Equity Method Investments

9 Months Ended

Sep. 30, 2021

Equity Method Investments and Joint Ventures [Abstract]

In May 2019, the Partnership, through its wholly owned indirect subsidiary DKL Pipeline, LLC (“DKL Pipeline”), entered into a Contribution and Subscription Agreement (the “Contribution Agreement”) with Plains Pipeline, L.P. (“Plains”) and Red River Pipeline Company LLC (“Red River”). Pursuant to the Contribution Agreement, DKL Pipeline contributed $124.7 million, substantially all of which was financed by borrowings under the DKL Credit Facility, to Red River in exchange for a 33% membership interest in Red River and DKL Pipeline’s admission as a member of Red River. In addition, we contributed $0.4 million of startup capital pursuant to the Amended and Restated Limited Liability Company Agreement. During the third quarter of 2020, Red River, which owns a crude oil pipeline running from Cushing, Oklahoma to Longview, Texas, completed a planned expansion project to increase the pipeline capacity and commenced operations on the completed expansion project on October 1, 2020. We contributed $3.5 million related to such expansion project in May 2019 and during 2020 made additional capital contributions of $12.2 million based on capital calls received. During the nine months ended September 30, 2021, we made additional capital contributions totaling $1.4 million based on capital calls received.

Summarized unaudited financial information for Red River on a 100% basis is shown below (in thousands):


	September 30, 2021		December 31, 2020
Current Assets	$	25,444	$	13,488
Non-current Assets	$	406,051	$	413,259
Current liabilities	$	11,786	$	7,789


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	19,349	$	13,919	$	46,136	$	35,888
Gross profit	$	12,027	$	8,189	$	26,367	$	21,251
Operating income	$	11,871	$	8,020	$	25,866	$	20,717
Net income	$	11,853	$	8,022	$	25,843	$	20,768

We have two joint ventures that have constructed separate crude oil pipeline systems and related ancillary assets, which are serving third parties and subsidiaries of Delek Holdings. We own a 50% membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P. ("CP LLC") to operate one of these pipeline systems (the "Caddo Pipeline") and a 33% membership interest in the entity formed with Rangeland Energy II, LLC ("Rangeland Energy") to operate the other pipeline system (the "Rio Pipeline"). During 2018, Rangeland Energy was acquired by Andeavor (which was subsequently acquired by Marathon Petroleum Corporation) and the legal entity in which we have an equity investment became Andeavor Logistics Rio Pipeline LLC ("Andeavor Logistics").

Combined summarized unaudited financial information for these two equity method investees on a 100% basis is shown below (in thousands):


	September 30, 2021		December 31, 2020
Current assets	$	20,790	$	20,763
Non-current assets	$	245,560	$	253,862
Current liabilities	$	3,731	$	1,496


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	12,090	$	14,227	$	35,316	$	42,412
Gross profit	$	6,757	$	9,634	$	20,462	$	28,468
Operating income	$	6,300	$	9,135	$	19,022	$	26,999
Net Income	$	6,300	$	9,136	$	19,023	$	27,023

The Partnership's investments in these three entities were financed through a combination of cash from operations and borrowings under the DKL Credit Facility. As of September 30, 2021 and December 31, 2020, the Partnership's investment balance in these joint ventures was $251.9 million and $253.7 million, respectively.

We do not consolidate any part of the assets or liabilities or operating results of our equity method investees. Our share of net income or loss of the investees will increase or decrease, as applicable, the carrying value of our investments in unconsolidated affiliates. With respect to our equity method investments, we determined that these entities do not represent variable interest entities and consolidation is not required. We have the ability to exercise significant influence over each of these joint ventures through our participation in the management committees, which make all significant decisions. However, since all significant decisions require the consent of the other investor(s) without regard to economic interest, we have determined that we have joint control and have applied the equity method of accounting. Our investment in these joint ventures is reflected in our pipelines and transportation segment.