments in common stock. An impairment of an equity investment results when factors indicate that the investment’s fair value is less than its carrying value and the reduction in value is other than temporary in nature.

Our investments in the following entities are accounted for under the equity method of accounting:

Entity	Type of Operation	Our Ownership Interest
Settoon Towing, LLC	Barge Transportation Services	50	%
BridgeTex Pipeline Company, LLC (“BridgeTex”)	Crude Oil Pipeline	50	%
Caddo Pipeline LLC (“Caddo”) (1)	Crude Oil Pipeline (2)	50	%
Diamond Pipeline LLC (“Diamond”) (1)	Crude Oil Pipeline (2)	50	%
Eagle Ford Pipeline LLC	Crude Oil Pipeline	50	%
Eagle Ford Terminals Corpus Christi LLC (“Eagle Ford Terminals”) (1)	Crude Oil Terminal and Dock (2)	50	%
Frontier Pipeline Company	Crude Oil Pipeline	50	%
Saddlehorn Pipeline Company, LLC (“Saddlehorn”) (1)	Crude Oil Pipeline (2)	40	%
White Cliffs Pipeline, LLC	Crude Oil Pipeline	36	%
Butte Pipe Line Company	Crude Oil Pipeline	22	%

(1)

Our initial investment in the entity occurred in 2015.

(2)

Asset is currently under construction by the entity and has not yet been placed in service.

In November 2014, we acquired a 50% interest in BridgeTex from Oxy. BridgeTex owns a 300,000 barrel-per-day crude oil pipeline that extends from Colorado City in West Texas to a crude oil terminal in East Houston, which we believe is complementary to our existing West Texas assets. We paid cash of $1.088 billion, including working capital adjustments of $13 million, for our interest in BridgeTex.

We consider distributions received from unconsolidated entities as returns on investment in those entities to the extent of cumulative net operating cash flows, and therefore classify these distributions as cash flows from operating activities in our Consolidated Statement of Cash Flows. We define cumulative net operating cash flows as cumulative net income adjusted for certain non-cash items such as depreciation and amortization expense. Other distributions received from unconsolidated entities would be considered a return of the investment and classified as cash flows from investing activities on the Consolidated Statement of Cash Flows.

We generally fund our portion of development, construction or capital expansion projects of our equity method investees through capital contributions. Our contributions to these entities increase the carrying value of our investments and are reflected in our Consolidated Statements of Cash Flows as cash used in investing activities. During the years ended December 31, 2015, 2014 and 2013, we made cash contributions of $253 million, $158 million and $133 million, respectively, to certain of our equity method investees. The contributions amount for 2015 is net of $53 million of cash received as a return of our investment. We anticipate that we will make additional contributions related to ongoing projects at Diamond, Saddlehorn, Eagle Ford Terminals and Caddo over the next several years.

Our investments in unconsolidated entities exceeded our share of the underlying equity in the net assets of such entities by $760 million and $763 million at December 31, 2015 and 2014, respectively. Such basis differences are included in the carrying values of our investments on our Consolidated Balance Sheets. The portion of the basis differences attributable to depreciable or amortizable assets is amortized on a straight-line basis over the estimated useful life of the related assets, which reduces “Equity earnings in unconsolidated entities” on our Consolidated Statements of Operations. The portion of the basis differences attributable to goodwill is not amortized. The basis difference is primarily related to our acquisition of an interest in BridgeTex.

Summarized Financial Information of Unconsolidated Entities

Combined summarized financial information for all of our unconsolidated entities is shown in the tables below (in millions):

	December 31,
	2015		2014
Current assets	$	365	$	184
Noncurrent assets	$	2,901	$	2,303
Current liabilities	$	231	$	142
Noncurrent liabilities	$	184	$	222

	Year Ended December 31,
	2015		2014		2013
Revenues	$	769	$	531	$	344
Operating income	$	441	$	301	$	181
Net income	$	424	$	285	$	172