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Investments in Unconsolidated Entities | 12 Months Ended
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Dec. 31, 2022
Equity Method Investments and Joint Ventures [Abstract] |
Investments in Unconsolidated Entities | Investments in Unconsolidated Entities Investments in entities over which we have significant influence but not control are accounted for under 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. 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 unconsolidated entities consisted of the following (in millions, except percentage data):
|  |  |  | Ownership Interest at December 31, 2022 |  | Investment Balance December 31,
Entity (1) |  | Type of Operation |  |  | 2022 |  | 2021
BridgeTex Pipeline Company, LLC (“BridgeTex”) |  | Crude Oil Pipeline |  | 20% |  | $ | 403 |  |  | $ | 406 |
Cactus II (2) |  | Crude Oil Pipeline |  | —% |  | — |  |  | 737 |
Capline Pipeline Company LLC |  | Crude Oil Pipeline |  | 54% |  | 539 |  |  | 531 |
Diamond Pipeline LLC (“Diamond”) |  | Crude Oil Pipeline |  | 50% |  | 460 |  |  | 464 |
Eagle Ford Pipeline LLC (“Eagle Ford Pipeline”) |  | Crude Oil Pipeline |  | 50% |  | 371 |  |  | 363 |
Eagle Ford Terminals Corpus Christi LLC (“Eagle Ford Terminals”) |  | Crude Oil Terminal and Dock |  | 50% |  | 118 |  |  | 120 |
OMOG JV LLC (“OMOG”) (3) |  | Crude Oil Pipeline |  | 57% |  | 211 |  |  | 102 |
Saddlehorn |  | Crude Oil Pipeline |  | 30% |  | 197 |  |  | 209 |
White Cliffs Pipeline, LLC |  | Crude Oil Pipeline |  | 36% |  | 150 |  |  | 171 |
Wink to Webster Pipeline LLC (“W2W Pipeline”) (4) |  | Crude Oil Pipeline |  | 16% |  | 357 |  |  | 345 |
Other investments (5) |  |  |  |  |  | 278 |  |  | 357 |
Total Investments in Unconsolidated Entities |  |  |  |  |  | $ | 3,084 |  |  | $ | 3,805 |
(1)The financial results from these entities are reported in our Crude Oil segment. (2)In November 2022, we acquired an additional 5% interest in Cactus II which, combined with changes in governance, resulted in our obtaining control of the entity. We now reflect Cactus II as a consolidated subsidiary in our Consolidated Financial Statements. See Note 7 for additional information. (3)In November 2022, we acquired an additional interest in OMOG. Although we own greater than 50% of OMOG, we use the equity method to account for the investment because the joint venture partner still retains substantive participating rights. (4)Although we own less than 20% of W2W Pipeline, we use the equity method to account for the investment because we believe we have significant influence over the financial and operating decisions of the company. (5)In July 2022, we acquired the remaining 50% interest in Advantage. Prior to the acquisition, our 50% interest in Advantage was accounted for as an equity method investment. See Note 7 for additional information. Acquisitions During the fourth quarter of 2022, through a non-monetary transaction, we acquired an additional interest in OMOG in exchange for the contribution of portions of two pipeline systems. Subsequent to the transaction, our ownership interest in OMOG increased to 57% from 40%. We continue to account for OMOG as an equity method investment. The transaction resulted in a loss of approximately $25 million, which represents the difference between the fair value and historical book value of the assets contributed. This loss is reflected in “Gains (losses) on/(impairment of) investments in unconsolidated entities, net” on our Consolidated Statement of Operations. Impairments During the year ended December 31, 2020, we recognized losses as a result of the write-down of certain of our investments in unconsolidated entities, as discussed further below. Such amounts are reflected in “Gains (losses) on/(impairment of) investments in unconsolidated entities, net” on our Consolidated Statement of Operations. STACK. During the third quarter of 2020, we determined that there was an other-than-temporary impairment of our investment in STACK Pipeline LLC as a result of a continued decline of drilling activity and related volumes of crude oil in its area of operation. We recognized a loss of $91 million related to the write-down of the portion of the carrying amount of our investment that exceeded its fair value. The estimated fair value (which we consider a Level 3 measurement in the fair value hierarchy) was based on a discounted cash flow approach utilizing various assumptions and the application of a discount rate of approximately 14%, which represented our estimate of the cost of capital of a theoretical market participant. Such assumptions included (but were not limited to) (i) volumes (consistent with 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. Red Oak. In June 2019, we formed Red Oak Pipeline LLC (“Red Oak”), a joint venture with a subsidiary of Phillips 66 and in which we own a 50% interest, to develop a new crude oil pipeline project. In 2020, the partners of Red Oak determined that the project would not proceed as previously contemplated. We determined that there was an other-than-temporary impairment of our investment in Red Oak, and we recognized a loss of $69 million related to the write-down of our investment in Red Oak to the estimated residual value of our share of the net assets during the second quarter of 2020. Other investments. During the first quarter of 2020, we also recognized a loss of $43 million related to the write-down of certain of our investments included in “Other investments” in the table above due to an other-than-temporary impairment related to a decline in market conditions. Divestitures Saddlehorn. In February 2020, we sold a 10% ownership interest in Saddlehorn for proceeds of approximately $78 million. We recorded a gain of approximately $21 million related to this sale, which is included in “Gains (losses) on/(impairment of) investments in unconsolidated entities, net” on our Consolidated Statement of Operations. We continue to account for our remaining 30% interest in Saddlehorn under the equity method of accounting. Distributions Distributions received from unconsolidated entities are classified based on the nature of the distribution approach, which looks to the activity that generated the distribution. We consider distributions received from unconsolidated entities as a return on investment in those entities to the extent that the distribution was generated through operating results, and therefore classify these distributions as cash flows from operating activities in our Consolidated Statement of Cash Flows. Other distributions received from unconsolidated entities are considered a return of investment and classified as cash flows from investing activities on the Consolidated Statement of Cash Flows. Contributions We generally fund our portion of development, construction or capital investment projects of our equity method investees through capital contributions. During the years ended December 31, 2022, 2021 and 2020, we made cash contributions of $13 million, $82 million and $445 million, respectively, to certain of our equity method investees. We capitalize interest costs associated with contributions to unconsolidated entities for projects under development and construction. Our contributions to these entities (including capitalized interest costs) increase the carrying value of our investments and are reflected in our Consolidated Statements of Cash Flows as cash used in investing activities. Basis Differences Our investments in unconsolidated entities exceeded our share of the underlying equity in the net assets of such entities by $204 million and $223 million at December 31, 2022 and 2021, 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 majority of the basis difference at both December 31, 2022 and 2021 was attributable to goodwill related to our ownership interest in BridgeTex and Capline LLC with the remaining basis difference primarily related to capitalized interest incurred during construction of the assets of our unconsolidated entities. Summarized Financial Information of Unconsolidated Entities Combined summarized financial information for all of our unconsolidated entities is shown in the tables below (in millions). None of our unconsolidated entities have noncontrolling interests.
| December 31,
| 2022 |  | 2021
Current assets | $ | 471 |  |  | $ | 509 |
Noncurrent assets | $ | 7,579 |  |  | $ | 8,879 |
Current liabilities | $ | 252 |  |  | $ | 366 |
Noncurrent liabilities | $ | 8 |  |  | $ | 15 |
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Revenues | $ | 1,726 |  |  | $ | 1,320 |  |  | $ | 1,360 |
Operating income | $ | 1,004 |  |  | $ | 505 |  |  | $ | 828 |
Net income | $ | 1,011 |  |  | $ | 506 |  |  | $ | 826 |

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI https://asc.fasb.org/topic&trid=2196965 + Details
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