UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 10-Q
 
☒☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019March 31, 2020
OR
☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file number: 001-37640
nblxupdatedlogoa71.jpg
NOBLE MIDSTREAM PARTNERS LP
(Exact name of registrant as specified in its charter)
Delaware
 
47-3011449
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. employer identification number)
1001 Noble Energy Way
 
 
Houston,
Texas
 
77070
(Address of principal executive offices)
 
(Zip Code)
(281)
872-3100
(Registrant’sRegistrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
 
 
 
 
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Units, Representing Limited Partner Interests
 
NBLX
 
New York
The Nasdaq Stock ExchangeMarket LLC
 
 
 
 
(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒☒ No ☐☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒☒    No ☐☐
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large“large accelerated filer”filer”, “accelerated filer”“accelerated filer”, “smaller“smaller reporting company”company” and “emerging“emerging growth company ”” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
☒
Accelerated filer ☐☐
Non-accelerated filer ☐☐
Smaller reporting company
☐
☐
Emerging growth company 
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐☐    No ☒☒
As of October 31, 2019,April 30, 2020, the registrant had 39,707,34390,372,114 Common Units outstanding.



Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
Note 7. Investments9. Net Income per Limited Partner Unit
17 
Note 10. Partnership Distributions
18
Note 11. Net Income per Limited Partner Unit
18
Note 12. Commitments and Contingencies
19
 
 
 
 
 
 
 
 
 
 
Item 1A.  Risk Factors
 
 
Item 6.  Exhibits
 
 


2
Table of Contents

Part I. Financial Information
Item 1. Financial Statements
Noble Midstream Partners LP
Consolidated Balance Sheets
(in thousands, unaudited)
September 30, 2019 December 31, 2018
March 31, 2020
 
December 31, 2019
ASSETS   
 
 
 
Current Assets   
 
 
 
Cash and Cash Equivalents$17,571
 $10,740
$
17,656

 
$
12,676

Accounts Receivable — Affiliate40,475
 31,613
Accounts Receivable — Third Party20,251
 23,091
Accounts Receivable — Affiliate
45,149

 
42,428

Accounts Receivable — Third Party
34,464

 
44,093

Other Current Assets8,579
 5,875
10,148

 
8,730

Total Current Assets86,876
 71,319
107,417

 
107,927

Property, Plant and Equipment   
 
 
 
Total Property, Plant and Equipment, Gross1,682,820
 1,500,609
2,053,503

 
2,006,995

Less: Accumulated Depreciation and Amortization(114,789) (79,357)
(260,734
)
 
(244,038
)
Total Property, Plant and Equipment, Net1,568,031
 1,421,252
1,792,769

 
1,762,957

Investments
871,030

 
660,778

Intangible Assets, Net286,042
 310,202
269,847

 
277,900

Goodwill109,734
 109,734
—

 
109,734

Investments565,387
 82,317
Other Noncurrent Assets6,696
 3,093
5,911

 
6,786

Total Assets$2,622,766
 $1,997,917
$
3,046,974

 
$
2,926,082

LIABILITIES, MEZZANINE EQUITY AND EQUITY   
 
 
 
Current Liabilities   
 
 
 
Accounts Payable — Affiliate$2,568
 $2,778
Accounts Payable — Trade100,157
 92,756
Accounts Payable — Affiliate
$
8,701

 
$
8,155

Accounts Payable — Trade
98,271

 
107,705

Other Current Liabilities10,238
 9,217
12,885

 
11,680

Total Current Liabilities112,963
 104,751
119,857

 
127,540

Long-Term Liabilities   
 
 
 
Long-Term Debt948,907
 559,021
1,650,799

 
1,495,679

Asset Retirement Obligations19,268
 17,330
38,357

 
37,842

Other Long-Term Liabilities1,410
 582
4,031

 
4,160

Total Liabilities1,082,548
 681,684
1,813,044

 
1,665,221

Mezzanine Equity   
 
 
 
Redeemable Noncontrolling Interest, Net102,830
 —
109,281

 
106,005

Equity   
 
 
 
Limited Partner   
Common Units (39,712 and 23,759 units outstanding, respectively)618,049

699,866
Subordinated Units (15,903 units outstanding as of December 31, 2018)—
 (130,207)
General Partner5,820
 2,421
Total Partners’ Equity623,869
 572,080
Common Units (90,161 and 90,136 units outstanding, respectively)
759,145


813,999

Noncontrolling Interests813,519
 744,153
365,504

 
340,857

Total Equity1,437,388
 1,316,233
1,124,649

 
1,154,856

Total Liabilities, Mezzanine Equity and Equity$2,622,766
 $1,997,917
$
3,046,974

 
$
2,926,082

The accompanying notes are an integral part of these consolidated financial statements.


3
Table of Contents

Noble Midstream Partners LP
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per unit amounts, unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
Three Months Ended March 31,
2019
2018
2019
2018
2020

2019
Revenues















Midstream Services — Affiliate$100,846

$73,136

$278,724

$204,323
Midstream Services — Third Party19,607

19,934

63,298

44,763
Crude Oil Sales — Third Party48,870
 46,093
 133,522
 109,781
Midstream Services — Affiliate
$
113,784


$
103,803

Midstream Services — Third Party
27,898


24,029

Crude Oil Sales — Third Party
82,363

 
32,870

Total Revenues169,323

139,163

475,544

358,867
224,045


160,702

Costs and Expenses       
 
 
 
Cost of Crude Oil Sales46,240
 44,379
 125,217
 105,830
79,859

 
30,898

Direct Operating22,524

23,955

77,677

59,496
26,850


30,423

Depreciation and Amortization20,851

18,376

60,487

46,076
25,931


23,033

General and Administrative4,129

4,204

12,990

19,626
5,486


4,361

Other Operating (Income) Expense(469) —
 (488) —
Goodwill Impairment
109,734

 
—

Other Operating Expense
1,286

 
—

Total Operating Expenses93,275

90,914

275,883

231,028
249,146


88,715

Operating Income76,048

48,249

199,661

127,839
Operating (Loss) Income
(25,101
)

71,987

Other Expense (Income)       
 
 
 
Interest Expense, Net of Amount Capitalized3,952

3,506

11,507

6,220
6,857


5,228

Investment Loss (Income)5,621
 (3,866) 5,028
 (10,825)
5,409

 
(2,341
)
Total Other Expense (Income)9,573

(360)
16,535

(4,605)
12,266


2,887

Income Before Income Taxes66,475

48,609

183,126

132,444
State Income Tax Provision92

(94)
290

163
Net Income66,383

48,703

182,836

132,281
Less: Net Income Attributable to Noncontrolling Interests25,751
 4,086
 62,236
 11,719
(Loss) Income Before Income Taxes
(37,367
)

69,100

Income Tax Provision
149


1,309

Net (Loss) Income
(37,516
)

67,791

Less: Net Income Prior to the Drop-Down and Simplification Transaction
—

 
4,536

Net (Loss) Income Subsequent to the Drop-Down and Simplification Transaction
(37,516
)
 
63,255

Less: Net (Loss) Income Attributable to Noncontrolling Interests
(47,619
)
 
19,696

Net Income Attributable to Noble Midstream Partners LP40,632
 44,617
 120,600
 120,562
10,103

 
43,559

Less: Net Income Attributable to Incentive Distribution Rights5,820
 1,462
 13,967
 3,415
—

 
3,507

Net Income Attributable to Limited Partners$34,812
 $43,155
 $106,633
 $117,147
$
10,103

 
$
40,052

       
 
 
 
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic       
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
 
 
 
Common Units$0.88
 $1.09
 $2.65
 $2.96
$
0.11

 
$
1.01

Subordinated Units$—
 $1.09
 $2.89
 $2.96
$
—

 
$
1.01

       
 
 
 
Net Income Attributable to Limited Partners Per Limited Partner Unit — Diluted       
Weighted Average Limited Partner Units Outstanding — Basic
 
 
 
Common Units$0.88
 $1.09
 $2.64
 $2.96
90,152

 
23,696

Subordinated Units$—
 $1.09
 $2.89
 $2.96
—

 
15,903

       
 
 
 
Weighted Average Limited Partner Units Outstanding — Basic
       
Weighted Average Limited Partner Units Outstanding — Diluted
 
 
 
Common Units39,604
 23,688
 31,855
 23,686
90,164

 
23,721

Subordinated Units—
 15,903
 7,747
 15,903
—

 
15,903

       
Weighted Average Limited Partner Units Outstanding —Diluted
       
Common Units39,624
 23,704
 31,879
 23,701
Subordinated Units—
 15,903
 7,747
 15,903
The accompanying notes are an integral part of these consolidated financial statements.


4
Table of Contents

Noble Midstream Partners LP
Consolidated Statements of Cash Flows
(in thousands, unaudited)
Nine Months Ended September 30,
Three Months Ended March 31,
2019 2018
2020
 
2019
Cash Flows From Operating Activities   
 
 
 
Net Income$182,836
 $132,281
Net (Loss) Income
$
(37,516
)
 
$
67,791

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities   
 
 
 
Depreciation and Amortization60,487
 46,076
25,931

 
23,033

Income Taxes
—

 
1,202

Goodwill Impairment
109,734

 
—

Loss (Income) from Equity Method Investees8,858
 (7,569)
6,562

 
(1,027
)
Distributions from Equity Method Investees8,655
 3,520
8,631

 
6,659

Unit-Based Compensation683
 1,057
Other Adjustments for Noncash Items Included in Income573
 523
2,145

 
761

Changes in Operating Assets and Liabilities, Net of Assets Acquired and Liabilities Assumed   
 
 
 
Increase in Accounts Receivable(8,696) (14,054)
Increase in Accounts Payable16,886
 7,173
Decrease (Increase) in Accounts Receivable
6,909

 
(9,310
)
(Decrease) Increase in Accounts Payable
(3,299
)
 
2,956

Other Operating Assets and Liabilities, Net(4,161) (1,071)
(714
)
 
3,256

Net Cash Provided by Operating Activities266,121
 167,936
118,383

 
95,321

Cash Flows From Investing Activities   
 
 
 
Additions to Property, Plant and Equipment(189,021) (540,991)
(53,019
)
 
(73,602
)
Black Diamond Acquisition, Net of Cash Acquired—
 (649,868)
Additions to Investments(501,344) (426)
(225,599
)
 
(270,603
)
Distributions from Cost Method Investee and Other856
 1,020
Other
154

 
289

Net Cash Used in Investing Activities(689,509) (1,190,265)
(278,464
)
 
(343,916
)
Cash Flows From Financing Activities   
 
 
 
Distributions to Noncontrolling Interests(17,973) (5,814)
Distributions to Noncontrolling Interests and Parent
(5,700
)
 
(10,067
)
Contributions from Noncontrolling Interests45,494
 593,034
77,966

 
15,969

Borrowings Under Revolving Credit Facility655,000
 690,000
260,000

 
345,000

Repayment of Revolving Credit Facility(665,000) (725,000)
(105,000
)
 
(175,000
)
Proceeds from Term Loan Credit Facilities400,000
 500,000
Distributions to Unitholders(83,517) (63,220)
(62,114
)
 
(25,667
)
Proceeds from Preferred Equity, Net of Issuance Costs97,198
 —
—

 
99,450

Debt Issuance Costs and Other(1,884) (3,050)
Other
(141
)
 
(94
)
Net Cash Provided by Financing Activities429,318
 985,950
165,011

 
249,591

Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash5,930
 (36,379)
Increase in Cash, Cash Equivalents, and Restricted Cash
4,930

 
996

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period (1)
11,691
 55,531
12,726

 
15,712

Cash, Cash Equivalents, and Restricted Cash at End of Period (1)
$17,621
 $19,152
$
17,656

 
$
16,708

(1) 
See Note 2. Basis of Presentation for our reconciliation of total cash.
The accompanying notes are an integral part of these consolidated financial statements.


5
Table of Contents

Noble Midstream Partners LP
Consolidated Statements of Changes in Equity
(in thousands, unaudited)
 
 
Partner's Equity
 
 
 
Parent Net Investment
Common Units
Subordinated Units
General Partner
Noncontrolling Interests
Total
December 31, 2019
$
—

$
813,999

$
—

$
—

$
340,857

$
1,154,856

Net Income (Loss)
—

10,103

—

—

(47,619
)
(37,516
)
Contributions from Noncontrolling Interests
—

—

—

—

77,966

77,966

Distributions to Noncontrolling Interests
—

—

—

—

(5,700
)
(5,700
)
Distributions to Unitholders
—

(62,114
)
—

—

—

(62,114
)
Preferred Equity Accretion
—

(3,276
)
—

—

—

(3,276
)
Other
—

433

—

—

—

433

March 31, 2020
$
—

$
759,145

$
—

$
—

$
365,504

$
1,124,649

 Partnership  
 Common UnitsSubordinated UnitsGeneral PartnerNoncontrolling InterestsTotal
December 31, 2018$699,866
$(130,207)$2,421
$744,153
$1,316,233
Net Income23,967
16,085
3,507
19,696
63,255
Contributions from Noncontrolling Interests—
—
—
15,969
15,969
Distributions to Noncontrolling Interests—
—
—
(4,669)(4,669)
Distributions to Unitholders(13,930)(9,316)(2,421)—
(25,667)
Black Diamond Equity Ownership Promote Vesting (1)
4,092
2,746
—
(6,838)—
Unit-Based Compensation and Other470
—
—
—
470
March 31, 2019714,465
(120,692)3,507
768,311
1,365,591
Net Income25,487
6,282
4,640
16,789
53,198
Contributions from Noncontrolling Interests—
—
—
18,141
18,141
Distributions to Noncontrolling Interests—
—
—
(7,316)(7,316)
Distributions to Unitholders(14,534)(9,751)(3,507)—
(27,792)
Black Diamond Equity Ownership Promote Vesting (1)
8,196
—
—
(8,196)—
Conversion of Subordinated Units to Common Units (2)
(124,161)124,161
—
—
—
Preferred Equity Accretion(3,151)—
—
—
(3,151)
Unit-Based Compensation and Other273
—
—
—
273
June 30, 2019606,575
—
4,640
787,729
1,398,944
Net Income34,812
—
5,820
25,751
66,383
Contributions from Noncontrolling Interests—
—
—
11,384
11,384
Distributions to Noncontrolling Interests—
—
—
(5,988)(5,988)
Distributions to Unitholders(25,418)—
(4,640)—
(30,058)
Black Diamond Equity Ownership Promote Vesting (1)
5,357
—
—
(5,357)—
Preferred Equity Accretion(3,114)—
—
—
(3,114)
Unit-Based Compensation and Other(163)—
—
—
(163)
September 30, 2019$618,049
$—
$5,820
$813,519
$1,437,388
December 31, 2018
$
170,322

$
699,866

$
(130,207
)
$
2,421

$
744,153

$
1,486,555

Net Income
4,536

23,967

16,085

3,507

19,696

67,791

Contributions from Noncontrolling Interests and Parent
—

—

—

—

15,969

15,969

Distributions to Noncontrolling Interests and Parent
(6,495
)
—

—

—

(4,669
)
(11,164
)
Distributions to Unitholders
—

(13,930
)
(9,316
)
(2,421
)
—

(25,667
)
Black Diamond Equity Ownership Promote Vesting
—

4,092

2,746

—

(6,838
)
—

Other
—

470

—

—

—

470

March 31, 2019
$
168,363

$
714,465

$
(120,692
)
$
3,507

$
768,311

$
1,533,954


(1)
See Note 2. Basis of Presentation for further discussion of the Black Diamond equity ownership promote vesting.
(2)
See Note 10. Partnership Distributions for further discussion of the conversion of Subordinated Units.
The accompanying notes are an integral part of these consolidated financial statements.














Noble Midstream Partners LP
Consolidated Statements of Changes in Equity
(in thousands, unaudited)
 Partnership  
 Common UnitsSubordinated UnitsGeneral PartnerNoncontrolling InterestsTotal
December 31, 2017$642,616
$(168,136)$520
$141,230
$616,230
Net Income23,058
15,484
819
(225)39,136
Contributions from Noncontrolling Interests—
—
—
409,865
409,865
Distributions to Noncontrolling Interests—
—
—
(3,007)(3,007)
Distributions to Unitholders(11,575)(7,765)(520)—
(19,860)
Black Diamond Equity Ownership Promote Vesting (1)
1,215
1,214


(2,429)—
Unit-Based Compensation and Other288
—
—
—
288
March 31, 2018655,602
(159,203)819
545,434
1,042,652
Net Income21,210
14,240
1,134
7,858
44,442
Contributions from Noncontrolling Interests—
—
—
105,757
105,757
Distributions to Noncontrolling Interests—
—
—
(522)(522)
Distributions to Unitholders(12,108)(8,126)(819)—
(21,053)
Black Diamond Equity Ownership Promote Vesting (1)
2,731
1,833
—
(4,564)—
Unit-Based Compensation and Other395
—
—
—
395
June 30, 2018667,830
(151,256)1,134
653,963
1,171,671
Net Income25,825
17,330
1,462
4,086
48,703
Contributions from Noncontrolling Interests—
—
—
77,412
77,412
Distributions to Noncontrolling Interests—
—
—
(2,285)(2,285)
Distributions to Unitholders(12,669)(8,504)(1,134)—
(22,307)
Black Diamond Equity Ownership Promote Vesting (1)
3,389
2,275
—
(5,664)—
Unit-Based Compensation and Other340
—
—
—
340
September 30, 2018$684,715
$(140,155)$1,462
$727,512
$1,273,534

(1)

See Note 2. Basis of Presentation for further discussion of the Black Diamond equity ownership promote vesting.

The accompanying notes are an integral part of these consolidated financial statements.



















76
Table of Contents
Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 1. Organization and Nature of Operations
Organization Noble Midstream Partners LP (the “Partnership”, “NBLX”, “we”, “us” or our)“our”) is a growth-oriented Delaware master limited partnership formed in December 2014 by our sponsor, Noble Energy, Inc. (Noble(“Noble” or Parent)“Parent”), to own, operate, develop and acquire a wide range of domestic midstream infrastructure assets. Our current focus areas are the Denver-Julesburg Basin (DJ Basin)(“DJ Basin”) in Colorado and the Southern Delaware Basin position of the Permian Basin (Delaware Basin)(“Delaware Basin”) in Texas.
Partnership Assets Our assets consist of ownership interests in certain development companies (DevCos) which serve specific areas and integrated development plan (IDP)(“IDP”) areas and consist of the following:
DevCoAreas ServedNBLX Dedicated ServiceNBLX Ownership
Noncontrolling Interest (1)
Areas Served
NBLX Dedicated Service
NBLX Ownership
Noncontrolling Interest (1)
Colorado River DevCo LP

Wells Ranch IDP (DJ Basin)


East Pony IDP (DJ Basin)

All Noble DJ Basin Acreage
Crude Oil Gathering
Natural Gas Gathering
Water Services

Crude Oil Gathering

Crude Oil Treating
100%N/A
San Juan River DevCo LPEast Pony IDP (DJ Basin)Water Services25%75%
Green River DevCo LPMustang IDP (DJ Basin)
Crude Oil Gathering
Natural Gas Gathering
Water Services
25%75%
Laramie River DevCo LPGreeley Crescent IDP (DJ Basin)
Crude Oil Gathering
Water Services
100%N/A
Black Diamond Dedication Area (DJ Basin)(3)
Crude Oil Gathering
Natural Gas Gathering
54.4%45.6%
Blanco River DevCo LPDelaware Basin
Crude Oil Gathering
Natural Gas Gathering
Produced Water Services
40%60%
Colorado River LLC (2)

Wells Ranch IDP (DJ Basin)


East Pony IDP (DJ Basin)

All Noble DJ Basin Acreage
Crude Oil Gathering
Natural Gas Gathering
Water Services

Crude Oil Gathering

Crude Oil Treating
100%
N/A
San Juan River LLC (2)
East Pony IDP (DJ Basin)
Water Services
100%
N/A
Green River LLC (2)
Mustang IDP (DJ Basin)
Crude Oil Gathering
Natural Gas Gathering
Water Services
100%
N/A
Laramie River LLC (2)
Greeley Crescent IDP (DJ Basin)
Crude Oil Gathering
Water Services
100%
N/A
Black Diamond Dedication Area (DJ Basin)(3)
Crude Oil Gathering
Natural Gas Gathering
Crude Oil Transmission
54.4%
45.6%
Gunnison River DevCo LPBronco IDP (DJ Basin)
Crude Oil Gathering
Water Services
5%95%
Bronco IDP (DJ Basin) (4)
Crude Oil Gathering
Water Services
5%
95%
Blanco River LLC (2)
Delaware Basin
Crude Oil Gathering
Natural Gas Gathering
Produced Water Services
100%
N/A
Trinity River DevCo LLC (2)(5)
Delaware Basin
Crude Oil Transmission
Natural Gas Compression
100%N/A
Delaware Basin
Crude Oil Transmission
Natural Gas Compression
100%
N/A
Dos Rios DevCo LLC (3)(6)
Delaware Basin
Crude Oil Transmission
Y-Grade Transmission
100%N/A
Delaware Basin
Crude Oil Transmission
Y-Grade Transmission
100%
N/A
Noble Midstream Holdings LLC
East Pony IDP (DJ Basin)
Natural Gas Gathering
Natural Gas Processing
100%
N/A
Delaware Basin
Crude Oil Gathering
Natural Gas Gathering
Produced Water Services
100%
N/A
(1) 
The noncontrolling interest represents Noble’sNoble’s retained ownership interest in each DevCo.the Gunnison River DevCo LP. The noncontrolling interest in Black Diamond Gathering LLC (Black Diamond)(“Black Diamond”) represents Greenfield Member’sMidstream, LLC's (the “Greenfield Member”) interest in Black Diamond.
(2) 
Our ownership interest in Advantage Pipeline Holdings, L.L.C. (the Advantage Joint Venture) is owned through Trinity River DevCo LLC. See Note 7. Investments.On December 31, 2019, the general partner and limited partnership of each of the companies were merged into limited liability companies.
(3) 
Our ownership interest in Saddlehorn Pipeline Company, LLC (“Saddlehorn”) is owned through a wholly-owned subsidiary of Black Diamond. See Note 6. Investments.
(4) 
The Bronco IDP is a future development area. We currently have no midstream infrastructure assets in the Bronco IDP.
(5) 
Our interest in Advantage Pipeline Holdings, L.L.C. (“Advantage”) is owned through Trinity River DevCo LLC.
(6) 
Our ownership interests in Delaware Crossing LLC (the (“Delaware Crossing Joint Venture)”), EPIC Y-Grade, LP (EPIC Y-Grade) and(“EPIC Y-Grade”), EPIC Crude Holdings, LP (EPIC Crude)(“EPIC Crude”) and EPIC Propane Pipeline Holdings, LP (“EPIC Propane”) are owned through wholly-owned subsidiaries of Dos Rios DevCo LLC. See Note 7.6. Investments.
Nature of Operations Through our ownership interests in the DevCos, weWe operate and own interests in the following assets:
•
crude oil gathering systems;
•
natural gas gathering and processing systems and compression units;
•
crude oil treating facilities;
•
produced water collection, gathering, and cleaning systems;

natural gas gathering systems and compression units;
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crude oil treating facilities;Noble Midstream Partners LP
produced water collection, gathering, and cleaning systems;Notes to Consolidated Financial Statements (Unaudited)
fresh water storage and delivery systems; and
investments in midstream entities that provide transportation services.
•
fresh water storage and delivery systems; and
•
investments in midstream entities that provide transportation services.
We generate revenues primarily by charging fees on a per unit basis for gathering crude oil and natural gas, delivering and storing fresh water, and collecting, cleaning and disposing of produced water. Additionally, we purchase and sell crude oil to customers at various delivery points on our gathering systems.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 2. Basis of Presentation
Basis of Presentation and Consolidation   The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP)(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying consolidated financial statements at September 30, 2019March 31, 2020 and December 31, 20182019 and for the three and nine months ended September 30,March 31,2020 and 2019 and 2018 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and equity for such periods.
In Note 8. Segment Information, we report a new Investments in Midstream Entities reportable segment and present prior period amounts on a comparable basis. Prior period segment information has been reclassified to conform to the current period presentation.
Operating results for the three and nine months ended September 30, 2019March 31,2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020. We have no items of other comprehensive income; therefore, our net income is identical to our comprehensive income.
Variable Interest EntitiesConsolidation Our consolidated financial statements include our accounts, the accounts of subsidiaries which the Partnership wholly owns and the accounts of subsidiaries in which the DevCos, each of which we control as general partner. All intercompany balances and transactions have been eliminated upon consolidation. We have determined that the partners with equity at risk in each of the DevCos lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance; therefore, each DevCo is considered a variable interest entity, or VIE. Through our 100% ownership interest in Noble Midstream Services, LLC, a Delaware limited liability company which owns controlling interests in each of the DevCos, we have the authority to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate each of the DevCos in our financial statements. A substantial portion of the financial statement activity associated with our DevCos is captured within the Gathering Systems and Fresh Water Delivery reportable segments. Although our unconsolidated investments are owned through certain DevCos, all financial statement activity associated with our unconsolidated investments are captured within the Investments in Midstream Entities reportable segment. See Note 7. Investments and Note 8. Segment Information.Partnership has partial ownership.
On January 31, 2018, Black Diamond, an entity formed by Black Diamond Gathering Holdings LLC (the Noble Member), a wholly-owned subsidiary of Noble Midstream Partners LP, and Greenfield Midstream, LLC (the Greenfield Member), completed the acquisition of all of the issued and outstanding limited liability company interests in Saddle Butte Rockies Midstream, LLC and certain affiliates (collectively, Saddle Butte) from Saddle Butte Pipeline II, LLC (Seller). The acquisition of Saddle Butte will be referred to as the Black Diamond Acquisition. See Note 3. AcquisitionVariable Interest Entities. Our consolidated financial statements include the accounts of Black Diamond, which we control. We have determined that the partners with equity at risk in Black Diamond lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance. Therefore, Black Diamond is considered a VIE.variable interest entity (“VIE”). Through our majority representation on the Black Diamond company board of directors as well as our responsibility as operator of the acquiredBlack Diamond system, we have the authority to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate Black Diamond in our financial statements.
Financial statement activity associated with Black Diamond Equity Ownership Promote Vesting In accordance withis captured within the limited liability company agreement of Black Diamond, Noble Member received an equity ownership promote. The limited liability company agreement of Black Diamond required special allocations of gross income to balanceGathering Systems and the ratio of each member’s capital account to its agreed equity ownership interest over time. The special allocations were accounted for as equity transactions between the Partnership and a subsidiary with no gain or loss recognized. As of September 30, 2019, each member’s capital account agreed to its equity ownership interest and no further special allocations are required.Investments in Midstream Entities reportable segments. See Note 3. Acquisition 7. Segment Information.
Noncontrolling InterestsDrop-Down and Simplification Transaction We present ourOn November 14, 2019, we entered into a Contribution, Conveyance, Assumption and Simplification Agreement with Noble. Pursuant to such agreement, we acquired (i) the remaining 60% limited partner interest in Blanco River DevCo LP, (ii) the remaining 75% limited partner interest in Green River DevCo LP, (iii) the remaining 75% limited partner interest in San Juan River DevCo LP and (iv) all of the issued and outstanding limited liability company interests of Noble Midstream Holdings LLC (“NBL Holdings”). Additionally, all of the Incentive Distribution Rights (“IDRs”) were converted into common units representing limited partner interests in the Partnership (“Common Units”). The acquisition of the interests and conversion of the IDRs are collectively referred to as the “Drop-Down and Simplification Transaction.” The total consideration paid by the Partnership for the Drop-Down and Simplification Transaction was $1.6 billion, which consisted of $670 million in cash and 38,455,018 Common Units issued to Noble.
The Drop-Down and Simplification Transaction represented a transaction between entities under common control. Prior to the acquisition of the remaining limited partner interests in Blanco River DevCo LP, Green River DevCo LP and San Juan River DevCo LP, the interests were reflected as noncontrolling interests in the Partnership’s consolidated financial statements withstatements. As we acquired additional interests in already-consolidated entities, the acquisition of these interests did not result in a noncontrolling interest section representing Noble’s retained ownershipchange in reporting entity, as defined under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 805, Business Combinations. Therefore, results of our DevCos as well as Greenfield Member’s ownership of Black Diamond.operations related to these entities are accounted for on a prospective basis.
Redeemable Noncontrolling InterestConversely, the acquisition of all of the issued and outstanding limited liability company interests of NBL Holdings is characterized as a change in reporting entity, as defined under FASB Accounting Standards Codification Topic 805, Business Combinations, as this entity previously had not been consolidated by us. Therefore, results of operations related to NBL Holdings have been accounted for on a retrospective basis. Our financial information has been recast to include the historical results of NBL Holdings for the Onthree months ended March 25, 31,2019 we, through Dos Rios Crude Intermediate LLC,. The financial statements of NBL Holdings for the period prior to the Drop-Down and Simplification Transaction have been prepared from the separate records maintained by Noble and may not necessarily be indicative of the results of operations had these entities operated on a wholly-owned subsidiaryconsolidated basis during those periods. Because a direct ownership relationship did not exist among the Partnership and NBL Holdings prior to the Drop-Down and Simplification Transaction, the net investment in NBL Holdings is shown as Parent Net Investment, in lieu of Dos Rios DevCo LLC, secured a $200 millionpartners’ equity, commitment from GIP CAPS Dos Rios Holding Partnership, L.P. (GIP). Upon securingin the accompanying Consolidated Statement of Changes in Equity for periods prior to the Drop-Down and Simplification Transaction.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Equity Method of AccountingWe use the equity commitment,method of accounting for investments in entities that we issued 100,000 preferred units, with a facedo not control but over which we exert significant influence. For certain entities, we serve as the operator and exert significant influence over the day-to-day operations. For other entities, we do not serve as the operator; however, our voting position on management committees or the board of directors allows us to exert significant influence over decisions regarding capital investments, budgets, turnarounds, maintenance, monetization decisions and other project matters. Under the equity method of accounting, initially we record the investment at our cost. Differences in the cost, or basis, of the investment and the net asset value of $1,000 per preferred unit (Preferred Equity). Proceeds from the Preferred Equity totaled $100 million and we incurred offering costsinvestee will be amortized into earnings over the remaining useful life of $3.4 million. The remaining $100 million equity commitment is available for a one-year period, subject to certain conditions precedent. Proceeds from the Preferred Equity were utilized to repay a portion of outstanding borrowings under our revolving credit facility.underlying assets. See Note 6. DebtInvestments.

Cost Method of AccountingWe use the cost method of accounting for our 3.33% interest in White Cliffs Pipeline L.L.C. (“White Cliffs”) as we have virtually no influence over its operations and financial policies. Under the cost method of accounting, we recognize cash distributions from White Cliffs as investment income in our consolidated statements of operations to the extent there is net income and record cash distributions in excess of our ratable share of earnings as return of investment. See Note 6. Investments.
9
TableRedeemable Noncontrolling InterestOur redeemable noncontrolling interest is related to the preferred equity issuance by one of Contents
Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


our subsidiaries. We can redeem the Preferred Equitypreferred equity in whole or in part at any time for cash at a predetermined redemption price. The predetermined redemption price is based on the greater of (i) an amount necessary to achieve a defined12% internal rate of return or the(ii) an amount necessary to achieve a 1.375x multiple on invested capital. GIP CAPS Dos Rios Holding Partnership, L.P. (“GIP”) can request redemption of the Preferred Equity following the later of the sixth anniversary of the Preferred Equity closingpreferred equity on or the fifth anniversary of the EPIC Crude pipeline completion date at a pre-determined base return.after March 25, 2025. As GIP’sGIP’s redemption right is outside of our control, the Preferred Equitypreferred equity is not considered to be a component of equity on the consolidated balance sheet, and such Preferred Equity is reported as mezzanine equity on the consolidated balance sheet. In addition, because the Preferred Equitypreferred equity was issued by a subsidiary of the Partnership and is held by a third party, it is considered a redeemable noncontrolling interest.
The Preferred Equitypreferred equity was recorded initially at fair value on the issuance date. Subsequent to issuance, we accrete changes in the redemption value of the Preferred Equitypreferred equity from the date of issuance to GIP’sGIP’s earliest redemption date of the Preferred Equity.date. The Preferred Equitypreferred equity is perpetual and has a 6.5% annual dividend rate, payable quarterly in cash, with the ability to accrue unpaid dividends during the first two years following the closing. During any quarter in which a dividend is accrued, the accreted value of the Preferred Equitypreferred equity will be increased by the accrued but unpaid dividend (i.e., a paid-in-kind dividend). The dividends for the first three quarters of 2019 were paid-in-kind. Accretion during the three and nine months ended September 30, 2019March 31, 2020 was approximately $3.1$3.3 million and $6.3 million, respectively..
Accounting for Investments Noncontrolling InterestsWe use the equity methodpresent our consolidated financial statements with a noncontrolling interest section representing Greenfield Member’s ownership of accounting for our investmentsBlack Diamond and Noble’s retained ownership in the Advantage Joint Venture,Gunnison River DevCo LP.
Segment Information Accounting policies for reportable segments are the Delaware Crossing Joint Venture, EPIC Y-Grade and EPIC Crude,same as wethose described in this footnote. Transfers between segments are accounted for at market value. We do not control, but do exert significant influence over their operations. We useconsider interest income and expense or income tax benefit or expense in our evaluation of the cost methodperformance of accounting for our investment in White Cliffs Pipeline L.L.C. (White Cliffs) as we have virtually no influence over its operations and financial policies.reportable segments. See Note 7. InvestmentsSegment Information.
Leases We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains a lease, at the commencement date, we record a right-of-use (ROU) asset and a corresponding lease liability based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate to determine the present value of lease payments, we use our hypothetical secured borrowing rate based on information available at lease commencement. The weighted average discount rate is 3.69% for operating leases and 2.80% for our finance lease.
Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, it is reasonably likely that we will exercise the option.
Additionally, we have lease agreements that include lease and non-lease components, which are generally accounted for as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. See Note 9. Leases
Use of Estimates   The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. The current commodity price, supply and demand environment coupled with the novel coronavirus (“COVID-19”) pandemic contributed to an unusually high degree of uncertainty in our estimates this quarter and have increased the likelihood that actual results could differ significantly from those estimates.
Impairments During the quarter, we identified certain impairment indicators including the significant decrease in commodity prices, changes to our customers’ development outlook due to reductions in demand resulting from the COVID-19 pandemic and excess crude oil and natural gas inventories, and a decrease in our market capitalization. Due to these impairment indicators, we conducted impairment testing of certain of our assets, as follows:
Property, Plant and Equipment and Intangible Assets Due to publicly announced changes to our customers’ development outlook within the Delaware Basin and the Black Diamond dedication area, we concluded impairment indicators existed and conducted an undiscounted cash flow test. We developed estimates of future undiscounted cash flows expected in connection with providing midstream services within the dedication areas and compared the estimates to the carrying amount of the assets utilized to provide midstream services. Assumptions used in the estimates include expectations of throughput volumes, future development and capital spending plans. Based upon the results of the undiscounted cash flow test, we concluded that the carrying amount of the assets were recoverable and no impairment was recorded.
Goodwill All of our goodwill was assigned to the Black Diamond reporting unit within the Gathering Systems reportable segment. We performed a qualitative assessment and concluded it was more likely than not that the fair value of the Black Diamond reporting unit was less than its carrying value. We then performed a fair value assessment using the income approach.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions for operating and development costs as well as taking into account changes and uncertainties in our customers’ development outlook. Based on these assessments, we concluded that our goodwill was fully impaired and recorded a non-cash charge of $109.7 million.
Equity Method Investments We consider our equity method investments to be essential components of our business and necessary and integral elements of our value chain in support of our operations. We considered whether any facts or circumstances suggested that our equity method investments were impaired on an other-than-temporary basis and concluded that the carrying values of our equity method investments were not impaired.
Intangible Assets Our intangible asset accumulated amortization totaled approximately $53.7$69.9 million and $29.6$61.9 million as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. Intangible asset amortization expense totaled approximately $8.1$8.1 million for the three months ended March 31, 2020 and 2019.
Tax Provision We are not a taxable entity for United States federal income tax purposes or for the majority of states that impose an income tax. Taxes are generally borne by our partners through the allocation of taxable income and we do not record deferred taxes related to the aggregate difference in the basis of our assets for financial and tax reporting purposes. We are subject to a Texas margin tax due to our operations in the Delaware Basin and we recorded a de minimis state tax provision for the three months ended March 31, 2020 and 2019.
For periods prior to the Drop-Down and Simplification Transaction, our consolidated financial statements include a provision for tax expense on income related to the assets contributed to the Partnership. Deferred federal and state income taxes were provided on temporary differences between the financial statement carrying amounts of recognized assets and liabilities and their respective tax bases as if the Partnership filed tax returns as a stand-alone entity. Substantially all of our tax provision for the three months ended September 30,March 31, 2019 represents federal income taxes associated with the assets contributed in the Drop-Down and 2018 and $24.2 million and $21.4 million for the nine months ended September 30, 2019 and 2018, respectively. The weighted average amortization period for our intangible assets is approximately 11 years.Simplification Transaction.
Recently Adopted Accounting Standards
LeasesClarifying Certain Accounting Standards Codification (“ASC”) Topics In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 (ASU 2016-02), which creates Topic 842 – Leases (ASC 842). The standard requires lessees to recognize a ROU asset and lease liability on the balance sheet for the rights and obligations created by leases. ASC 842 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.


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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


The new standard provided a number of optional practical expedients. We elected:
the package of ‘practical expedients’, permitting us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs;
the practical expedient pertaining to land easements, allowing us to account for existing land easements under previous accounting policy; and
the practical expedient to not separate lease and non-lease components for the majority of our leases.
We adopted ASC 842 on January 1, 2019 using the modified retrospective approach. The standard did not materially impact our consolidated balance sheet or consolidated statement of operations and had no impact on our consolidated statement of cash flows. Prior period financial statements were not adjusted. See Note 9. Leases.
Recently Issued Accounting Standards
Financial Instruments: Credit LossesIn June 2016,first quarter 2020, the FASB issued Accounting Standards UpdateASU No. 2016-13 (ASU 2016-13):2020-01: Financial Instruments – Credit LossesInvestments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which replacesto clarify the incurred loss impairment methodology with a methodology that reflects current expected credit losses.interactions between these Topics. The standard applies to a broad scope of financial instruments, including financial assets measured at amortized cost and off-balance sheet credit exposures notupdate provides clarifications for entities investing in equity securities accounted for as insurance, such as financial guaranteesunder the ASC 321 measurement alternative and other unfunded loan commitments.companies that hold certain non-derivative forward contracts and purchased options to acquire equity securities. ASU 2016-132020-01 is effective for fiscal years beginning after December 15, 2019,2020, with early adoption permitted.
We are executing an implementation plan, which includes data collection, contract review and assessment, and determination of necessary systems, processes and internal controls. We continue to evaluateearly adopted this ASU 2016-03; based on our current credit portfolio we doin first quarter 2020. This adoption did not believe adoption of the standard will have a material impact on our financial statements.
Recently Issued Accounting Standards
London Interbank Offered Rate (“LIBOR”) Reform In first quarter 2020, the FASB issued ASU No. 2020-04 (ASU 2020-04): Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease the transition from LIBOR to an alternative reference rate. The ASU intends to address certain concerns stakeholders raised relating to accounting for contract modifications and hedge accounting. These optional expedients and exceptions to applying GAAP, assuming certain criteria are met, are allowed through December 31, 2022. We are currently evaluating the provisions of ASU 2020-04 and have not yet determined whether we will elect the optional expedients. We do not expect the transition to an alternative rate to have a significant impact on our business, operations or liquidity.
Reconciliation of Total Cash We define total cash as cash, cash equivalents and restricted cash. Our restricted cash is included in other current assets in our consolidated balance sheets. The following table provides a reconciliation of total cash:
Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018
2020
 
2019
Cash and Cash Equivalents at Beginning of Period$10,740
 $18,026
$
12,676

 
$
14,761

Restricted Cash at Beginning of Period (1) (2)
951
 37,505
Restricted Cash at Beginning of Period (1)
50

 
951

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period$11,691
 $55,531
$
12,726

 
$
15,712

   
 
 
 
Cash and Cash Equivalents at End of Period$17,571
 $18,201
$
17,656

 
$
16,658

Restricted Cash at End of Period (1)
50
 951
—

 
50

Cash, Cash Equivalents, and Restricted Cash at End of Period$17,621
 $19,152
$
17,656

 
$
16,708

(1) 
Restricted cash represents the amount held as collateral at December 31, 2018 and September 30, 2019 for certain of our letters of credit.
(2)

10
Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Restricted cash represents the amount held in escrow at December 31, 2017 for the Black Diamond Acquisition.
Revenue Recognition We recognize revenue at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer, using a five-step process, in accordance with ASC 606 –– Revenue from Contracts with Customers (ASC 606).
Under ASC 606, remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied as of September 30, 2019.March 31, 2020. A certain fresh water delivery affiliate revenue agreement contains a minimum volume commitment for the delivery of fresh water for a fixed fee per barrel with annual percentage escalations. The following table includes estimated revenues, as of September 30, 2019,March 31, 2020, for the agreement. Our actual volumes delivered may exceed the future minimum volume commitment.
(in thousands)Midstream Services — Affiliate
Midstream Services — Affiliate
Remainder of 2019$7,616
202036,817
Remainder of 2020
$
27,776

202137,635
37,635

Total$82,068
$
65,411



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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 3. Acquisition
On January 31, 2018, Black Diamond completed the Black Diamond Acquisition for approximately $638.5 million in cash. Noble Member and Greenfield Member each funded its share of the purchase price, approximately $319.9 million and $318.6 million, respectively, through contributions to Black Diamond. Noble Member funded its share of the purchase price through a combination of cash on hand and borrowings under its revolving credit facility. See Note 6. Debt.
In addition to the payment to the Seller, Black Diamond, through an additional contribution from Greenfield Member, paid PDC Energy, Inc. (PDC Energy) approximately $24.1 million to expand PDC Energy’s acreage dedication as well as extend the duration of the acreage dedication by five years. In accordance with the limited liability company agreement of Black Diamond, Noble Member received a 54.4% equity ownership interest in Black Diamond and Greenfield Member received a 45.6% equity ownership interest in Black Diamond. Noble Member’s agreed equity ownership interest included a 4.4% equity ownership interest promote which was designed to vest only after Noble Member was allocated an amount of gross revenue equal to the contributions by Greenfield Member in excess of its agreed equity ownership interest. As of September 30, 2019, Noble Member has received the necessary allocations of gross revenue and the equity ownership interest promote has vested. See Note 2. Basis of Presentation.
We serve as the operator of the Black Diamond system. We acquired a large-scale integrated gathering system located in the DJ Basin with approximately 160 miles of pipeline in operation and delivery capacity of approximately 300 MBbl/d as well as approximately 141,000 dedicated acres from six customers under fixed-fee arrangements.
Purchase Price Allocation The transaction has been accounted for as a business combination, using the acquisition method. The following table represents the final allocation of the total Black Diamond Acquisition purchase price to the assets acquired and the liabilities assumed based on the fair value at the acquisition date, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill. The following table sets forth our final purchase price allocation:
(in thousands) 
Cash Consideration$638,266
PDC Energy Payment24,120
Current Liabilities Assumed18,259
Total Purchase Price and Liabilities Assumed$680,645
  
Cash and Restricted Cash$12,518
Accounts Receivable10,661
Other Current Assets2,206
Property, Plant and Equipment205,766
Intangible Assets  (1)
339,760
Fair Value of Identifiable Assets570,911
Implied Goodwill (2)
109,734
Total Asset Value$680,645
(1)
The customer contracts we acquired are long-term, fixed-fee contracts for the purchase and sale of crude oil. Fair value was calculated using the multi-period excess earnings method under the income approach for the existing customers. The fair value was determined using unobservable inputs and is considered to be a Level 3 measurement on the fair value hierarchy.
(2)
Based upon the final purchase price allocation, we have recognized $109.7 million of goodwill, all of which is assigned to the Black Diamond reporting unit within the Gathering Systems reportable segment. As a result of the acquisition, we expect to realize certain synergies which may result from our operation of the Black Diamond system.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Pro Forma Results The following pro forma consolidated financial information was derived from the historical financial statements of the Partnership and Saddle Butte and gives effect to the acquisition as if it had occurred on January 1, 2018. The pro forma results of operations do not include any cost savings or other synergies that may result from the Black Diamond Acquisition or any estimated costs that have been or will be incurred by us to integrate the acquired assets. The pro forma consolidated financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the acquisition taken place on January 1, 2018; furthermore, the financial information is not intended to be a projection of future results.
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per unit amounts)
2019 (1)
 
2018 (1)
 
2019 (1)
 2018
Revenues$169,323
 $139,163
 $475,544
 $369,379
Net Income66,383
 48,703
 182,836
 129,796
Net Income Attributable to Noble Midstream Partners LP40,632
 44,617
 120,600
 118,896
        
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic       
Common Units$0.88
 $1.09
 $2.65
 $2.92
Subordinated Units$—
 $1.09
 $2.89
 $2.92
        
Net Income Attributable to Limited Partners Per Limited Partner Unit — Diluted       
Common Units$0.88
 $1.09
 $2.64
 $2.92
Subordinated Units$—
 $1.09
 $2.89
 $2.92
(1)
No pro forma adjustments were made for the period as Black Diamond operations are included in our results for the full period.
Note 4.3. Transactions with Affiliates
Revenues We derive a substantial portion of our revenues from commercial agreements with Noble. Revenues generated from commercial agreements with Noble and its affiliates consist of the following:
Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018 2019 2018
2020
 
2019
Crude Oil, Natural Gas and Produced Water Gathering$79,208
 $54,674
 $209,530
 $144,569
Gathering and Processing
$
89,298

 
$
75,380

Fresh Water Delivery20,847
 17,416
 66,801
 56,774
23,599

 
27,587

Other791
 1,046
 2,393
 2,980
887

 
836

Total Midstream Services — Affiliate$100,846
 $73,136
 $278,724
 $204,323
Total Midstream Services — Affiliate
$
113,784

 
$
103,803


Expenses General and administrative expense consists of the following:
Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018 2019 2018
2020
 
2019
General and Administrative Expense — Affiliate
$1,805
 $1,894
 $5,601
 $5,599
General and Administrative Expense — Third Party
2,324
 2,310
 7,389
 14,027
General and Administrative Expense — Affiliate
$
2,674

 
$
2,278

General and Administrative Expense — Third Party
2,812

 
2,083

Total General and Administrative Expense$4,129
 $4,204
 $12,990
 $19,626
$
5,486

 
$
4,361



Omnibus Agreement Our omnibus agreement with Noble contractually requires us to pay a fixed annual fee to Noble for certain administrative and operational support services being provided to us. The omnibus agreement generally remains in full force and effect so long as Noble controls our general partner, Noble Midstream GP, LLC (“General Partner”). The cap on the initial rate of $6.9 million expired in September 2019 and we completed the annual fee redetermination process during February 2020. The redetermined rate is $15.7 million and became effective March 1, 2020.
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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 5.4. Property, Plant and Equipment
Property, plant and equipment, at cost, is as follows:
(in thousands)September 30, 2019 December 31, 2018
Crude Oil, Natural Gas and Produced Water Gathering Systems and Facilities$1,403,678
 $1,199,679
Fresh Water Delivery Systems80,840
 78,820
Crude Oil Treating Facilities23,140
 20,027
Construction-in-Progress (1)
175,162
 202,083
Total Property, Plant and Equipment, at Cost1,682,820
 1,500,609
Accumulated Depreciation and Amortization(114,789) (79,357)
Property, Plant and Equipment, Net$1,568,031
 $1,421,252
(1)
Construction-in-Progress at September 30, 2019 primarily includes $146.7 million in gathering system projects, $8.3 million in fresh water delivery system projects and $18.8 million in equipment for use in future projects. Construction-in-Progress at December 31, 2018 primarily includes $147.1 million in gathering system projects, $21.6 million in fresh water delivery system projects and $32.8 million in equipment for use in future projects.
Note 6. Debt
Debt consists of the following:
 September 30, 2019 December 31, 2018
(in thousands, except percentages)Debt Interest Rate Debt Interest Rate
Revolving Credit Facility, due March 9, 2023$50,000
 3.45% $60,000
 3.67%
2018 Term Loan Credit Facility, due July 31, 2021500,000
 3.17% 500,000
 3.42%
2019 Term Loan Credit Facility, due August 23, 2022400,000
 3.05% —
 —%
Finance Lease Obligation (1)
2,082
 —% 3,231
 —%
Total952,082
   563,231
  
Term Loan Credit Facility Unamortized Debt Issuance Costs(1,432)   (979)  
Total Debt950,650
   562,252
  
Finance Lease Obligation Due Within One Year (1)
(1,743)   (3,231)  
Long-Term Debt$948,907
   $559,021
  
(in thousands)
March 31, 2020
 
December 31, 2019
Gathering and Processing Systems
$
1,840,973

 
$
1,795,957

Fresh Water Delivery Systems
95,886

 
96,004

Construction-in-Progress (1)
116,644

 
115,034

Total Property, Plant and Equipment, at Cost
2,053,503

 
2,006,995

Accumulated Depreciation and Amortization
(260,734
)
 
(244,038
)
Property, Plant and Equipment, Net
$
1,792,769

 
$
1,762,957

(1) 
See NoteConstruction-in-progress at 9. LeasesMarch 31, 2020 primarily includes $99.9 million in gathering system projects and $15.3 million in equipment for use in future projects. Construction-in-progress at December 31, 2019 primarily includes $98.4 million in gathering system projects and $15.4 million in equipment for use in future projects.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 5. Debt
Debt consists of the following:
 
March 31, 2020
 
December 31, 2019
(in thousands, except percentages)
Debt
 
Interest Rate
 
Debt
 
Interest Rate
Revolving Credit Facility, due March 9, 2023 (1)
$
750,000

 
2.16
%
 
$
595,000

 
3.11
%
Term Loan Credit Facility, due July 31, 2021
500,000

 
1.94
%
 
500,000

 
2.85
%
Term Loan Credit Facility, due August 23, 2022
400,000

 
1.82
%
 
400,000

 
2.74
%
Finance Lease Obligation
2,019

 
—
%
 
2,005

 
—
%
Total
1,652,019

 
 
 
1,497,005

 
 
Unamortized Debt Issuance Costs
(1,220
)
 
 
 
(1,326
)
 
 
Total Debt
1,650,799

 
 
 
1,495,679

 
 
Finance Lease Obligation Due Within One Year
—

 
 
 
—

 
 
Long-Term Debt
$
1,650,799

 
 
 
$
1,495,679

 
 
(1) 
Our revolving credit facility has a total borrowing capacity of $1.15 billion. As of March 31, 2020 and December 31, 2019, our revolving credit facility had $400 million and $555 million available for borrowing, respectively.
2019 Term Loan Credit FacilityDuring the first quarter 2020, we borrowed a net On August 23, 2019, we entered into a three-year senior unsecured term loan credit facility that permits aggregate borrowings of up to $400 million. Proceeds from the term loan were primarily used to repay a portion of the outstanding borrowings$155 million under our revolving credit facility and pay fees and expenses in connection with the term loan credit facility. We incurred approximately $0.6 million of fees and expenses.
The term loan credit facility contains usual and customary representations and warranties, affirmative and negative covenants, and events of default that are substantially the same as those contained inProceeds from our revolving credit facility were utilized to fund portions of our capital contributions to investments, capital program and the 2018 term loan credit facility. Upon the occurrence and during the continuation of an event of default under the term loan credit facility the lenders may declare all amounts outstanding under the term loan credit facility to be immediately due and payable and exercise other remedies as provided by applicable law.for working capital purposes.
Compliance with Covenants The revolving credit facility and term loan credit facilities require us to comply with certain financial covenants as of the end of each fiscal quarter. We were in compliance with such covenants as of September 30, 2019.March 31, 2020.
Fair Value of Long-Term Debt Our revolving credit facility and term loan credit facilities are variable-rate, non-public debt. The fair value of our revolving credit facility and term loan credit facilities approximates the carrying amount. The fair value is estimated based on observable inputs. As such, we consider the fair value of these facilities to be a Level 2 measurement on the fair value hierarchy.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 7.6. Investments
We have ownership interests in the following entities:
3.33% interest in White Cliffs;
50% interest in the Advantage Joint Venture;
50% interest in the Delaware Crossing Joint Venture;
15% interest in EPIC Y-Grade; and
30% interest in EPIC Crude.
•
3.33% interest in White Cliffs;
•
50% interest in Advantage;
•
50% interest in Delaware Crossing;
•
15% interest in EPIC Y-Grade;
•
30% interest in EPIC Crude;
•
15% interest in EPIC Propane; and
•
20% interest in Saddlehorn.
Delaware Crossing Joint Venture On February 7, 2019, we executed definitive agreements with Salt Creek Midstream LLC (Salt Creek) and completed the formation of the Delaware Crossing, Joint Venture to construct a crude oil pipeline system with a capacity of 160 MBbl/d in the Delaware Basin.Basin which began delivering crude oil into all connection points in April 2020. During the first ninethree months of 2019,2020, we have made capital contributions of approximately $51.5 million.$16.9 million.
EPIC Y-Grade On January 31, 2019, we exercised and closed ouran option with EPIC Midstream Holdings, LP (EPIC)(“EPIC”) to acquire an interest in EPIC Y-Grade.Y-Grade, which owns the EPIC Y-Grade is constructing an approximately 700-mile pipeline linking natural gas liquid (NGL) reservesfrom the Delaware Basin to Corpus Christi, Texas. Upon commissioning of the EPIC Crude pipeline in February 2020, EPIC began the Permian Basinclean out process and Eagle Ford Shaletransition of the EPIC Y-Grade pipeline back to Gulf Coast refiners, petrochemical companies, and export markets.NGL service. During the first ninethree months of 2019,2020, we have made capital contributions of approximately $166.1 million.$12.8 million.
EPIC Crude On January 31, 2019, we exercised ouran option with EPIC to acquire an interest in EPIC Crude. OnCrude, and on March 8, 2019, we closed ourthe option to acquire the interest. EPIC Crude has been engaged in the construction of the EPIC crude oil pipeline from the Delaware Basin to Corpus Christi, Texas. Construction of the EPIC Crude pipeline was completed and commissioned in February 2020 and entered full service on April 1, 2020. During the first three months of 2020, we made capital contributions of approximately $30.0 million.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


EPIC Propane On December 19, 2019, we exercised and closed an option with EPIC to acquire thean interest in EPIC Crude. EPIC CrudePropane, which is constructing an approximately 700-milea propane pipeline with a capacity of 590 MBbl/dthat will run from the Delaware BasinEPIC Y-Grade Logistics, LP fractionator complex in Robstown, Texas to the Gulf Coast.Phillips 66 petrochemical facility in Sweeney, Texas, with additional connectivity to the Markham underground storage caverns. During the first ninethree months of 2019,2020, we have made capital contributions of approximately $268.7 million.$1.5 million.
Saddlehorn Pipeline On February 1, 2020, Black Diamond exercised and closed an option to acquire a 20% ownership interest in Saddlehorn for $160 million, or $87.0 million net to the Partnership. Greenfield Member contributed $73.0 million for its portion of the purchase price. Black Diamond purchased a 10% interest from each of Magellan Midstream Partners, L.P. (“Magellan”) and Plains All American Pipeline, L.P. (“Plains”). After the transaction, Magellan and Plains each own a 30% membership interest and Black Diamond and Western Midstream each own a 20% membership interest in Saddlehorn. Magellan continues to serve as operator of the Saddlehorn pipeline.
The following table presents our investments at the dates indicated:
(in thousands)September 30, 2019 December 31, 2018
March 31, 2020
 
December 31, 2019
White Cliffs$10,274
 $9,373
$
10,115

 
$
10,268

Advantage Joint Venture74,711
 72,944
Delaware Crossing Joint Venture50,435
 —
Advantage
75,139

 
76,834

Delaware Crossing
85,423

 
68,707

EPIC Y-Grade166,491
 —
171,221

 
162,850

EPIC Crude263,476
 —
364,885

 
339,116

EPIC Propane
4,503

 
3,003

Saddlehorn
159,744

 
—

Total Investments$565,387
 $82,317
$
871,030

 
$
660,778


The following table presents our investment loss (income) for the periods indicated:
Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018 2019 2018
2020
 
2019
White Cliffs$(716) $(912) $(2,605) $(2,716)
$
(715
)
 
$
(1,048
)
Advantage Joint Venture(1,867) (2,772) (5,621) (7,569)
Delaware Crossing Joint Venture512
 —
 2,050
 —
Advantage
(2,076
)
 
(2,241
)
Delaware Crossing
720

 
1,183

EPIC Y-Grade2,000
 —
 3,054
 —
5,618

 
30

EPIC Crude6,130
 —
 9,375
 —
6,901

 
—

EPIC Propane
25

 
—

Saddlehorn
(4,626
)
 
—

Other (1)
(438) (182) (1,225) (540)
(438
)
 
(265
)
Total Investment Loss (Income)$5,621
 $(3,866) $5,028
 $(10,825)
$
5,409

 
$
(2,341
)
(1) 
Represents income associated with our fee for serving as the operator of the Advantage Joint Venture and Delaware Crossing Joint Venture.Crossing.
Note 8.7. Segment Information
We manage our operations by the nature of the services we offer. Our reportable segments comprise the structure used to make key operating decisions and assess performance. As a result of our increased investment in midstream entities during first quarter 2019, we have established an Investments in Midstream Entities reportable segment. Our Investments in Midstream Entities reportable segment includes all activity associated with our unconsolidated investments. See Note 7. Investments.
We are now organized into the following reportable segments: Gathering Systems (crude(primarily includes crude oil gathering, natural gas gathering and processing, produced water gathering, crude oil treating, and crude oil sales), Fresh Water Delivery, Investments in Midstream Entities and Corporate. We

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


often refer to the services of our Gathering Systems and Fresh Water Delivery reportable segments collectively as our midstream services. Prior period segment information has been reclassified

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Noble Midstream Partners LP
Notes to conform to the current period presentation.Consolidated Financial Statements (Unaudited)


Summarized financial information concerning our reportable segments is as follows:
(in thousands)
Gathering Systems (1)
 
Fresh Water Delivery (1)
 Investments in Midstream Entities 
Corporate (2)
 Consolidated
Gathering Systems
 
Fresh Water Delivery
 
Investments in Midstream Entities
 
Corporate (1)
 
Consolidated
Three Months Ended September 30, 2019         
Midstream Services — Affiliate$79,999
 $20,847
 $—
 $—
 $100,846
Midstream Services — Third Party17,475
 2,132
 —
 —
 19,607
Crude Oil Sales — Third Party48,870
 —
 —
 —
 48,870
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
 
 
Midstream Services — Affiliate
$
90,185

 
$
23,599

 
$
—

 
$
—

 
$
113,784

Midstream Services — Third Party
23,724

 
4,174

 
—

 
—

 
27,898

Crude Oil Sales — Third Party
82,363

 
—

 
—

 
—

 
82,363

Total Revenues
196,272

 
27,773

 
—

 
—

 
224,045

Goodwill Impairment
109,734

 
—

 
—

 
—

 
109,734

Income (Loss) Before Income Taxes
(41,218
)
 
22,443

 
(5,409
)
 
(13,183
)
 
(37,367
)
Additions to Long-Lived Assets
47,619

 
—

 
—

 
109

 
47,728

Additions to Investments
—

 
—

 
225,599

 
—

 
225,599

 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
Midstream Services — Affiliate
$
76,216

 
$
27,587

 
$
—

 
$
—

 
$
103,803

Midstream Services — Third Party
20,220

 
3,809

 
—

 
—

 
24,029

Crude Oil Sales — Third Party
32,870

 
—

 
—

 
—

 
32,870

Total Revenues146,344
 22,979
 —
 —
 169,323
129,306

 
31,396

 
—

 
—

 
160,702

Income (Loss) Before Income Taxes61,952
 18,825
 (5,621) (8,681) 66,475
53,660

 
23,209

 
2,341

 
(10,110
)
 
69,100

Additions to Long-Lived Assets56,781
 4,646
 —
 299
 61,726
75,176

 
2,756

 
—

 
269

 
78,201

Additions to Investments—
 —
 86,757
 —
 86,757
—

 
—

 
270,603

 
—

 
270,603

         
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018         
Midstream Services — Affiliate$55,720
 $17,416
 $—
 $—
 $73,136
Midstream Services — Third Party14,005
 5,929
 —
 —
 19,934
Crude Oil Sales — Third Party46,093
 —
 —
 —
 46,093
Total Revenues115,818
 23,345
 —
 —
 139,163
Income (Loss) Before Income Taxes34,780
 18,129
 3,866
 (8,166) 48,609
Additions to Long-Lived Assets72,948
 6,159
 —
 —
 79,107
Additions to Investments—
 —
 307
 —
 307
         
Nine Months Ended September 30, 2019         
Midstream Services — Affiliate$211,923
 $66,801
 $—
 $—
 $278,724
Midstream Services — Third Party54,903
 8,395
 —
 —
 63,298
Crude Oil Sales — Third Party133,522
 —
 —
 —
 133,522
Total Revenues400,348
 75,196
 —
 —
 475,544
Income (Loss) Before Income Taxes
158,671
 55,655
 (5,028) (26,172) 183,126
Additions to Long-Lived Assets187,437
 6,040
 —
 810
 194,287
Additions to Investments—
 —
 501,344
 —
 501,344
         
Nine Months Ended September 30, 2018         
Midstream Services — Affiliate$147,549
 $56,774
 $—
 $—
 $204,323
Midstream Services — Third Party31,831
 12,932
 —
 —
 44,763
Crude Oil Sales — Third Party109,781
 —
 —
 —
 109,781
Total Revenues289,161
 69,706
 —
 —
 358,867
Income (Loss) Before Income Taxes94,674
 54,066
 10,825
 (27,121) 132,444
Additions to Long-Lived Assets669,908
 18,711
 —
 —
 688,619
Additions to Investments—
 —
 426
 —
 426
         
September 30, 2019         
March 31, 2020
 
 
 
 
 
 
 
 
 
Total Assets$1,953,417
 $87,100
 $565,387
 $16,862
 $2,622,766
$
2,066,048

 
$
94,420

 
$
871,030

 
$
15,476

 
$
3,046,974

         
 
 
 
 
 
 
 
 
 
December 31, 2018         
December 31, 2019
 
 
 
 
 
 
 
 
 
Total Assets$1,804,100
 $96,280
 $82,317
 $15,220
 $1,997,917
$
2,160,026

 
$
91,840

 
$
660,778

 
$
13,438

 
$
2,926,082

(1) 
A substantial portion of the financial statement activity associated with our DevCos is captured within the Gathering Systems and Fresh Water Delivery reportable segments. Although our unconsolidated investments are owned through certain DevCos, all financial statement activity associated with our unconsolidated investments is captured within the Investments in Midstream Entities reportable segment. As our DevCos represent VIEs, see the above reportable segments for our VIEs impact to the consolidated financial statements.
(2)
The Corporate segment includes all general Partnership activity not attributable to our DevCos.operating subsidiaries.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 9. Leases
In the normal course of business, we enter into lease agreements to support our operations. We lease field equipment as well as water and pipeline transportation assets.
Operating Leases Our operating leases consist of field equipment and transportation assets. Our field equipment leases have fixed monthly payments over a minimum term with options to extend the rental period on a month-to-month basis. Our leased transportation assets have variable monthly payments (price per barrel throughput) over a minimum term with the option to extend on a year-to-year basis. Our operating and variable lease expense is recorded in direct operating expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019.
Finance Leases We lease water assets for use in the performance of our fresh water delivery services. The amount of the lease obligation is based on the discounted present value of future minimum lease payments, and therefore does not reflect future cash lease payments. Our finance lease expense is recorded in depreciation and amortization expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019. Interest expense for our finance lease is recorded in interest expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019.
Short Term Leases Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Short term lease expense is recorded in direct operating expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019.
Balance Sheet Information ROU assets and lease liabilities are as follows:
(thousands)Balance Sheet LocationSeptember 30, 2019
Assets  
Operating (1)
Other Noncurrent Assets$3,303
Finance (2)
Total Property, Plant and Equipment, Net3,958
Total ROU Assets $7,261
Liabilities  
Current  
OperatingOther Current Liabilities$2,621
FinanceOther Current Liabilities1,743
Noncurrent  
OperatingOther Noncurrent Liabilities667
Finance (3)
Long-Term Debt339
Total Lease Liabilities $5,370
(1)
All of our operating leases mature between 2019 through 2021. Future operating lease payments of $0.7 million are due in 2019, $2.5 million are due in 2020 and $0.2 million are due in 2021.
(2)
Finance lease assets are recorded net of accumulated amortization of $1.0 million as of September 30, 2019.
(3)
Our finance lease matures during 2021.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Note 10.8. Partnership Distributions
Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to unitholders of record on the applicable record date. The following table details the distributions paid in respect of the periods presented below:
    
Distributions
(in thousands)
    Limited Partners  
PeriodRecord DateDistribution DateDistribution per Limited Partner Unit
Common Unitholders(1)
Subordinated UnitholdersHolder of IDRsTotal
Q4 2017February 5, 2018February 12, 2018$0.4883
$11,566
$7,765
$520
$19,851
Q1 2018May 7, 2018May 14, 2018$0.5110
$12,103
$8,126
$819
$21,048
Q2 2018August 6, 2018August 13, 2018$0.5348
$12,668
$8,504
$1,134
$22,306
Q4 2018February 4, 2019February 11, 2019$0.5858
$13,876
$9,316
$2,421
$25,613
Q1 2019May 6, 2019May 13, 2019$0.6132
$14,534
$9,751
$3,507
$27,792
Q2 2019August 5, 2019August 12, 2019$0.6418
$25,418
$—
$4,640
$30,058
 
 
 
 
Distributions
(in thousands)
 
 
 
 
Limited Partners
 
 
Period
Record Date
Distribution Date
Distribution per Limited Partner Unit
Common Unitholders(1)
Subordinated Unitholders (2)
Holder of IDRs (3)
Total
Q4 2018
February 4, 2019
February 11, 2019
$
0.5858

$
13,876

$
9,316

$
2,421

$
25,613

Q4 2019
February 4, 2020
February 14, 2020
$
0.6878

$
62,012

$
—

$
—

$
62,012

(1) 
Distributions to common unitholders does not include distribution equivalent rights on units that vested under the Noble Midstream Partners LP 2016 Long-Term Incentive Plan (the LTIP)“LTIP’).
(2) 
On May 14, 2019, all Subordinated Units were converted into Common Units.
(3) 
In November 2019, we acquired all of Noble’s IDRs. See Note 2. Basis of Presentation
Incentive Distribution RightsCash Distributions Noble currently holds Incentive Distribution Rights (IDRs) that entitle it to receive increasing percentages, up toOn March 25, 2020, the Board of Directors of our General Partner approved a maximum of 50%,73% reduction of the available cash we distribute from operating surplus in excess of $0.4313quarterly distribution to $0.1875 per unit per quarter. The maximum distribution of 50% does not include any distributions that Noble may receive on Common Units or Subordinated Units that it owns.
Conversion of Subordinated Units On April 25, 2019,due to the board of directors of our general partner declared a quarterly cash distribution of $0.6132 per unit for the quarter ended March 31, 2019.volatile commodity and market environment. The distribution waswill be paid on May 13, 201915, 2020, to unitholders of record as of the closeMay 8, 2020.

14
Table of business on May 6, 2019. Upon payment of the distribution, the requirements for the conversion of all Subordinated Units were satisfied under our partnership agreement. As a result, on May 14, 2019, all 15,902,584 Subordinated Units, which were owned entirely by Contents
Noble converted into Common Units on a one-for-one basis and thereafter will participate on terms equal with all other Common Units in distributions from available cash.Midstream Partners LP
Cash Distributions On October 24, 2019, the board of directors of our general partner declared a quarterly cash distribution of $0.6716 per unit. The distribution will be paid on November 11, 2019,Notes to unitholders of record as of November 4, 2019. Also on November 11, 2019, a cash incentive distribution of $5.8 million will be made to Noble related to its IDRs, based upon the level of distribution paid per Common Unit.Consolidated Financial Statements (Unaudited)


Note 11.9. Net Income Per Limited Partner Unit
Our net income is attributed to limited partners, in accordance with their respective ownership percentages, and when applicable, giving effect to incentive distributions paid to Noble, the holder of our IDRs. The Common and Subordinated unitholders represent an aggregate 100% limited partner interest in us. Pursuant to our partnership agreement,Noble. For periods prior to the extent that the quarterly distributions exceed certain target levels, Noble, as the holderconversion of our IDRs, is entitled to receive certain incentive distributions that will result in more net income proportionately being allocated to Noble than to the holders of CommonSubordinated Units and Subordinated Units.
Becausesimplification of IDRs, we havehad more than one class of participating securities and we useutilized the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include Common Units, Subordinated Units and IDRs.
Basic and diluted net income per limited partner Common Unit and Subordinated Unit is computed by dividing the respective limited partners’partners’ interest in net income for the period by the weighted-average number of Common Units and Subordinated Units outstanding for the period. Diluted net income per limited partner Common Unit and Subordinated Unit reflects the potential dilution that could occur if agreements to issue Common Units, such as awards under the LTIP, were settled or converted into Common Units. When it is determined that potential Common Units resulting from an award should be included in the diluted net income per limited partner Common and Subordinated Unit calculation, the impact is reflected by applying the treasury stock method.See Note 10. Partnership Distributions for further discussion of the conversion of Subordinated Units on May 14, 2019.

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Noble Midstream Partners LP
Notes to Consolidated Financial Statements (Unaudited)


Our calculation of net income per limited partner Common and Subordinated Unit is as follows:
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per unit amounts)2019 2018 2019 2018
Net Income Attributable to Noble Midstream Partners LP$40,632
 $44,617
 $120,600
 $120,562
Less: Net Income Attributable to Incentive Distribution Rights5,820
 1,462
 13,967
 3,415
Net Income Attributable to Limited Partners$34,812
 $43,155
 $106,633
 $117,147
        
Net Income Attributable to Common Units$34,812
 $25,825
 $84,266
 $70,093
Net Income Attributable to Subordinated Units—
 17,330
 22,367
 47,054
Net Income Attributable to Limited Partners$34,812
 $43,155
 $106,633
 $117,147
        
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic       
Common Units$0.88
 $1.09
 $2.65
 $2.96
Subordinated Units$—
 $1.09
 $2.89
 $2.96
        
Net Income Attributable to Limited Partners Per Limited Partner Unit — Diluted       
Common Units$0.88
 $1.09
 $2.64
 $2.96
Subordinated Units$—
 $1.09
 $2.89
 $2.96
        
Weighted Average Limited Partner Units Outstanding — Basic       
Common Units39,604
 23,688
 31,855
 23,686
Subordinated Units—
 15,903
 7,747
 15,903
        
Weighted Average Limited Partner Units Outstanding — Diluted       
Common Units39,624
 23,704
 31,879
 23,701
Subordinated Units—
 15,903
 7,747
 15,903
        
Antidilutive Restricted Units44
 21
 66
 22

 
Three Months Ended March 31,
(in thousands, except per unit amounts)
2020
 
2019
Net Income Attributable to Noble Midstream Partners LP
$
10,103

 
$
43,559

Less: Net Income Attributable to Incentive Distribution Rights
—

 
3,507

Net Income Attributable to Limited Partners
$
10,103

 
$
40,052

 
 
 
 
Net Income Attributable to Common Units
$
10,103

 
$
23,967

Net Income Attributable to Subordinated Units (1)
—

 
16,085

Net Income Attributable to Limited Partners
$
10,103

 
$
40,052

 
 
 
 
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
 
 
 
Common Units
$
0.11

 
$
1.01

Subordinated Units (1)
$
—

 
$
1.01

 
 
 
 
Weighted Average Limited Partner Units Outstanding — Basic
 
 
 
Common Units
90,152

 
23,696

Subordinated Units (1)
—

 
15,903

 
 
 
 
Weighted Average Limited Partner Units Outstanding — Diluted
 
 
 
Common Units
90,164

 
23,721

Subordinated Units (1)
—

 
15,903

 
 
 
 
Antidilutive Restricted Units
167

 
67

(1) 
On May 14, 2019, all Subordinated Units were converted into Common Units.
Note 12.10. Commitments and Contingencies
We may become involved in various legal proceedings in the ordinary course of business. These proceedings would be subject to the uncertainties inherent in any litigation, and we will regularly assess the need for accounting recognition or disclosure of these contingencies. We would expect to defend ourselves vigorously in all such matters. Based on currently available information, we believe it is unlikely that the outcome of known matters would have a material adverse impact on our combined financial condition, results of operations or cash flows.


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Item 2. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)(“MD&A”) is intended to provide a narrative about our business from the perspective of our management. Our MD&A&A is presented in the following major sections:
•
•
Executive Overview;
•
and Operating Outlook;
•
•
Results of Operations; and
•
•
Liquidity and Capital Resources.
MD&A&A is our analysis of the Partnership’sPartnership’s financial performance and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. It contains forward-looking statements including, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target”“anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. We do not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with our disclosures in Item 3 of this report under the heading: “Disclosure“Disclosure Regarding Forward-Looking Statements.””
EXECUTIVE OVERVIEW AND OPERATING OUTLOOK
The following discussion highlights the current operating environment, as well as significant operating and financial results for thirdfirst quarter 2019.2020. This discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018,2019, which includes disclosures regarding our critical accounting policies as part of “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations.””
The impacts on our business of both the recent significant decline in commodity prices due to the COVID-19 outbreak and the actions of foreign oil producers, such as Saudi Arabia and Russia, are unprecedented. We will continue to focus on our customer base and maintaining safe and reliable operations and are working with our customers to further align activity and volume expectations.
COVID-19
Market ConditionsIn first quarter 2020, the COVID-19 pandemic spread quickly across the globe and countries mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various responsive actions and containment measures, which included business closures, work stoppages, shuttering of public spaces and events and/or severe restrictions in global and regional travel, among others, have caused unprecedented declines in the global demand for crude oil and natural gas commodities. As a result, the global economy has experienced a slowing of economic growth, disruption of global manufacturing supply chains, stagnation of crude oil and natural gas consumption and interference with workforce continuity. This decline in global demand driven by reduced consumption has contributed to commodity prices declining precipitously beginning in mid-March 2020. The longevity and severity of COVID-19 impacts to the oil and gas industry, including the reduced demand for crude oil and natural gas commodities and its resulting impact on commodity prices, may continue until a vaccine or alternative treatment is made widely available across the globe.
Current and Future Expected Impact to the Partnership The COVID-19 outbreak, and specifically stay-at-home orders throughout the country, has suppressed the demand for energy commodities and our services, a trend we expect to continue into the second quarter, and perhaps beyond. Additionally, the risks associated with COVID-19 have impacted our workforce and the way we meet our business objectives. In response to this, we, with the support of Noble, executed the following:
•
Remote workforce –Due to concerns over health and safety, we have asked the vast majority of our workforce to work remotely until further notice. As of March 31, 2020, working remotely has not significantly impacted our ability to maintain operations, including use of financial reporting systems, nor has it significantly impacted our internal control environment. We have not incurred, and in the future do not expect to incur, significant expenses related to business continuity as employees work from home.
•
Mobilized a Crisis Management Team (“CMT”) –The CMT is responsible for ensuring the organization follows Center for Disease Control (“CDC”), national, state and local guidance in preparing and responding to COVID-19. The CMT implemented communication protocols should an employee become sick, and we will continue to follow CDC guidance, which is subject to change in the future.
The rapid and unprecedented decreases in energy demand have impacted certain elements of our distribution channels. We are also experiencing impacts from downstream markets, as certain pipelines have limited ability to transport production as refineries reduce activity or are declaring force majeure. Additionally, inventory surpluses have overwhelmed U.S. storage capacity, leading to a further strain on the supply chain. The constraints to the supply chain could force our customers to shut-in

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production of certain U.S. onshore wells or entire IDPs in the future, which would result in a further decline in demand for our services.
Commodity Prices
Market ConditionsContemporaneously with the COVID-19 pandemic, Organization of Petroleum Exporting Countries (“OPEC”) and non-OPEC producers failed to agree to production cuts which were intended to stabilize and support global crude oil prices. With no agreement in place, certain large international crude oil producers, including Saudi Arabia and Russia, began to deeply discount sales of their crude oil and committed to ramping up production in an attempt to protect, or increase, their global market share. This increased production has further contributed to global production levels far exceeding current demand, a trend that exacerbates already depressed commodity prices. These extreme supply and demand dynamics have caused a significant decline in crude oil prices negatively impacting all crude oil producers. In April 2020, members of OPEC agreed to certain production cuts. While these production cuts could rebalance the market in the long-term, we do not believe they will be large enough to offset the sharp decrease in demand caused by COVID-19 in the near-term.
Additionally, the U.S. domestic natural gas market remains oversupplied and has contributed to depressed pricing.We expect that as development activity begins to decline in the U.S. leading to reduced crude oil and associated natural gas production, U.S. domestic natural gas prices will adjust as supply and demand levels equalize.
The commodity price environment may continue to remain depressed for an extended period of time based on over-supply, decreasing demand and a potential global economic recession caused by COVID-19.
Current and Future Expected Impact to the PartnershipThe recent decline in commodity prices adversely affected shale producers in the U.S., including our customers. In response, our customers have reduced their capital investment programs, which is expected to result in a decline in demand for our services. The commodity price environment is expected to remain depressed based on decreased demand, over-supply and a potential global economic recession. In addition, we expect downstream capacity and storage constraints to continue to have a negative impact on the ability to transport production. If constraints continue such that storage becomes unavailable to our customers or commodity prices remain depressed, they may be forced or elect to shut-in some or all of their production and delay or discontinue drilling plans, which would result in a further decline in demand for our services.
In this market environment, we are focused on prioritizing free cash flow and protecting our balance sheet. In response, we executed the following:
•
Reduced 2020 capital program –In March 2020, we reduced the Partnership’s 2020 organic capital program by approximately 35%, or $75 million, to a range of $120 to $150 million, to reflect updated producer forecasts in the DJ and Delaware Basins. In May 2020, we further reduced our organic capital program to a range of $60 to $80 million. In total, we have lowered capital expectations by more than 65% from our original February 2020 guidance. These reductions highlight our resiliency and ability to efficiently reallocate resources to align with customer activity.
•
Reduced quarterly distribution –The Board of Directors of our General Partner approved a 73% reduction of the quarterly distribution to $0.1875 per unit for first quarter 2020. We intend to utilize funds from the distribution reduction to reduce our debt levels. Our Board of Directors of our General Partner will continue reviewing the quarterly distribution in context of market conditions.
Potential Global Recession
Market Conditions COVID-19, coupled with the drop in commodity prices, has contributed to equity market volatility and, potentially, the risk of a global recession. We expect this global equity market volatility experienced in first quarter 2020 to continue until the COVID-19 pandemic stabilizes.
In March and April 2020, the U.S. government passed a series of stimulus packages which, collectively, provide the largest relief packages in U.S. history. These packages include various provisions intended to provide relief to individuals and businesses in the form of tax changes, loans and grants, among others. At this time, we do not believe these stimulus measures will have a material impact on the Partnership; however, we do believe it could aid the economy by providing relief to certain individuals and smaller businesses.
Current and Future Expected Impact to the Partnership We have experienced a sharp decline in our unit price over the first quarter 2020, a condition that is consistent across our sector. We do not have any debt covenants or other lending arrangements that depend upon our unit price. As of March 31, 2020, we are in compliance with the covenants contained in our revolving credit facility and term loans, which provide that our consolidated leverage ratio as of the end of each fiscal quarter may not exceed 5.00 to 1.0, and our consolidated interest coverage ratio as of the end of each fiscal quarter to be no less than 3.00 to 1.0. The consolidated leverage ratio and consolidated interest coverage ratio are defined in the respective agreements.
As cities, states and countries implement plans to loosen confinement restrictions and stimulate markets and economies, there is an increased risk for the resurgence and recurrence of COVID-19. Such an event is likely to impact global populations and

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could result in the reinstatement of containment measures, leading to potentially an extended period of reduced demand for our services.
Potential Future Impacts
We performed impairment assessments as of March 31, 2020, including assessments of property, plant and equipment, customer-related intangible assets, goodwill and equity method investments. Based on these assessments, we fully impaired our goodwill. See Item 1. Financial Statements – Note 2. Basis of Presentation. As mentioned above, we are in compliance with the covenants contained in our revolving credit facility.
Impairment testing involves uncertainties related to key assumptions such as expectations of our customers’ development and capital spending plans, among others, and a significant number of interdependent variables are derived from these key assumptions. There is a high degree of complexity in their application in determining use and value in recovery tests and fair value determinations.
Given the inherent volatility of the current market conditions driven by the COVID-19 pandemic and the oil and gas supply dynamics, the potential for future conditions to deviate from our current assumptions exists. For instance, further erosion in consumer energy demand, lower crude oil and natural gas development and production, or lower commodity prices could trigger future impairments of our assets or non-compliance with the financial covenants in our revolving credit facility and term loans.
Workforce and Executive Salary Adjustments
As previously disclosed, the officers of our General Partner manage our operations and activities. All of the employees required to conduct and support our operations are employed by Noble and are subject to the operational services and secondment agreement and omnibus agreement that we entered into with Noble.
Noble implemented furlough and part-time working programs for certain employees in response to reductions in planned activity levels, representing approximately 30% of the U.S. workforce. Certain employees that support our operations were impacted by the furlough and part-time working programs. Additionally, Noble lowered executive leadership salaries by 10% to 20%. Certain officers of our General Partner were impacted by the salary reductions. The aforementioned actions by Noble have not significantly impacted our ability to maintain operations, including use of financial reporting systems, nor have they significantly impacted our internal control environment.
First Quarter 2020 Significant Results
The following discussion highlightsoutlines significant operating, financial and transactional results for thirdfirst quarter 2019.2020.
Significant Operating Results Include:
average crude oil sales volumes of 10 MBbl/d, an increase of 32% as compared with third quarter 2018;
average crude oil gathering volumes of 230 MBbl/d, an increase of 31% as compared with third quarter 2018;
average natural gas gathering volumes of 618 BBtu/d, an increase of 91% as compared with third quarter 2018;
average produced water gathered volumes of 180 MBbl/d, an increase of 48% as compared with third quarter 2018; and
average fresh water delivered volumes of 135 MBbl/d, a decrease of 31% as compared with third quarter 2018.
Significant Financial Results Include:
•
Net loss of $37.5 million, a decrease of 155% as compared with first quarter 2019 primarily due to the non-cash charge associated with our goodwill impairment;
•
Net cash provided by operating activities of $118.4 million, an increase of 24% as compared with first quarter 2019;
•
Adjusted EBITDA (non-GAAP financial measure) of $114.8 million, an increase of 27% as compared with first quarter 2019; and
•
Distributable cash flow (non-GAAP financial measure) of $93.7 million, an increase of 74% as compared with first quarter 2019.
net income of $66.4 million, an increase of 36% as compared with third quarter 2018;Significant Transactional Results Include:
net cash provided by operating activities of $93.4 million, an increase of 49% as compared with third quarter 2018;
declared a distribution of $0.6716 per unit, an increase of 20% above the third quarter 2018 distribution per unit;
Adjusted EBITDA (non-GAAP financial measure) of $94.0 million, an increase of 31% as compared with third quarter 2018; and
distributable cash flow (non-GAAP financial measure) of $50.3 million, an increase of 8% as compared with third quarter 2018.
•
On February 1, 2020, Black Diamond exercised and closed an option to acquire a 20% ownership interest in Saddlehorn, which provides diversification into downstream and long-haul opportunities.
For additional information regarding our non-GAAP financial measures, please see —— EBITDA (Non-GAAP Financial Measure), Distributable Cash Flow (Non-GAAP Financial Measure) and Reconciliation of Non-GAAP Financial Measures, below.


OPERATING OUTLOOK
18
2019
Table of Contents

Organic Capital Program
WeAs mentioned above, we have revisedreduced our 20192020 organic capital program excluding investment capital, to accommodate a gross investment level of $265 to $275 million, with $141 to $151 million attributable to the Partnership. Our capital expenditures during the first nine months of 2019 have been below the expectations set forth in our initial capital program primarily due to a consistent focus on cost saving initiatives and the timingrange of our customers’ activity.approximately $60 to $80 million. We will continue to evaluate the level of capital spending throughout the year based on the following factors, among others, and their effect on project financial returns:
•
pace of our customers’ development based on current commodity prices;
•
operating and construction costs and our ability to achieve material supplier price reductions;
•
impact of new laws and regulations on our business practices, including those related to COVID-19;
•
indebtedness levels; and
•
availability of financing or other sources of funding.
pace of our customers’ development;
operating and construction costs and our ability to achieve material supplier price reductions;
impact of new laws and regulations on our business practices;
indebtedness levels; and
availability of financing or other sources of funding.
We plan to fund our capital program with cash on hand, from cash generated from operations, borrowings under our revolving credit facility and, if necessary, the issuance of additional equity or debt offerings.
Investment Capital Program
Delaware Crossing Joint Venture The Delaware Crossing Joint Venture is constructing a 95-mile pipeline system that will originate in Pecos County, Texas, and have additional connections in Reeves County and Winkler County, Texas. The project footprint will be served by a combination of in-field crude oil gathering lines and a trunkline to a hub in Wink, Texas. The project is underpinned by approximately 210,000 dedicated gross acres and nearly 100 miles of pipeline in Pecos, Reeves, Ward and Winkler Counties, Texas. The pipeline is expected to be operational in the first quarter of 2020. During the first nine months of 2019, we made capital contributions of $51.5 million. Our total cash contributions are expected to be approximately $75 million to $85 million. We intend to fund our remaining cash contributions with our revolving credit facility. Construction on the project is anticipated to be complete in early 2020.securities.
EPIC Y-Grade EPIC Y-Grade is constructing an approximately 700-mile pipeline linking NGL reserves in the Permian Basin and Eagle Ford Shale to Gulf Coast refiners, petrochemical companies, and export markets. The pipeline will have a throughput capacity of approximately 440 MBbl/d with multiple origin points. During the first nine months of 2019, we made capital contributions of $166.1 million, which represents approximately 90% of our expected capital contributions. We intend to fund substantially all of the remaining cash contributions in fourth quarter 2019 and will utilize our revolving credit facility. Construction is nearing completion on the EPIC Y-Grade project. Interim crude services commenced during the third quarter of 2019.
EPIC Crude EPIC Crude is constructing an approximately 700-mile pipeline with a capacity of 590 MBbl/d from the Delaware Basin to the Gulf Coast. EPIC Crude’s petition for declaratory order seeking approval of its rates and terms and conditions of its tariff was approved by the Federal Energy Regulatory Commission. During the first nine months of 2019, we made capital contributions of $268.7 million. Our total cash contributions are expected to be approximately $330 million to $350 million, with substantially all of the remaining cash contributions in fourth quarter 2019. We intend to fund our remaining cash contributions with our revolving credit facility. Construction on the project is anticipated to be complete in the first quarter of 2020.
Commercial Update
Black Diamond added a long-term oil gathering dedication from Verdad Resources LLC (Verdad Resources). The dedication from Verdad Resources increases Black Diamond dedicated acres by approximately 85,000 acres, or 54%.
Saddlehorn Transportation Commitment and Investment Option
Black Diamond entered into a strategic relationship with Saddlehorn Pipeline Company, LLC (Saddlehorn). Saddlehorn is jointly owned by affiliates of Magellan Midstream Partners, L.P. (Magellan), Plains All American Pipeline, L.P. (Plains) and Western Midstream Partners, LP (WES). The Saddlehorn pipeline is currently capable of transporting approximately 190 MBbl/d of crude oil and condensate from the DJ Basin and the Powder River Basin to storage facilities in Cushing, Oklahoma owned by Magellan and Plains. With the recent successful open season, the Saddlehorn pipeline will be expanded by 100 MBbl/d, to a new total capacity of 290 MBbl/d. The higher capacity is expected to be available in late 2020 following the addition of incremental pumping and storage capabilities.
As part of the strategic relationship, Black Diamond and Noble entered into long-term firm transportation commitments. Black Diamond received an option to acquire up to 20% ownership interest in Saddlehorn. Black Diamond’s investment option expires in April 2020.

Third Quarter 2019 Development Project Updates
Laramie River DevCo LP DJ Basin
In the Greeley Crescent IDP area, we commenced construction on the trunk line extensions supporting futurecontinued to build out crude oil and produced water gathering and fresh water delivery services.infrastructure to service future well connections. During the quarter, we connected 12 wells on the Empire crude oil gathering system and connected 42 wells to our produced water gathering system in the Greeley Crescent IDP for two stream gathering services andarea. We delivered fresh water to 1221 wells.
In the Black Diamond dedication area, wethe joint venture progressed with installing new crude oil gathering infrastructure for upcoming well connections from third-party producers.producers, as well as facility expansion and upgrade projects. During the quarter, we connected 8969 third-party wells to the Black Diamond gathering system.
Green River DevCo LP WeIn the Mustang IDP area, we extended infrastructure for crude oil, natural gas, and produced water gathering systems to facilitate further development in the Mustang IDP area and support future well connections. During the quarter, we connected 1520 affiliate wells to the Mustang gathering system.system and delivered fresh water to 28 affiliate wells.
Colorado River DevCo LP DuringIn the quarter,Wells Ranch IDP area, we commenced construction on extensions of gathering infrastructure to support future well connections in the Wells Ranch IDP. We connected 23 wells in the Wells Ranch IDP and no wells were connected in the East Pony IDP. Fresh water was also delivered to 10 wells in the Wells Ranch IDP.
San Juan River DevCo LP During the quarter, fresh water was delivered to 15 wells in the East Pony IDP area.
Blanco River DevCo LPconnections. During the quarter, we connected 17 sponsoredand delivered fresh water to 9 affiliate wells.
Delaware Basin
In the Permian, we connected 22 affiliate wells and 58 third-party wells to our gathering systems. We are now connected to 138 sponsor173 affiliate and 923 third-party wells, and we are actively preparing for additional well connections during the fourthearly second quarter of 2019.2020 before a pause in new projects.
Colorado Senate Bill 19-181Investment Capital Program
For some time, initiatives have been underway in the StateOur 2020 investment capital program will accommodate a net investment level of Colorado$240 to limit or ban crude oil and natural gas exploration, development or operations.$260 million. During first quarter 2019, Senate Bill 19-181 (SB 181)2020, capital contributions to investments totaled approximately $221 million, or $148 million net to the Partnership. A substantial portion of the remaining spend will be for EPIC Y-Grade and EPIC Crude to support completion of the crude storage and marine terminal equipment as well as NGL fractionator commissioning.
Investment Project Updates
Delaware Crossing Delaware Crossing began delivering crude oil into all connection points in April 2020. Operational capacity is 135 MBbl/d with capability to expand to 200 MBbl/d. The Liberty Terminal receives barrels from the southern producers in Reeves and Pecos counties. Volumes from the Liberty Terminal flow through the 16-inch mainline to the Wink Terminal. The Wink Terminal also receives gathering volumes from producers in Ward and Winkler counties in west Texas.
EPIC Y-Grade The pipeline was passedcommissioned in February 2020 and the clean out process and transition of the Y-Grade mainline from crude interim service to NGL service began. The pipeline commenced full service in early May 2020.
EPIC Crude Construction of the mainline and west dock of the marine terminal was completed in December 2019. The project entered full service on April 1, 2020.
EPIC Propane The EPIC Propane pipeline is currently under construction with anticipated completion in late 2020.
Saddlehorn The pipeline is currently undergoing expansion to increase crude oil capacity by 100 MBbl/d to a new total capacity of approximately 290 MBbl/d. The incremental capacity is expected to be available in late 2020.


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Table of Contents

RESULTS OF OPERATIONS
The impacts on our business of both the State Legislature. On April 16, 2019,recent significant decline in commodity prices and the Governor signed the bill into law. The legislation makes sweeping changes in Colorado oil and gas law, including, among other matters, requiring the Colorado Oil and Gas Conservation Commission (Colorado Commission) to prioritize public health and environmental concerns in its decisions, instructing the Colorado Commission to adopt rules to minimize emissions of methane and other air contaminants, and delegating considerable new authority to local governments to regulate surface impacts. Some local communities have adopted additional restrictions for oil and gas activities, such as requiring greater setbacks, and other groups have sought a cessation of permit issuances entirely until the Colorado Commission publishes new rules in keeping with SB 181.
Nevertheless, at this time, weCOVID-19 outbreak are not awarereflected within the results for the entire quarter. Therefore, results in first quarter 2020 may not be indicative of any significant changes to Noble’s or other third party customers’ development plans. For example, Noble has all necessary state approvals for more than 550 permits to drill wells over the next several years. The approved permits are for wells in multiple IDP areas, many of which arefuture results in the Mustang IDP area. However, if additional regulatory measures are adopted, Noble and other third party customers in Colorado could experience delays and/or curtailment in the permitting or pursuit of their exploration, development, or production activities. Such compliance costs and delays, curtailments, limitations, or prohibitions in their development plans could result in decreased demand for our services, which could have a material adverse effect on our cash flows, results of operations, financial condition, and liquidity.

RESULTS OF OPERATIONS
near term. Results of operations were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
(thousands)2019 2018 2019 2018
2020
 
2019
Revenues       
 
 
 
Midstream Services — Affiliate$100,846
 $73,136
 $278,724
 $204,323
Midstream Services — Third Party19,607
 19,934
 63,298
 44,763
Crude Oil Sales — Third Party48,870
 46,093
 133,522
 109,781
Midstream Services — Affiliate
$
113,784

 
$
103,803

Midstream Services — Third Party
27,898

 
24,029

Crude Oil Sales — Third Party
82,363

 
32,870

Total Revenues169,323
 139,163
 475,544
 358,867
224,045

 
160,702

Costs and Expenses       
 
 
 
Cost of Crude Oil Sales46,240
 44,379
 125,217
 105,830
79,859

 
30,898

Direct Operating22,524
 23,955
 77,677
 59,496
26,850

 
30,423

Depreciation and Amortization20,851
 18,376
 60,487
 46,076
25,931

 
23,033

General and Administrative4,129
 4,204
 12,990
 19,626
5,486

 
4,361

Other Operating (Income) Expense(469) —
 (488) —
Goodwill Impairment
109,734

 
—

Other Operating Expense
1,286

 
—

Total Operating Expenses93,275
 90,914
 275,883
 231,028
249,146

 
88,715

Operating Income76,048
 48,249
 199,661
 127,839
Operating (Loss) Income
(25,101
)
 
71,987

Other Expense (Income)       
 
 
 
Interest Expense, Net of Amount Capitalized3,952
 3,506
 11,507
 6,220
6,857

 
5,228

Investment Loss (Income)5,621
 (3,866) 5,028
 (10,825)
5,409

 
(2,341
)
Total Other Expense (Income)9,573
 (360) 16,535
 (4,605)
12,266

 
2,887

Income Before Income Taxes66,475
 48,609
 183,126
 132,444
State Income Tax Provision92
 (94) 290
 163
Net Income66,383
 48,703
 182,836
 132,281
Less: Net Income Attributable to Noncontrolling Interests25,751
 4,086
 62,236
 11,719
(Loss) Income Before Income Taxes
(37,367
)
 
69,100

Income Tax Provision
149

 
1,309

Net (Loss) Income
(37,516
)
 
67,791

Less: Net Income Prior to the Drop-Down and Simplification Transaction
—

 
4,536

Net (Loss) Income Subsequent to the Drop-Down and Simplification Transaction
(37,516
)
 
63,255

Less: Net (Loss) Income Attributable to Noncontrolling Interests
(47,619
)
 
19,696

Net Income Attributable to Noble Midstream Partners LP$40,632
 $44,617
 $120,600
 $120,562
$
10,103

 
$
43,559

       
 
 
 
Adjusted EBITDA(1) Attributable to Noble Midstream Partners LP
$59,504
 $59,930
 $177,976
 $164,208
$
107,211

 
$
62,850

       
 
 
 
Distributable Cash Flow(1) of Noble Midstream Partners LP
$50,282
 $46,446
 $144,889
 $132,355
$
93,720

 
$
53,965

(1) 
Adjusted EBITDA and Distributable Cash Flow are not measures as determined by GAAP and should not be considered an alternative to, or more meaningful than, net income, net cash provided by operating activities or any other measure as reported in accordance with GAAP. For additional information regarding our non-GAAP financial measures, please see —— EBITDA (Non-GAAP Financial Measure), Distributable Cash Flow (Non-GAAP Financial Measure) and Reconciliation of Non-GAAP Financial Measures, below.


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Throughput and Crude Oil Sales Volumes
The amount of revenue we generate primarily depends on the volumes of crude oil, natural gas and water for which we provide midstream services as well as the crude oil volumes we sell to customers. Throughput and crude oil sales volumes related to our Gathering Systems and Fresh Water Delivery reportable segments were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
2019 2018 2019 2018
2020
 
2019
Colorado River DevCo LP (Wells Ranch IDP and East Pony IDP) (1)
       
DJ Basin
 
 
 
Crude Oil Sales Volumes (Bbl/d)
19,668

 
7,029

Crude Oil Gathering Volumes (Bbl/d)
183,106

 
182,213

Natural Gas Gathering Volumes (MMBtu/d)
499,204

 
418,203

Natural Gas Processing Volumes (MMBtu/d)
42,668

 
52,349

Produced Water Gathering Volumes (Bbl/d)
42,094

 
38,044

Fresh Water Delivery Volumes (Bbl/d)
226,937

 
219,714

 
 
 
Delaware Basin
 
 
 
Crude Oil Gathering Volumes (Bbl/d)48,089
 59,145
 48,918
 63,630
58,556

 
42,160

Natural Gas Gathering Volumes (MMBtu/d)244,069
 223,354
 248,862
 216,191
182,282

 
100,545

Produced Water Gathering Volumes (Bbl/d)15,444
 15,007
 13,466
 17,348
162,178

 
123,977

Fresh Water Delivery Volumes (Bbl/d)38,880
 72,216
 44,075
 58,295
       
San Juan River DevCo LP (East Pony IDP) (1)
       
Fresh Water Delivery Volumes (Bbl/d)68,819
 —
 36,456
 —
       
Green River DevCo LP (Mustang IDP) (1)
       
Crude Oil Gathering Volumes (Bbl/d)35,808
 5,657
 29,333
 1,942
Natural Gas Gathering Volumes (MMBtu/d)195,544
 9,062
 148,160
 3,111
Produced Water Gathering Volumes (Bbl/d)14,936
 8,123
 14,157
 2,816
Fresh Water Delivery Volumes (Bbl/d)—
 49,672
 63,223
 61,450
       
Blanco River DevCo LP (Delaware Basin) (1)
       
Crude Oil Gathering Volumes (Bbl/d)48,722
 33,689
 43,147
 23,272
Natural Gas Gathering Volumes (MMBtu/d)173,405
 89,439
 135,142
 59,477
Produced Water Gathering Volumes (Bbl/d)138,765
 90,162
 121,995
 58,845
       
Laramie River DevCo LP (Greeley Crescent IDP and Black Diamond Dedication Area) (1)
       
Crude Oil Sales Volumes (Bbl/d)9,625
 7,266
 8,813
 6,164
Crude Oil Gathering Volumes (Bbl/d)97,589
 77,736
 101,141
 73,766
Natural Gas Gathering Volumes (MMBtu/d)4,935
 1,227
 6,266
 1,319
Produced Water Gathering Volumes (Bbl/d)11,127
 8,919
 12,851
 6,468
Fresh Water Delivery Volumes (Bbl/d)26,930
 73,507
 33,811
 54,694
       
 
 
 
Total Gathering Systems       
 
 
 
Crude Oil Sales Volumes (Bbl/d)9,625
 7,266
 8,813
 6,164
19,668

 
7,029

Crude Oil Gathering Volumes (Bbl/d)230,208
 176,227
 222,539
 162,610
241,662

 
224,373

Natural Gas Gathering Volumes (MMBtu/d)617,953
 323,082
 538,430
 280,098
681,486

 
518,748

Barrels of Oil Equivalent (Boe/d)319,058
 224,914
 300,381
 204,684
Barrels of Oil Equivalent (Boe/d) (1)
335,492

 
295,759

Natural Gas Processing Volumes (MMBtu/d)
42,668

 
52,349

Produced Water Gathering Volumes (Bbl/d)180,272
 122,211
 162,469
 85,477
204,272

 
162,021

       
 
 
 
Total Fresh Water Delivery       
 
 
 
Fresh Water Delivery Volumes (Bbl/d)134,629
 195,395
 177,565
 174,439
226,937

 
219,714

(1) 
See Item 1. Financial Statements – Note 1. OrganizationIncludes crude oil sales volumes that are transported on our gathering systems and Nature of Operations for our DevCo ownership interests.sold to third-party customers.

Revenues
Revenues
Revenues from our Gathering System and Fresh Water Delivery reportable segments were as follows:
(in thousands)2019 2018 Increase (Decrease) From Prior Year
Three Months Ended September 30,     
Crude Oil, Natural Gas and Produced Water Gathering — Affiliate
$79,208
 $54,674
 45 %
Crude Oil, Natural Gas and Produced Water Gathering — Third Party16,196
 12,459
 30 %
Fresh Water Delivery — Affiliate
20,847
 17,416
 20 %
Fresh Water Delivery — Third Party2,132
 5,929
 (64)%
Crude Oil Sales — Third Party48,870
 46,093
 6 %
Other — Affiliate791
 1,046
 (24)%
Other — Third Party1,279
 1,546
 (17)%
Total Revenues$169,323
 $139,163
 22 %
      
Nine Months Ended September 30,     
Crude Oil, Natural Gas and Produced Water Gathering — Affiliate
$209,530
 $144,569
 45 %
Crude Oil, Natural Gas and Produced Water Gathering — Third Party51,344
 28,796
 78 %
Fresh Water Delivery — Affiliate
66,801
 56,774
 18 %
Fresh Water Delivery — Third Party8,395
 12,932
 (35)%
Crude Oil Sales — Third Party133,522
 109,781
 22 %
Other — Affiliate2,393
 2,980
 (20)%
Other — Third Party3,559
 3,035
 17 %
Total Revenues$475,544
 $358,867
 33 %
(in thousands)
2020
 
2019
 
Increase (Decrease) From Prior Year
Three Months Ended March 31,
 
 
 
 
 
Gathering and Processing — Affiliate
$
89,298

 
$
75,380

 
18
 %
Gathering and Processing — Third Party
21,968

 
19,232

 
14
 %
Fresh Water Delivery — Affiliate
23,599

 
27,587

 
(14
)%
Fresh Water Delivery — Third Party
4,174

 
3,809

 
10
 %
Crude Oil Sales — Third Party
82,363

 
32,870

 
151
 %
Other — Affiliate
887

 
836

 
6
 %
Other — Third Party
1,756

 
988

 
78
 %
Total Revenues
$
224,045

 
$
160,702

 
39
 %

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Revenues Trend Analysis
Revenues increased during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018.2019. The increases in revenues by reportable segment were as follows:
Gathering Systems Gathering Systems revenues increased by $30.5$67.0 million during thirdfirst quarter 20192020 as compared with thirdfirst quarter 20182019 due to the following:
an increase of $15.0 million in crude oil, natural gas and produced water gathering services revenues due to an increase in the number of wells connected to our gathering system in the Mustang IDP;
an increase of $8.0 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes in the Delaware Basin resulting from an increase in the number of wells connected to our gathering systems;
an increase of $3.3 million in gathering services revenues due to an increase in the number of wells connected to the Black Diamond system; and
an increase of $2.8 million in crude oil sales due to an increase in crude oil sales volumes;
•
an increase of $49.5 million in crude oil sales due to sales of crude oil we purchase and transport to meet our transportation commitments as well as an increase the number of customers;
•
an increase of $8.5 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes resulting from an increase in the number of wells connected to our gathering systems in the Mustang, Wells Ranch and East Pony IDP areas;
•
an increase of $7.0 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes in the Delaware Basin resulting from an increase in the number of wells connected to our gathering systems.
Fresh Water Delivery Fresh Water Delivery revenues decreased by $0.4$3.6 million during thirdfirst quarter 20192020 as compared with thirdfirst quarter 20182019 due to the following:
a decrease of $11.7 million in fresh water delivery revenues due to a decrease in fresh water deliveries in the Wells Ranch, Greeley Crescent and Mustang IDP areas resulting from reduced well completion activity by Noble and third party customers;
substantially offset by;
an increase of $11.3 million in fresh water delivery revenues due to an increase in fresh water deliveries in the East Pony IDP area resulting from increased well completion activity by Noble.

•
a decrease of $7.7 million in fresh water delivery revenues due to a decrease in fresh water deliveries in the East Pony IDP area resulting from reduced well completion activity by Noble;
Gathering Systems Gathering Systems revenues increased by $111.2 million during the first nine months of 2019 as compared with the first nine months of 2018 due to the following:
an increase of $39.3 million in crude oil, natural gas and produced water gathering services revenues due to a full nine months of services provided during 2019 as well as an increase in the number of wells connected to our gathering system in the Mustang IDP;
an increase of $29.3 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes in the Delaware Basin resulting from an increase in the number of wells connected to our gathering systems;
an increase of $23.8 million in crude oil sales due to a full period of crude oil sales during 2019 due to the commencement of crude oil sales upon closing of the Black Diamond Acquisition as well as an increase in crude oil sales volumes during 2019; and
an increase of $16.5 million in gathering services revenues due to increased sales volumes and a full nine months of activity, as sales activity commenced upon closing of the Black Diamond Acquisition during first quarter 2018.
partially offset by:
a decrease of $6.2 million in crude oil, natural gas and produced water gathering services revenues due to the decreased activity in the Wells Ranch and East Pony IDPs.
Fresh Water Delivery Fresh Water Delivery revenues increased by $5.5 million during the first nine months of 2019 as compared with the first nine months of 2018 due to the following:
an increase of $19.7 million in fresh water delivery revenues due to an increase in fresh water deliveries in the East Pony IDP;
partially offset by;
•
an increase of $4.7 million in fresh water delivery revenues due to an increase in fresh water deliveries in the Wells Ranch IDP area resulting from increased well completion activity by Noble.
a decrease of $14.2 million in fresh water delivery revenues due to a decrease in fresh water deliveries to our customers in the Wells Ranch and Greeley Crescent IDP areas.

Costs and Expenses
Costs and expenses were as follows:
(in thousands)2019 2018 Increase (Decrease) from Prior Year
Three Months Ended September 30,     
Cost of Crude Oil Sales$46,240
 $44,379
 4 %
Direct Operating22,524
 23,955
 (6)%
Depreciation and Amortization20,851
 18,376
 13 %
General and Administrative4,129
 4,204
 (2)%
Other Operating (Income) Expense(469) —
 N/M
Total Operating Expenses$93,275
 $90,914
 3 %
      
Nine Months Ended September 30,     
Cost of Crude Oil Sales$125,217
 $105,830
 18 %
Direct Operating77,677
 59,496
 31 %
Depreciation and Amortization60,487
 46,076
 31 %
General and Administrative12,990
 19,626
 (34)%
Other Operating (Income) Expense(488) —
 N/M
Total Operating Expenses$275,883
 $231,028
 19 %
(in thousands)
2020
 
2019
 
Increase (Decrease)
from Prior Year
Three Months Ended March 31,
 
 
 
 
 
Cost of Crude Oil Sales
$
79,859

 
$
30,898

 
158
 %
Direct Operating
26,850

 
30,423

 
(12
)%
Depreciation and Amortization
25,931

 
23,033

 
13
 %
General and Administrative
5,486

 
4,361

 
26
 %
Goodwill Impairment
109,734

 
—

 
N/M

Other Operating Expense
1,286

 
—

 
N/M

Total Operating Expenses
$
249,146

 
$
88,715

 
181
 %
N/M Amount is not meaningful
Costs and Expenses Trend Analysis
Cost of Crude Oil Sales Cost of crude oil sales is recorded within our Gathering Systems reportable segment. Cost of crude oil sales increased during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018.. The increase during third quarter 2019 as compared to third quarter 2018 iswas primarily attributable to increased sales volumes. The increase during the first nine monthspurchases of 2019 as comparedcrude oil to the first nine months of 2018 is primarily attributable to increased sales volumes and a full nine months of activity, as sales activity commenced upon closing of the Black Diamond Acquisition during first quarter 2018.meet our crude oil transportation commitments.
Direct Operating Direct operating expense decreased during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and increased during the first nine months of 2019 as compared with the first nine months of 2018.. The changes in direct operating expense by reportable segment were as follows:
Gathering Systems Gathering Systems direct operating expense decreasedremained consistent during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018. Gathering Systems direct2019. Direct operating expense increased during the first nine months of 2019 as compared with the first nine months of 2018. The decrease during third quarter 2019 was primarilydecreases attributable to lower maintenance costs, contract services and rental expensescost efficiencies in the Delaware Basin.
The increase during the first nine months of 2019 was primarily attributable to operating expenses associated with the central gathering facilities (CGFs) in the Delaware Basin that were completed during 2018, operating expenses associated with increased volumes in the Permian Basin, MustangWells Ranch IDP andarea, East Pony IDP areasarea, and a full nine months of gathering services providedDelaware Basin were substantially offset by the Black Diamond system.increases attributable to increased activity.
Fresh Water Delivery Fresh Water Delivery direct operating expense remained consistentdecreased $3.0 million during thirdfirst quarter 20192020 as compared with thirdfirst quarter 20182019 due to consistent well completion activity across quarters. Fresh Water Delivery direct operating expense increased during the first nine monthsdecreased use of 2019 as compared withthird-party providers for water logistics services in the first nine months of 2018. The increase was primarily attributable to operating expenses associated with increased volumesEast Pony IDP area resulting from increasedreduced well completion activity by Noble.

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Depreciation and Amortization Depreciation and amortization expense increased during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018.. The increases in depreciation and amortization expenses by reportable segment were as follows:
Gathering Systems Gathering Systems depreciation and amortization expense increased $2.7 million during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018.. The increases wereincrease was due in part, to assets placed in service after September 30, 2018. Assets placed in service after September 30, 2018 wereMarch 31, 2019 primarily associated with the Mustang gathering system, the Delaware Basin CGFs,central gathering facilities, and the continued development of the

Black Diamond assets. Additionally, depreciation and amortization expense includes a full nine months of intangible asset amortization during the first nine months of 2019 associated with customer contracts and relationships acquired in the Black Diamond Acquisition.
Fresh Water Delivery Fresh Water Delivery depreciation and amortization expense remained consistent during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018. Fresh Water Delivery depreciation and amortization expense has remained consistent,, as our fresh water delivery infrastructure was substantially complete prior to 2018.2019.
General and Administrative Expense General and administrative expense is recorded within our Corporate reportable segment. General and administrative expense remained consistentincreased during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018. General and administrative expense decreased during the first nine months of 2019 as compared with the first nine months of 2018.. The decreaseincrease was primarily attributable to legalthe increase in the fixed annual fee payable under our omnibus agreement with Noble which became effective March 1, 2020. See Item 1. Financial Statements – Note 3. Transactions with Affiliates.
Goodwill Impairment During first quarter 2020, we fully impaired our goodwill. See Item 1. Financial Statements – Note 2. Basis of Presentation and financial advisory transaction expenses associated withManagement's Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview and Operating Outlook.
Other Operating Expense Other expense during first quarter 2020 is primarily related to the Black Diamond Acquisition. Transaction expenses associated with the Black Diamond Acquisition during the first nine monthswrite down of 2018 were approximately $7.5 million.crude oil inventory.
Other (Income) Expense Trend Analysis
(in thousands)2019 2018 Increase (Decrease) From Prior Year
2020
 
2019
 
Increase (Decrease) From Prior Year
Three Months Ended September 30,     
Three Months Ended March 31,
 
 
 
 
 
Other (Income) Expense     
 
 
 
 
 
Interest Expense$8,807
 $4,860
 81%
$
11,860

 
$
6,725

 
76
 %
Capitalized Interest(4,855) (1,354) 259%
(5,003
)
 
(1,497
)
 
234
 %
Interest Expense, Net3,952
 3,506
 13%
6,857

 
5,228

 
31
 %
Investment Loss (Income)5,621
 (3,866) N/M
5,409

 
(2,341
)
 
(331
)%
Total Other Expense (Income)$9,573
 $(360) N/M
$
12,266

 
$
2,887

 
325
 %
     
Nine Months Ended September 30,     
Other (Income) Expense     
Interest Expense$23,682
 $11,524
 106%
Capitalized Interest(12,175) (5,304) 130%
Interest Expense, Net11,507
 6,220
 85%
Investment Loss (Income)5,028
 (10,825) N/M
Total Other Expense (Income)$16,535
 $(4,605) N/M
Interest Expense, Net Interest expense is recorded within our Corporate reportable segment. Interest expense represents interest incurred in connection with our revolving credit facility and term loan credit facilities. Our interest expense includes interest on outstanding balances on the facilities and commitment fees on the undrawn portion of our revolving credit facility as well as the non-cash amortization of origination fees. A portion of the interest expense is capitalized based upon our construction-in-progress activity as well as our investments in equity method investees engaged in construction activities during the year. See See Item 1. Financial Statements – Note 5.4. Property, Plant and Equipment for our Construction-in-Progress balances as of September 30, 2019March 31, 2020 and December 31, 20182019 and See Item 1. Financial Statements – Note 7.6. Investments.
Interest expense increased$5.1 million during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018.. The increase wasis primarily attributable to the increased outstanding long-term debt during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during2019. The increase is partially offset by lower interest rates in the first nine months of 2019quarter 2020 as compared with the first nine months of 2018.
quarter 2019. Capitalized interest increased $3.5 millionduring thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018.. The increase is primarily attributable to capitalized interest associated with our capital contributions to the Delaware Crossing, Joint Venture, EPIC Y-Grade and EPIC Crude. The increase was partially offset by decreased construction-in-progress activity during third quarter 2019 and the first nine months of 2019 as compared with third quarter 2018 and the first nine months of 2018.
Investment Income Investment income is recorded within our Investments in Midstream Entities reportable segment. Investment income decreased$7.8 million during thirdfirst quarter 20192020 as compared with thirdfirst quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018. Earnings from the Advantage Joint Venture decreased during third quarter 2019 and during the first nine months of 2019 as compared with third quarter 2018 and during the first nine months of 2018

primarily due to a decrease in crude oil throughput volumes. Additionally, we haddriven by losses from the Delaware Crossing, Joint Venture, EPIC Y-Grade and EPIC Crude investments primarily attributable to expenses incurred in connection with the formation of the entities as well as general and administrative expenses incurred prior to service commencement. The losses were partially offset by earnings from our investment in Saddlehorn.

23
Table of Contents

Adjusted EBITDA (Non-GAAP Financial Measure)
Adjusted EBITDA should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, our Adjusted EBITDA may not be comparable to similar measures of other companies in our industry. For a reconciliation of Adjusted EBITDA to its most comparable measures calculated and presented in accordance with GAAP, see —— Reconciliation of Non-GAAP Financial Measures, below.
As a result of our increased investment in midstream entities, we have refined our presentation of Adjusted EBITDA to adjust for certain items with respect to our equity method investments. We now define Adjusted EBITDA as net income before income taxes, net interest expense, depreciation and amortization, transaction expenses, unit-based compensation and certain other items that we do not view as indicative of our ongoing performance. Additionally, Adjusted EBITDA reflects the adjusted earnings impact of our equity method investments by adjusting our equity earnings or losses from our equity method investments to reflect our proportionate share of the EBITDA of such equity method investments. Prior period Adjusted EBITDA has been reclassified to conform to the current period presentation.
Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:
•
our operating performance as compared with those of other companies in the midstream energy industry, without regard to financing methods, historical cost basis or capital structure;
•
the ability of our assets to generate sufficient cash flow to make distributions to our partners;
•
our ability to incur and service debt and fund capital expenditures; and
•
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
our operating performance as compared with those of other companies in the midstream energy industry, without regard to financing methods, historical cost basis or capital structure;
the ability of our assets to generate sufficient cash flow to make distributions to our partners;
our ability to incur and service debt and fund capital expenditures; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of Adjusted EBITDA provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA are net income and net cash provided by operating activities. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, net cash provided by operating activities or any other measure as reported in accordance with GAAP.
Distributable Cash Flow (Non-GAAP Financial Measure)
Distributable cash flow should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net income or net cash provided by operating activities, and these measures may vary from those of other companies. As a result, our distributable cash flow may not be comparable to similar measures of other companies in our industry. For a reconciliation of distributable cash flow to its most comparable measures calculated and presented in accordance with GAAP, see —— Reconciliation of Non-GAAP Financial Measures, below.
As a result of our increased investment in midstream entities, we have refined our presentation of distributable cash flow to adjust for certain items with respect to our equity method investments. We now define distributable cash flow as Adjusted EBITDA plus distributions received from our equity method investments less our proportionate share of Adjusted EBITDA from such equity method investments, estimated maintenance capital expenditures and cash interest paid. Prior period distributable cash flow has been reclassified to conform to the current period presentation.
Distributable cash flow does not reflect changes in working capital balances. Our partnership agreement requires us to distribute all available cash on a quarterly basis, and distributable cash flow is one of the factors used by the boardBoard of directorsDirectors of our general partnerGeneral Partner to help determine the amount of cash that is available to our unitholders for a given period. Therefore, we believe distributable cash flow provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities. Distributable cash flow should not be considered an alternative to, or more meaningful than, net income, net cash provided by operating activities or any other measure as reported in accordance with GAAP.

24
Table of Contents

Reconciliation of Non-GAAP Financial Measures
The following tables present reconciliations of Adjusted EBITDA and distributable cash flow from net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash Flow
Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018 2019 2018
2020
 
2019
Reconciliation from Net Income       
 
 
 
Net Income$66,383
 $48,703
 $182,836
 $132,281
Net (Loss) Income
$
(37,516
)
 
$
67,791

Add:       
 
 
 
Depreciation and Amortization20,851
 18,376
 60,487
 46,076
25,931

 
23,033

Interest Expense, Net of Amount Capitalized3,952
 3,506
 11,507
 6,220
6,857

 
5,228

State Income Tax Provision92
 (94) 290
 163
Income Tax Provision
149

 
1,309

Transaction and Integration Expenses106
 301
 175
 7,550
181

 
57

Proportionate Share of Equity Method Investment EBITDA Adjustments3,257
 579
 9,830
 1,921
8,912

 
2,003

Goodwill Impairment
109,734

 
—

Unit-Based Compensation and Other(630) 343
 382
 1,057
516

 
545

Adjusted EBITDA94,011
 71,714
 265,507
 195,268
114,764

 
99,966

Less:
 
 
 
Adjusted EBITDA Prior to Drop-Down and Simplification Transaction
—

 
9,418

Adjusted EBITDA Subsequent to Drop-Down and Simplification Transaction
114,764

 
90,548

Less:       
 
 
 
Adjusted EBITDA Attributable to Noncontrolling Interests34,507
 11,784
 87,531
 31,060
7,553

 
27,698

Adjusted EBITDA Attributable to Noble Midstream Partners LP59,504
 59,930
 177,976
 164,208
107,211

 
62,850

Add:       
 
 
 
Distributions from Equity Method Investments1,711
 —
 8,655
 3,520
Distributions from Equity Method Investments Attributable to Noble Midstream Partners LP
6,414

 
6,659

Less:       
 
 
 
Proportionate Share of Equity Method Investment EBITDA(3,518) 3,350
 972
 9,490
Proportionate Share of Equity Method Investment EBITDA Attributable to Noble Midstream Partners LP
10

 
3,031

Cash Interest Paid8,662
 4,728
 23,211
 11,165
11,549

 
6,558

Maintenance Capital Expenditures5,789
 5,406
 17,559
 14,718
8,346

 
5,955

Distributable Cash Flow of Noble Midstream Partners LP
$50,282
 $46,446
 $144,889
 $132,355
$
93,720

 
$
53,965














25
Table of Contents

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA and Distributable Cash Flow
Three Months Ended September 30, Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018 2019 2018
2020
 
2019
Reconciliation from Net Cash Provided by Operating Activities       
 
 
 
Net Cash Provided by Operating Activities$93,372
 $62,864
 $266,121
 $167,936
$
118,383

 
$
95,321

Add:       
 
 
 
Interest Expense, Net of Amount Capitalized3,952
 3,506
 11,507
 6,220
6,857

 
5,228

Changes in Operating Assets and Liabilities1,957
 1,981
 (4,029) 7,952
(2,896
)
 
3,098

Transaction and Integration Expenses106
 301
 175
 7,550
181

 
57

Equity Method Investment EBITDA Adjustments(5,229) 3,350
 (7,683) 5,970
(6,281
)
 
(3,628
)
Other Adjustments(147) (288) (584) (360)
(1,480
)
 
(110
)
Adjusted EBITDA94,011
 71,714
 265,507
 195,268
114,764

 
99,966

Less:       
 
 
 
Adjusted EBITDA Prior to Drop-Down and Simplification Transaction
—

 
9,418

Adjusted EBITDA Subsequent to Drop-Down and Simplification Transaction
114,764

 
90,548

Less:
 
 
 
Adjusted EBITDA Attributable to Noncontrolling Interests34,507
 11,784
 87,531
 31,060
7,553

 
27,698

Adjusted EBITDA Attributable to Noble Midstream Partners LP59,504
 59,930
 177,976
 164,208
107,211

 
62,850

Add:       
 
 
 
Distributions from Equity Method Investments1,711
 —
 8,655
 3,520
Distributions from Equity Method Investments Attributable to Noble Midstream Partners LP
6,414

 
6,659

Less:       
 
 
 
Proportionate Share of Equity Method Investment EBITDA(3,518) 3,350
 972
 9,490
Proportionate Share of Equity Method Investment EBITDA Attributable to Noble Midstream Partners LP
10

 
3,031

Cash Interest Paid8,662
 4,728
 23,211
 11,165
11,549

 
6,558

Maintenance Capital Expenditures5,789
 5,406
 17,559
 14,718
8,346

 
5,955

Distributable Cash Flow of Noble Midstream Partners LP
$50,282
 $46,446
 $144,889
 $132,355
$
93,720

 
$
53,965



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LIQUIDITY AND CAPITAL RESOURCES
Financing StrategyRecent events, as further described in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview and Operating Outlook, have significantly impacted our financing strategy. We have taken actions to defer certain development projects to reflect updated producer forecasts in the DJ and Delaware Basins and reduce our quarterly distribution in order to preserve our financial liquidity.
Our primary sourcescapital structure and financing strategy are designed to provide sufficient liquidity to meet our short-term working capital requirements, long-term capital expenditure requirements and to make quarterly cash distributions. In the current commodity price and economic environment, the duration of liquidity arewhich could be prolonged, we have reduced our long-term capital expenditure guidance to reflect updated producer forecasts in the DJ and Delaware Basins. Additionally, we have reduced our quarterly distribution to preserve cash and support the balance sheet. We expect these actions to increase our cash flows generated from operations based on commercial agreementsduring the remainder of 2020, strengthening our financial position and flexibility.
Our liquidity could also be impacted by counterparty credit risk. We closely monitor the credit worthiness of third-party counterparties with Noble and our third party customers. whom we do business. When considered necessary, we obtain letters of credit or other credit enhancements to mitigate risks associated with certain counterparties.
We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our revolving credit facility and may seek to opportunistically access the capital markets from time to time through debt or equity or debt offerings. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements and to make quarterly cash distributions. We do not have any commitment from Noble or our general partnerGeneral Partner or any of their respective affiliates to fund our cash flow deficits or provide other direct or indirect financial assistance to us. Certain consolidated subsidiaries make distributions to or receive contributions from Noble in proportion to Noble’s ownership in the subsidiary.
Our partnership agreement requires that we distribute all of our available cash to our unitholders. As a result, we expect to rely primarily upon external financing sources, including our revolving credit facility and the issuance of debt and equity securities, to fund acquisitions and our expansion capital expenditures.
Available Liquidity
Information regarding liquidity was as follows:
(in thousands)September 30, 2019 December 31, 2018
March 31, 2020
 
December 31, 2019
Cash, Cash Equivalents, and Restricted Cash (1)
$17,621
 $11,691
$
17,656

 
$
12,726

Amount Available to be Borrowed Under Our Revolving Credit Facility (2)
750,000
 740,000
400,000

 
555,000

Available Liquidity$767,621
 $751,691
$
417,656

 
$
567,726

(1) 
See Item 1. Financial Statements –– Note 2. Basis of Presentation.
(2) 
There was no available borrowing capacity under our term loan credit facilities as of September 30, 2019. See Item 1. Financial Statements –– Note 6.5. Debt.
Revolving Credit Facility and Term Loan Credit Facilities
OurDuring the first quarter 2020, we borrowed a net $155 million under our revolving credit facility is available to fund working capital requirements, acquisitions and expansion capital expenditures. We utilized a large portion offacility. Proceeds from our revolving credit facility were utilized to fund portions of our capital contributions to investments, capital program and for the Delaware Crossing Joint Venture, EPIC Y-Grade and EPIC Crude. We repaid a portion of our revolving credit facility with the proceeds from the Preferred Equity offering.working capital purposes. As of September 30, 2019, $50March 31, 2020, $750 million is outstanding under our revolving credit facility. See Item 1. Financial Statements –– Note 6.5. Debt.
On August 23, 2019, we entered into a new term loan credit facility that permitted aggregate borrowings of up to $400 million. Upon closing, we drew $400 million under the term loan credit facility and the proceeds were primarily used to repay a portion of the outstanding borrowings under our revolving credit facility and pay fees and expenses in connection with the term loan credit facility transactions. See Item 1. Financial Statements – Note 6. Debt.Cash Flows
Preferred Equity
On March 25, 2019, we secured an equity commitment totaling $200 million from GIP. During 2019, Preferred Equity proceeds totaled $100 million and we incurred offering costs of $3.4 million. The remaining $100 million equity commitment is available for a one-year period, subject to certain conditions precedent. Proceeds from the Preferred Equity were utilized to repay a portion of outstanding borrowings under our revolving credit facility. See Item 1. Financial Statements – Note 2. Basis of Presentation.
Cash Flows
The following table summarizes our total cash provided by (used in) operating, investing and financing activities:
Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018
2020
 
2019
Operating Activities$266,121
 $167,936
$
118,383

 
$
95,321

Investing Activities(689,509) (1,190,265)
(278,464
)
 
(343,916
)
Financing Activities429,318
 985,950
165,011

 
249,591

Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash$5,930
 $(36,379)
Increase in Cash, Cash Equivalents, and Restricted Cash
$
4,930

 
$
996

Operating Activities Net cash provided by operating activitiesincreased during the first ninethree months of 20192020 as compared with the first ninethree months of 2018.2019. The increase wasis primarily due to an increase inincreased revenues resulting from higher throughput volumes related to the expansion of existing systems and providing services to new areas and customers as well as a decrease in general and administrativedecreased direct operating expenses anddue to cost efficiencies. The increase was partially offset by anincreased general and administrative costs related to the increase in direct operating expenses.the fixed annual fee payable under our omnibus agreement and increased interest expense related to our increased debt balance in the first quarter 2020.
Investing Activities Cash used in investing activitiesdecreased during the first ninethree months of 20192020 as compared with the first ninethree months of 2018. The decrease was primarily due to the Black Diamond Acquisition during 2018 as well as increased additions to property, plant and equipment during 2018 due to the construction of the Mustang gathering system and Delaware Basin CGFs. The decrease was partially offset by our additions to investments during 2019 due to our capital contributions to the Delaware Crossing Joint Venture, EPIC Y-Grade and EPIC Crude.
Financing Activities Cash provided by financing activities decreased during the first nine months of 2019 as compared with the first nine months of 2018.. The decrease is primarily due to decreased capital contributions to our equity method

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investments as well as decreased capital expenditures in 2020. Our decreased capital contributions to Delaware Crossing, EPIC Crude and EPIC Y-Grade were partially offset by our capital contribution to Saddlehorn.
Financing ActivitiesCash provided by financing activitiesdecreased during the first three months of 2020 as compared with the first three months of 2019. The decrease is primarily due to the proceeds from the preferred equity issuance in first quarter 2019, as well as decreased net long-term debt borrowings decreased contributions from noncontrolling interest owners, increased distributions to noncontrolling interest owners and increased distributions to unitholders. The decrease was partially offset by net proceeds from the Preferred Equity.unitholders during first quarter 2020.
Off-Balance Sheet Arrangements
WeAs of March 31, 2020, our material off-balance sheet arrangements that we have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.include our transportation commitments and undrawn letters of credit.
Contractual Obligations
With the exception of the three-year senior unsecured term loan credit facility we entered into on August 23, 2019, weWe have had no material changes in our contractual commitments and obligations from amounts listed under Item 7. Management'sManagement’s Discussion and Analysis of Financial Conditions and Results of Operations - Liquidity and Capital Resources - Contractual Obligations in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Capital Requirements
Capital Expenditures and Other Investing Activities
The midstream energy business is capital intensive, requiring the maintenance of existing gathering systems and other midstream assets and facilities and the acquisition or construction and development of new gathering systems and other midstream assets and facilities. Capital expenditures and other investing activities (on an accrual basis) were as follows:
Nine Months Ended September 30,
Three Months Ended March 31,
(in thousands)2019 2018
2020
 
2019
Gathering System Expenditures (1)
$187,437
 $669,908
$
47,619

 
$
75,176

Fresh Water Delivery System Expenditures6,040
 18,711
—

 
2,756

Other810
 —
109

 
269

Total Capital Expenditures(1)$194,287
 $688,619
$
47,728

 
$
78,201

   
 
 
 
Additions to Investments$501,344
 $426
Additions to Investments (1) (2)
$
225,599

 
$
270,603

(1) 
Gathering system
Total capital expenditures forand additions to investments represent the nine months ended September 30, 2018 include onlyconsolidated expenditures of the Partnership and includes the portion of the purchase priceexpenditures funded by noncontrolling interest owners.
(2) 
Additions to investments for the Black Diamond Acquisition allocated to Property, Plant and Equipment totaling $205.8 million.three months ended March 31, 2020 includes $4.5 million of capitalized interest.
For the ninethree months ended September 30,March 31, 2020, our gathering system expenditures were primarily associated with the expansion of gathering infrastructure in the Wells Ranch and Mustang IDP areas, well connections in the Black Diamond dedication area and the expansion of gathering infrastructure in the Delaware Basin.
For the three months ended March 31, 2019, our gathering system expenditures were primarily associated with well connections in the Mustang IDP areas, Black Diamond dedication area and the Delaware Basin as well as expansion of the Mustang gathering system. Fresh water delivery system expenditures were primarily associated with the expansion of the Greeley Crescent fresh water delivery system.
For the nine months ended September 30, 2018, our gathering system expenditures were primarily associated with the construction of the Mustang gathering system and construction of central gathering facilities in the Delaware Basin. Additionally, our gathering system expenditures include the Black Diamond Acquisition as well as expenditures related to the connection of the acquired system to a major oil takeaway outlet in the DJ Basin. Fresh water delivery system expenditures were primarily associated with the construction of the Mustang fresh water delivery system.
For the ninethree months ended September 30, 2019,March 31, 2020, additions to investments were primarily related to our capital contributions to the Delaware Crossing Joint Venture, EPIC Y-Grade and EPIC Crude.Saddlehorn as well as our other equity method investments. See Item 1. Financial Statements –– Note 7.6. Investments. For the ninethree months ended September 30, 2018,March 31, 2019, additions to investments were primarily related to aour capital call for our White Cliffs Interest.contributions to Delaware Crossing, EPIC Y-Grade and EPIC Crude.

Cash Distributions
Our partnership agreement requires that we distribute all of our available cash quarterly. Quarterly distributions, if any, will be made within 45 days after the end of each calendar quarter to holders of record on the applicable record date.
On October 24, 2019,March 25, 2020, the boardBoard of directorsDirectors of our general partner declaredGeneral Partner approved a 73% reduction of the quarterly cash distribution of $0.6716to $0.1875 per unit.unit due to the volatile commodity and market environment.. The distribution will be paid on November 11, 2019,May 15, 2020, to unitholders of record as of November 4, 2019. Also on November 11, 2019, a cash incentive distribution of $5.8 million will be made to Noble related to its IDRs, based upon the level of distribution paid per Common Unit.
Upon payment of the distribution on May 13, 2019, the requirements for the conversion of all Subordinated Units were satisfied under our partnership agreement. As a result, on May 14, 2019, all 15,902,584 Subordinated Units, which were owned entirely by Noble, converted into Common Units. See Item 1. Financial Statements – Note 10. Partnership Distributions. For future quarters, the minimum quarterly distribution of $0.375 per unit equates to $14.9 million per quarter, or $59.4 million per year, based on the number of Common Units outstanding as of September 30, 2019.8, 2020.
We expect that if we are successful in executing our business strategy, we will grow our business in a steady and sustainable manner and distribute to our unitholders a portion of any increase in our cash available for distribution resulting from such growth. We expect our general partner may cause us to establish reserves for specific purposes, such as major capital expenditures or debt service payments, or may choose to generally reserve cash in the form of excess distribution coverage from time to time for the purpose of maintaining stability or growth in our quarterly distributions. In addition, our general partner may cause us to borrow amounts to fund distributions in quarters when we generate less cash than is necessary to sustain or grow our cash distributions per unit. Our cash distribution policy reflects a judgment that our unitholders will be better served by our distributing rather than retaining our cash available for distribution. The board of directors of our general partner has considerable discretion to determine the amount of our available cash each quarter. In addition, the board of directors of our general partner may change our cash distribution policy at any time.
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Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
We currently generate a substantial portion of our revenues pursuant to fee-based commercial agreements under which we are paid based on the volumes of crude oil, natural gas and produced water that we gather and handle and fresh water services we provide, rather than the underlying value of the commodity.
We have indirect exposure to commodity price risk in that persistent low commodity prices may cause our customers and other potential customers to delay drilling or shut-in production, which would reduce the volumes available for gathering and processing by our infrastructure assets. If our customers delay drilling or completion activity, or temporarily shut-in production due to persistently low commodity prices or for any other reason, we are not assured a certain amount of revenue as our commercial agreements do not contain minimum volume commitments. Because of the natural decline in production from existing wells, our success, in part, depends on our ability to maintain or increase hydrocarbon and water throughput volumes on our midstream systems, which depends on our customers’customers’ level of drilling and completion activity on our dedicated acreage. As further described in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview and Operating Outlook, the commodity price environment is expected to remain depressed based on decreasing demand, over-supply and a potential global economic recession. We cannot predict whether or when commodity prices and economic activities will return to prior levels.
We may acquire or develop additional midstream assets in a manner that increases our exposure to commodity price risk. Future exposure to the volatility of crude oil and natural gas and NGL prices could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash distributions to our unitholders.
Interest Rate Risk
Our primary exposure to interest rate risk results from outstanding borrowings under our revolving credit facility and term loan credit facilities, which have variable interest rates. As of September 30, 2019, $50March 31, 2020, $750 million and $900$900 million were outstanding under our revolving credit facility and term loan credit facilities, respectively. A 1.0% increase in our interest rates would have resulted in an estimated $6.3$4.1 million increase in interest expense for the ninethree months ended September 30, 2019.March 31, 2020. As a result, our results of operations, cash flows and financial condition and, as a further result, our ability to make cash distributions to our unitholders, could be adversely affected by significant increases in interest rates.
Credit Risk
We derive a substantial portion of our revenue from Noble and we expect to derive a substantial portion of our revenue from Noble for the foreseeable future. As a result, any event, whether in our area of operations or otherwise, that adversely affects Noble’sNoble’s production, drilling schedule, financial condition, leverage, market reputation, liquidity, results of operations or cash flows may adversely affect our revenues and cash available for distribution.
Additionally, we are subject to the risk of non-payment or non-performance by our customers, including with respect to our commercial agreements, most of which do not contain minimum volume commitments. Furthermore, we cannot predict the extent to which our customers’customers’ businesses would be impacted if conditions in the energy industry were to deteriorate nor can we

estimate the impact such conditions would have on our customers’customers’ ability to execute their drilling and development plans on our dedicated acreage or to perform under our commercial agreements. Any material non-payment or non-performance by our customers under our commercial agreements would have a significant adverse impact on our business, financial condition, results of operations and cash flows and could therefore materially adversely affect our ability to make cash distributions to our unitholders at the minimum quarterly distribution rate or at all.unitholders.
Seasonality
Demand for crude oil and natural gas generally decreases during the spring and fall months and increases during the summer and winter months. However, seasonal anomalies such as mild winters or mild summers sometimes lessen this fluctuation. In addition, certain crude oil and natural gas users utilize natural gas storage facilities and purchase some of their anticipated winter requirements during the summer. This can also lessen seasonal demand fluctuations. These seasonal anomalies can increase demand for crude oil and natural gas during the summer and winter months and decrease demand for crude oil and natural gas during the spring and fall months. With respect to our completed midstream systems, we do not expect seasonal conditions to have a material impact on our throughput volumes. Severe or prolonged winters may, however, impact our ability to complete additional well connections or construction projects, which may impact the rate of our growth. In addition, severe winter weather may also impact or slow the ability of Noble and our third party customers to execute their drilling and development plans.

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Disclosure Regarding Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are predictive in nature, depend upon or refer to future events or conditions or include the words “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “on schedule”, “strategy”“estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “on schedule,” “strategy” and other similar expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. Our forward-looking statements may include statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such expenditures on our performance, the costs of being a publicly traded partnership and our capital programs. In addition, our forward-looking statements address the various risks and uncertainties associated with the extraordinary market environment and impacts resulting from the COVID-19 pandemic and the actions of foreign oil producers (most notably Saudi Arabia and Russia) to increase crude oil production and the expected impact on our businesses, operations, earnings and results.
Forward-looking statements are not guarantees of future performance and are based on certain assumptions and bases, and subject to certain risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, and not all of which can be disclosed in advance. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
•
uncertainty regarding the length of time it will take for the U.S. and the rest of the world to slow the spread of the COVID-19 virus to the point where applicable authorities are comfortable easing current restrictions on various commercial and economic activities; such restrictions are designed to protect public health but also have the effect of significantly reducing demand for crude oil and natural gas;
•
the continuation of a swift and material decline in global crude oil demand and crude oil prices for an uncertain period of time that correspondingly may lead to a significant reduction of domestic crude oil and natural gas production, which in turn could result in significant declines in the actual or expected volumes transported through our pipelines and/or the reduction of commercial opportunities that might otherwise be available to us;
•
uncertainty regarding the future actions of foreign oil producers such as Saudi Arabia and Russia and the risk that they take actions that will prolong or exacerbate the current over-supply of crude oil;
•
uncertainty regarding the timing, pace and extent of an economic recovery in the U.S. and elsewhere, which in turn will likely affect demand for crude oil and natural gas and therefore the demand for the midstream services we provide and the commercial opportunities available to us;
•
the effect of an overhang of significant amounts of crude oil and natural gas inventory stored in the U.S. and elsewhere and the impact that such inventory overhang ultimately has on the timing of a return to market conditions that support increased drilling and production activities in the U.S.;
•
the ability of our customers to meet their drilling and development plans;
•
competitive conditions in our industry;
•
actions taken by third-party operators, gatherers, processors and transporters;
•
the demand for crude oil, natural gas and produced water gathering and processing services, crude oil treating and fresh water services;
•
our ability to successfully implement our business plan;
•
our ability to complete internal growth projects on time and on budget;
•
the price and availability of debt and equity financing;
•
the availability and price of crude oil and natural gas to the consumer compared to the price of alternative and competing fuels;
•
energy efficiency and technology trends;
•
operating hazards and other risks incidental to our midstream services;
•
natural disasters, weather-related delays, casualty losses and other matters beyond our control;
•
interest rates;
•
labor relations;
•
defaults by or bankruptcy of our customers under our agreements;
•
our inability to perform our obligations under our contracts, whether due to non-performance by third parties, including our customers or other counterparties, market constraints, third-party constraints, legal constraints (including governmental orders or guidance), or other factors;
•
changes in availability and cost of capital;
•
changes in our tax status;
•
the effect of existing and future laws and government regulations;

the ability
30
Table of our customers to meet their drilling and development plans;Contents
changes in general economic conditions;
•
the effects of future litigation;
•
interruption of the Partnership's operations due to social, civil or political events or unrest;
•
terrorist attacks or cyber threats;
•
any future acquisitions or dispositions of assets or the delay or failure of any such transaction to close;
•
the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations; and
•
certain factors discussed elsewhere in this Form 10-Q.
competitive conditions in our industry;
actions taken by third-party operators, gatherers, processors and transporters;
the demand for crude oil, natural gas and produced water gathering and processing services, crude oil treating and fresh water services;
our ability to successfully implement our business plan;
our ability to complete internal growth projects on time and on budget;
the price and availability of debt and equity financing;
the availability and price of crude oil and natural gas to the consumer compared to the price of alternative and competing fuels;
energy efficiency and technology trends;
operating hazards and other risks incidental to our midstream services;
natural disasters, weather-related delays, casualty losses and other matters beyond our control;
interest rates;
labor relations;
defaults by our customers under our agreements;
changes in availability and cost of capital;
changes in our tax status;
the effect of existing and future laws and government regulations;
the effects of future litigation;
interruption of the Partnership's operations due to social, civil or political events or unrest;
terrorist attacks or cyber threats;
any future acquisitions or dispositions of assets or the delay or failure of any such transaction to close; and

certain factors discussed elsewhere in this Form 10-Q.
You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law. You should consider carefully the statements under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018,2019 and in this quarterly report on Form 10-Q for the quarter ended March 31, 2020, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements. Our Annual Report on Form 10-K for the year ended December 31, 20182019 is available on our website at www.nblmidstream.com.
Item 4.     Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on the evaluation of our disclosure controls and procedures by our principal executive officer and our principal financial officer, as of the end of the period covered by this quarterly report, each of them has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
Information regarding legal proceedings is set forth in Part I. Financial Information, Item 1. Financial Statements —— Note 12.10. Commitments and Contingencies of this Form 10-Q, which is incorporated by reference into this Part II. Item 1.
Item 1A. Risk Factors
There have been no material changes, other than disclosed below, from the risk factors disclosed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 20182019.
We may not generate sufficient distributable cash flow to enable us to make quarterly distributions to our unitholders at our current distribution rate.
We may not generate sufficient distributable cash flow to enable us to make quarterly distributions at our current distribution rate. For example, in response to the unprecedented impact on our business from the significant decline in commodity prices and the COVID-19 outbreak, on March 25, 2020, the Board of Directors of our General Partner approved a 73% reduction of the quarterly distribution to $0.1875 per unit.
The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:
•
the volumes of natural gas we gather or process, the volumes of crude oil we gather and sell, the volumes of produced water we collect, clean or dispose of and the volumes of fresh water we distribute and store and the number of wells that have access to our crude oil treating facilities;
•
continued volatility of market prices of crude oil, natural gas and NGLs and their effect on our customers’ drilling and development plans on our dedicated acreage and the volumes of hydrocarbons that are produced on our dedicated acreage and for which we provide midstream services;
•
our customers’ ability to fund their drilling and development plans on our dedicated acreage;

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•
downstream processing and transportation capacity constraints and interruptions, including the failure of our customers to have sufficient contracted processing or transportation capacity;
•
the levels of our operating expenses, maintenance expenses and general and administrative expenses;
•
regulatory action affecting: (i) the supply of, or demand for, crude oil, natural gas, NGLs and water, (ii) the rates we can charge for our midstream services, (iii) the terms upon which we are able to contract to provide our midstream services, (iv) our existing gathering and other commercial agreements or (v) our operating costs or our operating flexibility;
•
the rates we charge third parties for our midstream services;
•
prevailing economic conditions; and
•
adverse weather conditions.
In addition, the actual amount of distributable cash flow that we generate will also depend on other factors, some of which are beyond our control, including:
•
global or national health pandemics, epidemics or concerns, such as the recent COVID-19 outbreak, which has reduced and may further reduce demand for oil and natural gas and related products due to reduced global or national economic activity;
•
limited production cuts and freezes implemented by OPEC members and other large oil producers such as Russia;
•
the level and timing of our capital expenditures;
•
our debt service requirements and other liabilities;
•
our ability to borrow under our debt agreements to fund our capital expenditures and operating expenditures and to pay distributions;
•
fluctuations in our working capital needs;
•
restrictions on distributions contained in any of our debt agreements;
•
the cost of acquisitions, if any;
•
the fees and expenses of our General Partner and its affiliates (including Noble) that we are required to reimburse;
•
the amount of cash reserves established by our General Partner; and
•
other business risks affecting our cash levels.
Because of the natural decline in production from existing wells, our success, in part, depends on our ability to maintain or disclosedincrease hydrocarbon throughput volumes on our midstream systems, which depends on our customers’ levels of development and completion activity on our dedicated acreage.
The level of crude oil and natural gas volumes handled by our midstream systems depends on the level of production from crude oil and natural gas wells dedicated to our midstream systems, which may be less than expected and which will naturally decline over time. In order to maintain or increase throughput levels on our midstream systems, we must obtain production from wells completed by Noble and any third-party customers on acreage dedicated to our midstream systems or execute agreements with other third parties in our areas of operation.
Factors that significantly affect our customers’ levels of development and completion activity on our dedicated acreage include: prices of crude oil and natural gas; the level of supply and demand for crude oil and natural gas, worldwide; governmental regulations, including the policies of governments regarding the exploration for and production and development of their crude oil and natural gas reserves. The recent announcement by Saudi Arabia of a significant reduction in its export prices as well as the expiration of previously agreed upon production cuts by Russia, coupled with the ongoing impacts of the COVID-19 pandemic have contributed to the unprecedented and significant recent decline in the price of crude oil.
The duration of the business disruption and related financial impact from COVID-19 and current commodity price environment cannot be reasonably estimated at this time. If the current environment continues for an extended period of time, it could materially adversely affect the demand for our services and our ability to operate our business in the manner and on the timelines previously planned.
We have no control over Noble’s or other producers’ levels of development and completion activity in our areas of operation, the amount of reserves associated with wells connected to our systems or the rate at which production from a well declines. In addition, we have no control over Noble or other producers or their exploration and development decisions, which may also be affected by the following, among other things:
•
the availability and cost of capital;

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•
global or national health pandemics, epidemics or concerns, such as the recent COVID-19 outbreak, which has reduced and may further reduce demand for oil and natural gas and related products due to reduced global or national economic activity;
•
limited production cuts and freezes implemented by OPEC members and other large oil producers such as Russia;
•
increased volatility of prevailing and projected crude oil, natural gas and NGL prices;
•
demand for crude oil, natural gas and NGLs, which has recently been significantly depressed due to global economic conditions;
•
levels of reserves;
•
geologic considerations;
•
changes in the strategic importance our customers assign to development in the DJ Basin or the Delaware Basin as opposed to their other operations, which could adversely affect the financial and operational resources our customers are willing to devote to development of our dedicated acreage;
•
increased levels of taxation related to the exploration and production of crude oil, natural gas and NGLs in our areas of operation;
•
environmental or other governmental regulations, including prorationing, the availability of permits, the regulation of hydraulic fracturing and a governmental determination that multiple facilities are to be treated as a single source for air permitting purposes; and
•
the costs of producing crude oil, natural gas and NGLs and the availability and costs of drilling rigs and other equipment.
Due to these and other factors, even if reserves are known to exist in areas served by our midstream assets, producers, including Noble, may choose not to develop those reserves. If producers choose not to develop their reserves, or they choose to slow their development rate, in our areas of operation, utilization of our midstream systems will be below anticipated levels. Our inability to provide increased services resulting from reductions in development activity, coupled with the natural decline in production from our current dedicated acreage, would result in our inability to maintain the then-current levels of utilization of our midstream assets, which could materially adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions.
Our exposure to commodity price risk may change over time and we cannot guarantee our customers will be able to abide by the terms of any existing agreements or that we will be able to secure similar terms in future agreements for our midstream services with our customers.
We currently generate the majority of our revenues pursuant to fee-based agreements under which we are paid based on volumes handled, rather than the underlying value of the commodity. Consequently, our existing operations and cash flows have little direct exposure to commodity price risk. However, our customers are exposed to commodity price risk, and extended reduction in commodity prices could reduce the production volumes available for our midstream services in the future below expected levels.
Historically, crude oil, natural gas and NGLs prices have been volatile and subject to wide fluctuations. For example, during 2019, the low price for both the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate (“WTI”) oil futures and NYMEX Henry Hub gas futures was $45.41 per barrel and $2.07 per MMBtu, respectively. For the period from January 1, 2020 through April 30, 2020, however, prices for oil and natural gas declined significantly, reaching lows of -$37.63 per barrel for NYMEX WTI oil futures and $1.55 per MMBtu for NYMEX Henry Hub gas futures. Negative NYMEX WTI oil futures prices during April 2020 represented the impact of severe storage constraints as of the expiration date for front month oil purchase contracts.
This recent significant decline in crude oil prices has largely been attributable to the recent actions of Saudi Arabia and Russia, which have resulted in a substantial decrease in crude oil and natural gas prices, and the global outbreak of COVID-19, which has reduced demand for crude oil and natural gas because of significantly reduced global and national economic activity. We cannot predict whether or when commodity prices and economic activities will return to normalized levels. Although we intend to maintain fee-based pricing terms on both new contracts and existing contracts for which prices have not yet been set, our efforts to negotiate such terms may not be successful, which could have a materially adverse effect on our business.
Events outside of our control, including a pandemic, epidemic or outbreak of an infectious disease, such as the recent global outbreak of COVID-19 and the potential global recession, could have a material adverse impact on our financial position, results of operations and cash flows.
The U.S. and other world economies are potentially in a recession due to the global outbreak of COVID-19, which began late in 2019. In March 2020, OPEC and non-OPEC producers failed to agree to production cuts, causing a significant drop in crude oil prices. In April 2020, members of OPEC agreed to certain production cuts. While these production cuts could

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rebalance the market in the long-term, in the short-term, we do not believe they will be large enough to offset the sharp decrease in demand caused by COVID-19.These factors collectively have contributed to unprecedented negative global economic impacts, including a significant drop in hydrocarbon product demand, which could extend throughout 2020 and beyond.
A recession would likely extend the time for the current oil markets to absorb excess supplies and rebalance inventory resulting in decreased demand for our midstream services for a number of future quarters. Our profitability will likely be significantly affected by this decreased demand and could lead to material impairments of our long-lived assets, intangible assets and equity method investments. Additionally, these factors could lead to further reductions in our distributions to unitholders or may cause us to fall out of compliance with the covenants in our revolving credit facility and term loans. The global outbreak of COVID-19 and impact of lower commodity prices could lead to disruptions in our supply network, including, among other things, storage and pipeline constraints brought on by overproduction and decreased demand from refiners.
Our future access to capital, as well as that of our partners and contractors, could be limited due to tightening capital markets that could delay or inhibit our capital projects.
The outbreak of COVID-19 could potentially further impact our workforce. The infection of key personnel, or the infection of a significant amount of our workforce, could have a material adverse impact on our business, financial condition and results of operations.
The majority of our workforce is working remotely until the risks of COVID-19 are reduced. Additionally, in response to reduced development and activity levels stemming from the commodity price environment, Noble has placed a number of employees on furlough or part-time work programs. A remote workforce combined with workforce reduction programs could introduce risks to achieving business objectives and/or the ability to maintain our controls and procedures. For example, the technology required for the transition to remote work increases our vulnerability to cybersecurity threats, including threats of unauthorized access to sensitive information or to render data or systems unusable, the impact of which may have material adverse effects on our business and operations. See “Item 1A. Risk Factors ofFactors-Risks Related to Our Business – A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss” in our QuarterlyAnnual Report on Form 10-Q10-K for the periodyear ended June 30, 2019, whichDecember 31, 2019.
The impacts of COVID-19 and the significant drop in commodity prices has had an unprecedented impact on the global economy and our business. We are incorporated by reference into this Part II. Item 1A.unable to predict all potential impacts to our business, the severity of such impacts or the duration.


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Item 6. Exhibit

Exhibit Number
 
Exhibit
 
 
 
2.1
2.1+
 
 
 
 
3.1
 
 
 
 
3.2
 
 
 
 
3.3
 
 
 
 
3.4
 
 
 
 
3.5
 
 
 
 
3.6
 
 
 
 
3.7
 
 
 
 
3.5
4.1
 
3.6
Amendment to Certificate of Formation of Noble Midstream GP LLC (filed as Exhibit 3.5 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-207560) filed October 22, 2015 and incorporated herein by reference).
3.7
First Amended and Restated Limited Liability Company Agreement of Noble Midstream GP LLC (filed as Exhibit 3.2 to the Registrant’sRegistrant’s Current Report on Form 8-K (Date of Event: September 14, 2016) filed September 20, 2016 and incorporated herein by reference).
10.1
Term Credit Agreement, dated as of August 23, 2019, by and among Noble Midstream Partners LP, as Parent, and Noble Midstream Services, LLC, as Borrower, the subsidiaries of the Borrower identified therein, Bank of Montreal and the other lenders party thereto (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Date of Event: August 23,November 21, 2019) filed August 26,November 22, 2019 and incorporated herein by reference).
10.2
 
 
31.1
31.1
 
 
 
 
31.2
 
 
 
 
32.1
 
 
 
 
32.2
 
 
 
 
101
 
The following materials from Noble Midstream Partners LP'sLP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019March 31, 2020 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income; (ii) Consolidated Balance Sheets; (iii) Consolidated Statements of Cash Flows; (iv) Consolidated Statements of Changes in Equity; and (v) Notes to Consolidated Financial Statements.
 
 
 
104
 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

+ Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be furnished to the Securities and Exchange Commission upon request.
Signatures
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Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
Noble Midstream Partners LP
 
 
 
 
By: Noble Midstream GP, LLC,
       its General Partner
 
 
 
 
 
Date
 
November 7, 2019
May 8, 2020
 
By: /s/ Thomas W. Christensen
 
 
 
 
Thomas W. Christensen
Chief Financial Officer


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