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Acquisitions, Divestitures and Asset Impairments | 6 Months Ended
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Jun. 30, 2020
Business Combinations [Abstract] |
Acquisitions, Divestitures and Asset Impairments | Acquisitions, Divestitures and Asset Impairments Acquisitions Felix Midstream LLC. In February 2020, we acquired Felix Midstream LLC, now known as FM Gathering LLC (“FM Gathering”) from Felix Energy Holdings II, LLC for approximately $300 million, net of working capital and other adjustments. FM Gathering owns and operates a newly constructed crude oil gathering system in the Delaware Basin, with associated crude oil storage and truck offloading capacity, and is supported by a long-term acreage dedication. The assets acquired are primarily included in our Transportation and Supply and Logistics segments. This acquisition was accounted for using the acquisition method of accounting and the determination of the fair value of the assets acquired and liabilities assumed has been estimated in accordance with the applicable accounting guidance. The determination of these values is preliminary and we expect to finalize our fair value determination in 2020. The assets acquired primarily consisted of property and equipment of $115 million and intangible assets of $187 million. The preliminary fair value of the tangible assets is a Level 3 measurement in the fair value hierarchy and was determined using a cost approach. The cost approach was based on costs incurred on similar recent construction projects. The preliminary fair value of the intangible assets is also a Level 3 measurement in the fair value hierarchy and was determined by applying a discounted cash flow approach. Such approach utilized discount rates varying from 15% to 16%, based on our estimate of the risk that a theoretical market participant would assign to the respective intangible assets. Divestitures Saddlehorn Pipeline Company, LLC. In February 2020, we sold a 10% ownership interest in Saddlehorn Pipeline Company, LLC for proceeds of approximately $78 million, including working capital adjustments. 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. Assets Held For Sale. As of June 30, 2020, we classified approximately $198 million as assets held for sale on our Condensed Consolidated Balance Sheet (in “Other current assets”). The assets held for sale, which were valued based on fair value less costs to sell, are primarily property and equipment, are included in our Facilities segment and are related to transactions to sell our interests in certain Los Angeles Basin (“LA Basin”) terminals. In January 2020, we signed a definitive agreement to sell certain of our LA Basin crude oil terminals for $195 million, subject to certain adjustments. We expect the transaction to close in the second half of 2020, subject to customary closing conditions, including the receipt of regulatory approvals. During the first quarter of 2020, certain NGL terminals included in our Facilities segment were also classified as held for sale. In April 2020, the transaction closed for proceeds of approximately $163 million, subject to certain adjustments. Upon these classifications to assets held for sale, we recognized non-cash impairment losses of approximately $167 million during the first quarter of 2020. Such impairment losses are reflected in “(Gains)/losses on asset sales and asset impairments, net” on our Condensed Consolidated Statement of Operations. Asset Impairments (Held and Used) During the six months ended June 30, 2020, we recognized approximately $558 million of non-cash impairment losses related to certain pipeline and other long-lived assets included in our Transportation and Facilities segments, along with certain of our investments in unconsolidated entities. Of these losses, approximately $446 million is reflected in “(Gains)/losses on asset sales and asset impairments, net” with the remainder reflected in “Gain on/(impairment of) investments in unconsolidated entities, net” on our Condensed Consolidated Statement of Operations. A majority of the impairment losses were recognized during the first quarter of 2020. See Note 7 for additional information regarding our investments in unconsolidated entities. The current macroeconomic and geopolitical conditions including the collapse of oil prices driven by both the decrease in demand caused by the COVID-19 pandemic and excess supply, as well as changing market conditions and expected lower crude oil production in certain regions, resulted in expected decreases in future cash flows for certain of our assets, which was a triggering event that required us to assess the recoverability of our carrying value of such long-lived assets. As a result of our impairment review, we wrote off the portion of the carrying amount of these long-lived assets that exceeded their fair value. Our estimated fair values (which we consider a Level 3 measurement in the fair value hierarchy) were based upon 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 (based on 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.
Acquisitions, Divestitures and Asset Impairments | Acquisitions, Divestitures and Asset Impairments Acquisitions Felix Midstream LLC. In February 2020, we acquired Felix Midstream LLC, now known as FM Gathering LLC (“FM Gathering”) from Felix Energy Holdings II, LLC for approximately $300 million, net of working capital and other adjustments. FM Gathering owns and operates a newly constructed crude oil gathering system in the Delaware Basin, with associated crude oil storage and truck offloading capacity, and is supported by a long-term acreage dedication. The assets acquired are primarily included in our Transportation and Supply and Logistics segments. This acquisition was accounted for using the acquisition method of accounting and the determination of the fair value of the assets acquired and liabilities assumed has been estimated in accordance with the applicable accounting guidance. The determination of these values is preliminary and we expect to finalize our fair value determination in 2020. The assets acquired primarily consisted of property and equipment of $115 million and intangible assets of $187 million. The preliminary fair value of the tangible assets is a Level 3 measurement in the fair value hierarchy and was determined using a cost approach. The cost approach was based on costs incurred on similar recent construction projects. The preliminary fair value of the intangible assets is also a Level 3 measurement in the fair value hierarchy and was determined by applying a discounted cash flow approach. Such approach utilized discount rates varying from 15% to 16%, based on our estimate of the risk that a theoretical market participant would assign to the respective intangible assets. Divestitures Saddlehorn Pipeline Company, LLC. In February 2020, we sold a 10% ownership interest in Saddlehorn Pipeline Company, LLC for proceeds of approximately $78 million, including working capital adjustments. 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. Assets Held For Sale. As of June 30, 2020, we classified approximately $198 million as assets held for sale on our Condensed Consolidated Balance Sheet (in “Other current assets”). The assets held for sale, which were valued based on fair value less costs to sell, are primarily property and equipment, are included in our Facilities segment and are related to transactions to sell our interests in certain Los Angeles Basin (“LA Basin”) terminals. In January 2020, we signed a definitive agreement to sell certain of our LA Basin crude oil terminals for $195 million, subject to certain adjustments. We expect the transaction to close in the second half of 2020, subject to customary closing conditions, including the receipt of regulatory approvals. During the first quarter of 2020, certain NGL terminals included in our Facilities segment were also classified as held for sale. In April 2020, the transaction closed for proceeds of approximately $163 million, subject to certain adjustments. Upon these classifications to assets held for sale, we recognized non-cash impairment losses of approximately $167 million during the first quarter of 2020. Such impairment losses are reflected in “(Gains)/losses on asset sales and asset impairments, net” on our Condensed Consolidated Statement of Operations. Asset Impairments (Held and Used) During the six months ended June 30, 2020, we recognized approximately $558 million of non-cash impairment losses related to certain pipeline and other long-lived assets included in our Transportation and Facilities segments, along with certain of our investments in unconsolidated entities. Of these losses, approximately $446 million is reflected in “(Gains)/losses on asset sales and asset impairments, net” with the remainder reflected in “Gain on/(impairment of) investments in unconsolidated entities, net” on our Condensed Consolidated Statement of Operations. A majority of the impairment losses were recognized during the first quarter of 2020. See Note 7 for additional information regarding our investments in unconsolidated entities. The current macroeconomic and geopolitical conditions including the collapse of oil prices driven by both the decrease in demand caused by the COVID-19 pandemic and excess supply, as well as changing market conditions and expected lower crude oil production in certain regions, resulted in expected decreases in future cash flows for certain of our assets, which was a triggering event that required us to assess the recoverability of our carrying value of such long-lived assets. As a result of our impairment review, we wrote off the portion of the carrying amount of these long-lived assets that exceeded their fair value. Our estimated fair values (which we consider a Level 3 measurement in the fair value hierarchy) were based upon 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 (based on 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.

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- Definition The entire disclosure for the details of the charge against earnings resulting from the aggregate write down of all assets from their carrying value to their fair value. Disclosure may also include a description of the impaired asset and facts and circumstances leading to the impairment, amount of the impairment loss and where the loss is located in the income statement, method(s) for determining fair value, and the segment in which the impaired asset is reported. + References No definition available. + Details
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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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