Investments in Unconsolidated Entities

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



Entity ⁽¹⁾	Type of Operation	Ownership Interest at March 31, 2019	March 31, 2019		December 31, 2018
Advantage Pipeline Holdings LLC	Crude Oil Pipeline	50%	$	72	$	72
BridgeTex Pipeline Company, LLC	Crude Oil Pipeline	20%	434		435
Cactus II Pipeline LLC	Crude Oil Pipeline⁽²⁾	65%	531		455
Caddo Pipeline LLC	Crude Oil Pipeline	50%	65		65
Capline Pipeline Company LLC	Crude Oil Pipeline ⁽³⁾	54%	455		—
Cheyenne Pipeline LLC	Crude Oil Pipeline	50%	44		44
Diamond Pipeline LLC	Crude Oil Pipeline	50%	484		479
Eagle Ford Pipeline LLC	Crude Oil Pipeline	50%	396		383
Eagle Ford Terminals Corpus Christi LLC	Crude Oil Terminal and Dock ⁽²⁾	50%	117		108
Midway Pipeline LLC	Crude Oil Pipeline	50%	77		78
Saddlehorn Pipeline Company, LLC	Crude Oil Pipeline	40%	215		215
Settoon Towing, LLC	Barge Transportation Services	50%	58		58
STACK Pipeline LLC	Crude Oil Pipeline	50%	117		120
White Cliffs Pipeline, LLC	Crude Oil Pipeline	36%	191		190
Wink to Webster Pipeline LLC (“W2W Pipeline”)	Crude Oil Pipeline ⁽²⁾	20%	7		—
Total Investments in Unconsolidated Entities			$	3,263	$	2,702


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


⁽³⁾	The Capline pipeline was taken out of service in the fourth quarter of 2018. The members of Capline Pipeline Company LLC launched a binding open season to solicit shipper interest for a reversal of the Capline pipeline and the initiation of southbound service.

Formations

Capline. During the first quarter of 2019, the owners of the Capline pipeline system, which originates in St. James, Louisiana and terminates in Patoka, Illinois, contributed their undivided joint interests in the system for equity interests in a legal entity, Capline Pipeline Company LLC (“Capline LLC”). After the contribution, Capline LLC owns 100% of the pipeline system. Each owner’s undivided joint interest in the Capline pipeline system prior to the transaction is equal to each owner’s equity interest in Capline LLC. Although we own a majority of Capline LLC’s equity, we do not have a controlling financial interest in Capline LLC because the other members have substantive participating rights. Therefore, we account for our ownership interest in Capline LLC as an equity method investment.

The transaction resulted in a loss of control of our undivided joint interest, which was derecognized and contributed to Capline LLC. The loss of control required us to measure our equity interest in Capline LLC at fair value. At the time of the transaction, our 54% undivided joint interest in the Capline pipeline system had a carrying value of $177 million, which primarily related to property and equipment included in our Transportation segment. We determined the fair value of our investment in Capline LLC to be approximately $444 million, resulting in a gain of $267 million during the three months ended March 31, 2019. Such gain is included in “Gain on investment in unconsolidated entities” on our Condensed Consolidated Statement of Operations. Our share of the underlying equity in the net assets of Capline LLC exceeds our investment in Capline LLC. The portion of this basis difference attributable to depreciable or amortizable assets will be accreted on a straight-line basis over the estimated useful life of the related assets.

The fair value of our investment in Capline LLC was based on an income approach utilizing a discounted cash flow analysis. This approach requires us to make long-term forecasts of future revenues and expenditures. Those forecasts require the use of various assumptions and estimates which include those related to the timing and amount of capital expenditures, and the expected tariff rates and volumes of crude oil. These assumptions are based on a potential reversal of the Capline pipeline and the initiation of southbound service on the Capline pipeline from Patoka to St. James, and potential service on our Diamond joint venture pipeline and the Capline pipeline from Cushing, Oklahoma to St. James. We probability weighted various forecasted cash flow scenarios utilized in the analysis when we considered the possible outcomes. We use a discount rate representing our estimate of the risk adjusted discount rate that would be used by market participants. These projects are dependent upon shipper interest. If shipper interest varies from the levels assumed in our model, the related cash flows, and thus the fair value of our investment, could be materially impacted. The fair value of our investment was determined using significant unobservable inputs, or Level 3 inputs in the fair value hierarchy.

W2W Pipeline. In the first quarter of 2019, we announced the formation of W2W Pipeline, a joint venture with subsidiaries of ExxonMobil and Lotus Midstream, LLC. We own a 20% interest in W2W Pipeline, which is currently developing a new pipeline system that will originate in the Permian Basin in West Texas and transport crude oil to the Texas Gulf Coast. The pipeline system will provide more than 1 million barrels per day of crude oil and condensate capacity, and the project is targeted to commence operations in the first half of 2021. We account for our interest in W2W Pipeline under the equity method of accounting.