EQUITY METHOD INVESTMENTS

9 Months Ended

Sep. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

EQUITY METHOD INVESTMENTS

EQUITY METHOD INVESTMENTS

In October 2014, Diamondback obtained a 25% interest in HMW Fluid Management LLC (“HMW LLC”), which was formed to develop, own and operate an integrated water management system to gather, store, process, treat, distribute and dispose of water to exploration and production companies operating in Midland, Martin and Andrews Counties, Texas.

On June 30, 2018, HMW LLC’s operating agreement was amended. As a result of the amendment, the Partnership no longer recognizes an equity investment in HMW LLC but instead consolidates its undivided interest in the salt water disposal assets owned by HMW LLC. In exchange for the Partnership’s 25% investment, the Partnership received a 50% undivided ownership interest in two of the four SWD wells and associated assets previously owned by HMW LLC. The Partnership’s basis in the assets is equivalent to its basis in the equity investment in HMW LLC.

On February 1, 2019, Diamondback funded and the Predecessor acquired a 10% equity interest in EPIC Crude Holdings, LP (“EPIC”), which is building a pipeline (the “EPIC project”) that, once fully operational, will transport crude and natural gas liquids across Texas for delivery into the Corpus Christi market. As of September 30, 2019, the Partnership's total investment in the EPIC project was $89.2 million. During the nine months ended September 30, 2019, the Partnership recorded net expenses of $0.5 million related to the EPIC project. The EPIC project began initial operations during the third quarter of 2019.

On February 15, 2019, Diamondback funded and the Predecessor acquired a 10% equity interest in Gray Oak Pipeline, LLC (“Gray Oak”), which is building a pipeline (the “Gray Oak project”) that, once operational, will transport crude from the Permian to Corpus Christi on the Texas Gulf Coast. As of September 30, 2019, the Partnership's total investment in the Gray Oak project was $114.5 million. During the nine months ended September 30, 2019, the Partnership recorded net expenses of $0.2 million related to the Gray Oak project. The Gray Oak project is anticipated to be operational in the fourth quarter of 2019.

On March 29, 2019, the Predecessor executed a short-term promissory note to Gray Oak. The note allows for borrowing by Gray Oak of up to $123.0 million at 2.52% interest rate with a maturity date of March 31, 2022. During the three months ended September 30, 2019, there were no borrowings or repayments under this note. There were no outstanding loans at September 30, 2019.

On July 30, 2019, the Operating Company joined Wink to Webster Pipeline LLC as a 4% member, together with affiliates of ExxonMobil, Plains All American Pipeline, Delek US, MPLX LP, and Lotus Midstream. The joint venture is developing a crude oil pipeline with origin points at Wink and Midland in the Permian Basin for delivery to multiple Houston area locations (the "Wink to Webster project"). As of September 30, 2019, the Partnership's total investment in the Wink to Webster project was $21.2 million. During the nine months ended September 30, 2019, the Partnership recorded net income of less than $0.1 million related to interest. The Wink to Webster project is expected to begin service in the first half of 2021.

No impairments were recorded for the Partnership’s equity method investments for the nine months ended September 30, 2019 or 2018.

At September 30, 2019, there was $0.1 million of capitalized interest that was related to equity method investments that have not yet begun operations.