Investing Activities

12 Months Ended

Dec. 31, 2020

Note 7 – Investing Activities

Acquisition of Additional Interests in Caiman II

As of December 31, 2019, we effectively owned a 29 percent indirect interest in Blue Racer through our 58 percent interest in Caiman II, whose primary asset is a 50 percent interest in Blue Racer. On November 18, 2020, we paid $157 million, net of cash acquired, to acquire an additional 41 percent ownership interest in Caiman II. We now control and consolidate Caiman II, reporting the 50 percent interest in Blue Racer as an equity-method investment. Since substantially all of the fair value of the Caiman II assets acquired is concentrated in a single asset, the investment in Blue Racer, and we previously held a noncontrolling interest in Caiman II, we recorded the November 18, 2020, additional purchase of interests as an asset acquisition.

Equity Earnings (Losses)

Equity earnings (losses) in 2020 includes a $78 million loss associated with the first-quarter full impairment of goodwill recognized by our investee RMM, which was allocated entirely to our member interest per the terms of the membership agreement. Also included in 2020 are losses of $11 million, $26 million, and $10 million for our share of asset impairments at Laurel Mountain, Appalachia Midstream Investments, and Blue Racer, respectively.

Impairments of Equity-Method Investments

See Note 18 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for information regarding impairments of our equity-method investments of $1,046 million, $186 million, and $32 million for 2020, 2019, and 2018, respectively.

Other Investing Income (Loss) – Net

The following table presents certain items reflected in Other investing income (loss) – net in the Consolidated Statement of Operations:


	Year Ended December 31,
	2020		2019		2018
	(Millions)

Gain (loss) on deconsolidation of businesses	$	—	$	(29)	$	203
Gain on disposition of Jackalope	—		122		—
Other	8		14		16
Other investing income (loss) – net	$	8	$	107	$	219

Constitution deconsolidation

Upon determination that we were no longer the primary beneficiary, we deconsolidated our interest in Constitution Pipeline Company, LLC (Constitution) as of December 31, 2019, recognizing a loss on deconsolidation of $27 million.

Delaware basin asset deconsolidation and Brazos Permian II equity-method investment

During the fourth quarter of 2018, we contributed the majority of our existing Delaware basin assets and $27 million in cash in exchange for a 15 percent interest in the Brazos Permian II, which consists of gas and crude oil gathering pipelines, natural gas processing, and oil storage facilities. We recorded a deconsolidation gain of $141 million reflecting the excess of the fair value of our acquired interest over the carrying value of the assets contributed. We estimated the fair value of our interest to be $192 million primarily using a market approach (a Level 3 measurement within the fair value hierarchy). This approach involved the observation of recent transaction multiples in the Permian basin, including recent acquisitions consummated during 2018. Our interest in Brazos Permian II is considered an equity-method investment due to the fact that we are able to exert significant influence over its operating and financial policies.

Jackalope deconsolidation

During the second quarter of 2018, we deconsolidated our 50 percent interest in Jackalope Gas Gathering Services, L.L.C. (Jackalope). We recorded our interest in Jackalope as an equity-method investment at its estimated fair value, resulting in a deconsolidation gain of $62 million. We estimated the fair value of our interest to be $310 million using an income approach based on expected future cash flows and an appropriate discount rate (a Level 3 measurement within the fair value hierarchy). The determination of expected future cash flows involved significant assumptions regarding gathering and processing volumes and related capital spending. A 10.9 percent discount rate was utilized and reflected our estimate of the cost of capital as impacted by market conditions and risks associated with the underlying business. The deconsolidated carrying value of the net assets of Jackalope included $47 million of goodwill.

Gain on disposition of Jackalope

In April 2019, we sold our 50 percent equity-method interest in Jackalope for $485 million in cash, resulting in a gain on the disposition of $122 million.

Equity-Method Investments


	Ownership Interest at December 31, 2020	December 31,
		2020		2019
		(Millions)
Appalachia Midstream Investments	(1)	$	3,087	$	3,236
RMM	50%	421		881
OPPL	50%	395		403
Blue Racer/Caiman II (2)	50%	357		428
Discovery	60%	352		472
Laurel Mountain	69%	219		249
Gulfstream	50%	204		217
Brazos Permian II	15%	—		194
Other	Various	124		155
		$	5,159	$	6,235

___________

(1)Includes equity-method investments in multiple gathering systems in the Marcellus Shale with an approximate average 66 percent interest.

(2)See previous discussion in the section Acquisition of Additional Interests in Caiman II above.

The carrying value of our Appalachia Midstream Investments exceeds our portion of the underlying net assets by approximately $1.2 billion and $1.4 billion at December 31, 2020 and 2019, respectively. These differences were assigned at the acquisition date to property, plant, and equipment and customer relationship intangible assets. Certain of our other equity-method investments have a carrying value less than our portion of the underlying net assets primarily due to other than temporary impairments that we have recognized but that were not required to be recognized in the investees’ financial statements. These differences total approximately $1.3 billion and $360 million at December 31, 2020 and 2019, respectively, and were assigned to property, plant, and equipment and customer relationship intangible assets. Differences in the carrying value of our equity-method investments and our portion of the underlying net assets are generally amortized over the remaining useful lives of the associated underlying assets and included in Equity earnings (losses) within the Consolidated Statement of Operations.

Purchases of and contributions to equity-method investments

We generally fund our portion of significant expansion or development projects of these investees through additional capital contributions. These transactions increased the carrying value of our investments and included:


	Year Ended December 31,
	2020		2019		2018
	(Millions)
Blue Racer/Caiman II (1)	$	157	$	28	$	—
Appalachia Midstream Investments	116		140		246
Targa Train 7	6		43		—
Laurel Mountain	5		36		16
RMM	—		145		795
Jackalope	—		24		42
Brazos Permian II	—		18		27
Discovery	—		—		5
Other	41		19		1
	$	325	$	453	$	1,132

___________

(1)See previous discussion in the section Acquisition of Additional Interests in Caiman II above.

Dividends and distributions

The organizational documents of entities in which we have an equity-method investment generally require distribution of available cash to members on at least a quarterly basis. These transactions reduced the carrying value of our investments and included:


	Year Ended December 31,
	2020		2019		2018
	(Millions)
Appalachia Midstream Investments	$	357	$	293	$	297
Gulfstream	93		86		93
OPPL	50		77		73
Blue Racer/Caiman II (1)	47		42		46
RMM	39		38		—
Laurel Mountain	31		30		23
Discovery	21		41		45
UEOM	—		13		70
Other	15		37		46
	$	653	$	657	$	693

___________

(1)See previous discussion in the section Acquisition of Additional Interests in Caiman II above.

Summarized Financial Position and Results of Operations of All Equity-Method Investments


	December 31,
	2020		2019
	(Millions)
Assets (liabilities):
Current assets	$	630	$	581
Noncurrent assets	13,424		11,966
Current liabilities	(312)		(341)
Noncurrent liabilities	(3,884)		(2,532)


	Year Ended December 31,
	2020		2019		2018
	(Millions)
Gross revenue	$	2,625	$	2,490	$	2,411
Operating income	508		685		804
Net income	459		598		795