Noble Midstream Partners Reports Record Fourth Quarter and Full Year 2017 Results

Feb 20, 2018 at 8:00 AM EST

HOUSTON--(BUSINESS WIRE)-- Noble Midstream Partners LP (NYSE: NBLX) (“Noble Midstream” or the “Partnership”) today reported fourth quarter and full year 2017 financial and operational results.

The Partnership’s results are consolidated to include the non-controlling interests in the Partnership’s development companies (“DevCos”) retained by Noble Energy, Inc. (“Noble Energy”); however, certain results are shown as “attributable to the Partnership,” which excludes the non-controlling interests in the DevCos retained by Noble Energy. Noble Midstream believes the results “attributable to the Partnership” provide the best representation of the ongoing operations from which the Partnership’s unitholders will benefit.

Fourth Quarter and Recent Highlights Include:

  • Net Income of $46 million, or $43 million attributable to the Partnership
  • Net Cash Provided by Operating Activities of $42 million
  • Adjusted EBITDA1 of $52 million, or $48 million attributable to the Partnership, an increase over the prior quarter of 4% and year over year of 76% attributable to the Partnership
  • Distribution per unit of $0.4883, a 4.7% increase from the third quarter 2017 distribution and 30% above the minimum quarterly cash distribution; this represents a 24% year-over-year increase
  • Distributable Cash Flow (DCF)1 attributable to the Partnership of $43 million, resulting in distribution coverage1 of 2.2x
  • Oil and gas gathering volumes of 122 thousand barrels of oil equivalent per day (MBoe/d), a 28% increase over third quarter 2017 volumes and up nearly 100% year over year
  • Produced water gathering volumes of 49 thousand barrels of water per day (MBw/d), an 81% increase over third quarter 2017 volumes and up over four times year over year
  • Advantage Pipeline, LLC (Advantage Pipeline) volumes of 60 thousand barrels of oil per day (MBbl/d), 67% above third quarter 2017 volumes. January 2018 nominations grew to approximately 90 MBbl/d
  • Successful startup of two major projects in the fourth quarter - the Jesse James central gathering facility (CGF), the Partnership’s second CGF in the Delaware Basin, and a fresh water system in the DJ Basin for Noble Energy, through Green River DevCo

“Noble Midstream ended 2017 by delivering another outstanding quarter, with strong growth in our core gathering systems driving an increase in key financial metrics. I am proud of the operational and strategic milestones achieved during our first full year as a publicly traded partnership. We completed our inaugural drop-down, successfully executed our growth projects on time and on budget, and enhanced our third party business and downstream exposure through transformational business development activity. Noble Midstream is committed to maintaining our financial strength, which, combined with our deep backlog of strong return opportunities, differentially positions the company in 2018 and beyond,” stated Terry R. Gerhart, Chief Executive Officer of the general partner of Noble Midstream.

Fourth Quarter 2017 Results

Noble Midstream’s fourth quarter results were in-line or better than guidance in all categories.

Fourth quarter volume growth in the Partnership’s gathering systems was driven by (1) a full quarter's contribution of the oil and produced water gathering system for the Partnership’s third-party customer in the DJ Basin through Laramie River DevCo, (2) a full quarter's impact of the Billy Miner I oil, gas and produced water gathering system in the Delaware Basin through Blanco River DevCo, (3) the December 2017 startup of the second CGF in the Delaware Basin through Blanco River DevCo, and (4) strong well performance offsetting a decline in quarterly well connects for our customers in the Delaware and DJ Basin (75 equivalent wells, normalized to 4,500 lateral feet).

The Billy Miner I CGF, Jesse James CGF and Plains All American, L.P.’s Wolfbone Ranch Station connections to Advantage Pipeline are in-service.

Average fresh water delivered in the fourth quarter was above midpoint of guidance at 135 MBw/d; this represented a 23% decrease from the prior quarter, resulting from the previously announced reduced completion activity from our customers in the DJ Basin. The Partnership delivered fresh water to 36 Noble Energy equivalent wells in the fourth quarter, including 12 equivalent wells in Wells Ranch and 24 equivalent wells on federal leases in the East Pony area.

Fourth quarter revenue was $68 million, with gathering revenue representing approximately 69%, freshwater delivery accounting for 29% and oil treating and other revenue comprising the remaining 2%. Operating income was $45 million in the fourth quarter, an increase of 5% from the prior quarter. Fourth quarter investment income of $2 million is primarily comprised of approximately $900 thousand from the Partnership’s minority ownership in White Cliffs Pipeline LLC and $1.1 million from the Partnership’s 50% ownership in the Advantage joint venture.

Capital Expenditures

Capital expenditures in the fourth quarter totaled $136 million, or $62 million attributable the Partnership, primarily due to the following items:

  • Laramie River DevCo - Completion of the Partnership’s third-party oil and produced water gathering system in the DJ Basin. The Partnership connected 18 equivalent wells in the fourth quarter
  • Blanco River DevCo - Completion of the second CGF, Jesse James, as well as backbone gathering infrastructure on the Southern portion of Noble Energy’s Delaware Basin acreage. Capital also reflects significant procurement for the three CGFs scheduled to be online by mid-year 2018
  • Trinity River DevCo - Completion of the Billy Miner I and Jesse James CGFs connection to the Advantage Pipeline
  • Colorado River DevCo - Well connections in Noble Energy’s Wells Ranch (25 equivalent wells) and East Pony (19 equivalent wells) development areas
  • Green River DevCo - Construction on fresh water delivery infrastructure expansion in Noble Energy’s Mustang area and procurement and construction on the oil, gas and produced water gathering systems. The freshwater expansion commenced operations in December and the gathering system is expected to be operational mid-year 2018

Liquidity

As of December 31, 2017, the Partnership had $283 million of liquidity with $18 million in cash on hand and $265 million undrawn under its $350 million unsecured revolving credit facility. Subsequent to year-end and in connection with the closing of the acquisition of Saddle Butte Rockies Midstream, LLC, the Partnership partially exercised the accordion feature under its existing revolving credit facility. This increased the commitment under the revolving credit facility to $530 million from $350 million. As of January 31, 2018, $410 million was outstanding under the Partnership’s revolving credit facility.

Quarterly Distribution

On January 25, 2018, the Board of Directors of Noble Midstream’s general partner, Noble Midstream GP LLC, declared a fourth quarter cash distribution of $0.4883 per unit, a 4.7% increase from the third quarter 2017 and a 24% year-over-year increase.

The fourth quarter distribution was paid on February 12, 2018, to unitholders of record as of February 5, 2018.

Full Year 2017 Financial Results

For the full year 2017, all segments were in-line or above guidance ranges. The Partnership reported significant growth in operating and financial metrics versus 2016 due to an increase in equivalent well connects, strong well performance and multiple new project startups in the DJ Basin and Delaware Basin. Net income for the full year was $164 million, up 92%. Net income attributable to the Partnership grew from $28 million in 2016 to $141 million, or $4.10 per limited partner unit in 2017. Growth attributable to the Partnership reflects Noble Midstream’s previously announced acquisition of an additional interest in Colorado River DevCo and Blanco River DevCo which closed on June 26, 2017.

Capital expenditures in 2017, excluding acquisition capital, totaled $390 million, or $225 million attributable to the Partnership.

Conference Call

Noble Midstream will host a webcast and conference call today at 1:00 p.m. Central Time to discuss fourth quarter and full 2017 financial and operational results as well as 2018 guidance. The live audio webcast and related presentation material is accessible on the ‘Investors’ page of the Partnership’s website at www.nblmidstream.com. Conference call numbers for participation are 877-883-0383, or 412-902-6506 for international calls. The passcode number is 0571805. A replay of the conference call will be available at the same web location following the event.

About Noble Midstream Partners

Noble Midstream is a growth-oriented Delaware master limited partnership formed by Noble Energy, to own, operate, develop and acquire domestic midstream infrastructure assets. Noble Midstream currently provides crude oil, natural gas, and water-related midstream services in the DJ Basin in Colorado and the Delaware Basin in Texas. For more information, please visit www.nblmidstream.com.

Results included in this release reflect the results of our predecessor for accounting purposes for periods prior to the closing of our initial public offering (IPO) on September 20, 2016, as well as the results of the Partnership, for the period subsequent to the closing of the IPO.

This news release contains certain “forward-looking statements” within the meaning of federal securities law. Words such as “anticipates”, “believes”, “expects”, “intends”, “will”, “should”, “may”, “estimates”, and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect the Partnership’s current views about future events. No assurances can be given that the forward-looking statements contained in this news release will occur as projected and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, without limitation, our customers’ ability to meet their drilling and development plans, changes in general economic conditions, competitive conditions in the Partnership’s industry, actions taken by third-party operators, gatherers, processors and transporters, the demand for crude oil and natural gas gathering and processing services, the Partnership’s ability to successfully implement its business plan, the Partnership’s 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, and other risks inherent in the Partnership’s business, including those described under “Risk Factors” and “Forward-Looking Statements” in the Partnership’s most recent Annual Report on Form 10-Kand in other reports we file with the Securities and Exchange Commission. These reports are also available from the Partnership’s office or website, www.nblmidstream.com. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Noble Midstream does not assume any obligation to update forward-looking statements should circumstances, management’s estimates, or opinions change.

This news release also contains certain non-GAAP measures of financial performance that management believes are good tools for internal use and the investment community in evaluating Noble Midstream’s overall financial performance. Please see the attached schedules for reconciliations of the non-GAAP financial measures used in this news release to the most directly comparable GAAP financial measures.

This release serves as a qualified notice to nominees and brokers as provided for under Treasury Regulation Section 1.1446-4(b) that 100% of the Partnership’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate.Nominees, and not the Partnership, are treated as withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.

               

Schedule 1

Noble Midstream Partners LP

Revenue and Throughput Volume Statistics

(unaudited)

               
     

Three Months Ended
December 31,

     

Year Ended
December 31,

      2017       2016       2017       2016
Colorado River DevCo LP                              
Crude Oil Gathering Volumes (Bbl/d)     66,092         45,263         56,531         45,236
Natural Gas Gathering Volumes (MMBtu/d)     201,723         145,752         172,284         132,147
Produced Water Gathering Volumes (Bbl/d)     20,177         11,022         14,097         10,592
Fresh Water Delivery Volumes (Bbl/d)     67,486         76,190         83,856         64,306
Gathering and Fresh Water Delivery Revenues Affiliate (in thousands)     $ 48,816         $ 36,504         $ 175,258         $ 132,161
                               
San Juan River DevCo LP                              
Fresh Water Delivery Volumes (Bbl/d)     34,007         48,560         34,676         22,423
Fresh Water Delivery Revenues Affiliate (in thousands)     $ 8,761         $ 10,471         $ 37,590         $ 17,272
                               
Green River DevCo LP                              
Fresh Water Delivery Volumes (Bbl/d)                             7,498
Fresh Water Delivery Revenues Affiliate (in thousands)     $         $ (94 )       $         $ 4,728
                               
Blanco River DevCo LP                              
Crude Oil Gathering Volumes (Bbl/d)     11,251                 3,791        
Natural Gas Gathering Volumes (MMBtu/d)     26,330                 8,634        
Produced Water Gathering Volumes (Bbl/d)     24,053                 7,996        
Gathering Revenues Affiliate (in thousands)     $ 4,300         $         $ 5,876         $
                               
Laramie River DevCo LP                              
Crude Oil Gathering Volumes (Bbl/d)     15,806                 5,333        
Produced Water Gathering Volumes (Bbl/d)     4,510                 2,338        
Fresh Water Delivery Volumes (Bbl/d)     33,747                 37,458        
Gathering and Fresh Water Delivery Revenues Third Party (in thousands)     $ 4,858         $         $ 14,880         $
                               
Total Gathering Systems                              
Crude Oil Gathering Volumes (Bbl/d)     93,149         45,263         65,655         45,236
Natural Gas Gathering Volumes (MMBtu/d)     228,053         145,752         180,918         132,147
Barrels of Oil Equivalent (MBoe/d)     122         64         89         62
Produced Water Gathering Volumes (Bbl/d)     48,740         11,022         24,431         10,592
Gathering Revenues (in thousands)     $ 46,670         $ 26,848         $ 146,835         $ 94,160
                               
Total Fresh Water Delivery                              
Fresh Water Delivery Volumes (Bbl/d)     135,240         124,750         155,990         94,227
Fresh Water Delivery Revenues (in thousands)     $ 20,065         $ 20,033         $ 86,769         $ 60,001
             

Schedule 2

Noble Midstream Partners LP

Consolidated Statements of Operations

(in thousands, except per unit amounts, unaudited)

             
     

Three Months Ended
December 31,

   

Year Ended
December 31,

      2017     2016     2017     2016
Midstream Services Revenues                        
Crude Oil, Natural Gas and Produced Water Gathering Affiliate     $ 44,273       $ 26,847       $ 142,864       $ 94,160  
Crude Oil, Natural Gas and Produced Water Gathering Third Party     2,397             3,971        
Fresh Water Delivery Affiliate     17,604       20,033       75,860       60,001  
Fresh Water Delivery — Third Party     2,461             10,909        
Crude Oil Treating Affiliate     1,000       1,281       4,473       5,371  
Other Affiliate     338       304       1,204       1,192  
Total Midstream Services Revenues     68,073       48,465       239,281       160,724  
Costs and Expenses                        
Direct Operating     14,601       9,108       54,007       29,107  
Depreciation and Amortization     4,470       2,414       12,953       9,066  
General and Administrative     4,115       2,503       13,396       9,914  
Total Operating Expenses     23,186       14,025       80,356       48,087  
Operating Income     44,887       34,440       158,925       112,637  
Other (Income) Expense                        
Interest Expense, Net of Amount Capitalized     642       266       1,603       3,373  
Investment Income     (1,995 )     (1,017 )     (6,334 )     (4,526 )
Total Other (Income) Expense     (1,353 )     (751 )     (4,731 )     (1,153 )
Income Before Income Taxes     46,240       35,191       163,656       113,790  
Income Tax Provision     (13 )           20       28,288  
Net Income     46,253       35,191       163,636       85,502  
Less: Net Income Prior to the IPO on September 20, 2016                       45,990  
Net Income Subsequent to the IPO on September 20, 2016     46,253       35,191       163,636       39,512  
Less: Net Income Attributable to Noncontrolling Interests     3,285       9,826       23,064       11,054  
Net Income Attributable to Noble Midstream Partners LP     42,968       25,365       140,572       28,458  
Less: Net Income Attributable to Incentive Distribution Rights     520             835        
Net Income Attributable to Limited Partners     $ 42,448       $ 25,365       $ 139,737       $ 28,458  
                         
Net Income Attributable to Limited Partners Per Limited Partner Unit Basic and Diluted                        
Common Units     $ 1.16       $ 0.80       $ 4.10       $ 0.89  
Subordinated Units     $ 1.16       $ 0.80       $ 4.10       $ 0.89  
                         
Weighted Average Limited Partner Units Outstanding Basic                        
Common Units     20,676       15,903       18,192       15,903  
Subordinated Units     15,903       15,903       15,903       15,903  
Total Limited Partner Units     36,579       31,806       34,095       31,806  
                         
Weighted Average Limited Partner Units Outstanding Diluted                        
Common Units     20,692       15,903       18,204       15,903  
Subordinated Units     15,903       15,903       15,903       15,903  
Total Limited Partner Units     36,595       31,806       34,107       31,806  
                 

Schedule 3

Noble Midstream Partners LP

Consolidated Balance Sheets

(in thousands, unaudited)

                 
        December 31,
2017
      December 31,
2016
ASSETS                
Current Assets                
Cash and Cash Equivalents       $ 18,026         $ 57,421  
Restricted Cash       37,505          
Accounts Receivable — Affiliate       27,539         19,191  
Accounts Receivable — Third Party       2,641          
Other Current Assets       389         380  
Total Current Assets       86,100         76,992  
Property, Plant and Equipment                
Total Property, Plant and Equipment, Gross       706,039         311,045  
Less: Accumulated Depreciation and Amortization       (44,271 )       (31,642 )
Total Property, Plant and Equipment, Net       661,768         279,403  
Investments       80,461         11,151  
Deferred Charges       1,429         1,813  
Total Assets       $ 829,758         $ 369,359  
LIABILITIES                
Current Liabilities                
Accounts Payable — Affiliate       $ 1,616         $ 1,452  
Accounts Payable — Third Party       109,893         12,501  
Current Portion of Capital Lease               4,786  
Ad Valorem Tax       1,137         1,187  
Other Current Liabilities       1,739         430  
Total Current Liabilities       114,385         20,356  
Long-Term Liabilities                
Long-Term Debt       85,000          
Asset Retirement Obligations       10,416         5,415  
Long-Term Portion of Capital Lease       3,142          
Other Long-Term Liabilities       585         683  
Total Liabilities       213,528         26,454  
EQUITY                
Partners’ Equity                
Limited Partner                
Common Units (23,712 and 15,903 units outstanding, respectively)       642,616         308,338  
Subordinated Units (15,903 units outstanding)       (168,136 )       (36,799 )
General Partner       520          
Total Partners’ Equity       475,000         271,539  
Noncontrolling Interests       141,230         71,366  
Total Equity       616,230         342,905  
Total Liabilities and Equity       $ 829,758         $ 369,359  
                         

Schedule 4
Noble Midstream Partners LP
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

Non-GAAP Financial Measures

This news release, the financial tables and other supplemental information include Adjusted EBITDA, Distributable Cash Flow, and Distribution Coverage Ratio, which are all non-GAAP measures that may be used periodically by management when discussing our financial results with investors and analysts. The following presents a reconciliation of each of these non-GAAP financial measures to its nearest comparable GAAP measure.

We define Adjusted EBITDA as net income before income taxes, net interest expense, depreciation and amortization and unit-based compensation. 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 to 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 define Distributable Cash Flow as Adjusted EBITDA less estimated maintenance capital expenditures and cash interest expense. Distributable Cash Flow is used by management to evaluate our overall performance. 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 board of directors of our general partner to help determine the amount of cash that is available to our unitholders for a given period. We define Distribution Coverage Ratio as distributable cash flow divided by total distributions declared. The Distribution Coverage Ratio is used by management to illustrate our ability to make our distributions each quarter.

We believe that the presentation of Adjusted EBITDA, Distributable Cash Flow, and Distribution Coverage Ratio provide information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and Distributable Cash Flow are net income and net cash provided by operating activities. Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and Distributable Cash Flow exclude 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, Adjusted EBITDA and Distributable Cash Flow, as presented herein, may not be comparable to similarly titled measures of other companies.

Adjusted EBITDA and Distributable Cash Flow should not be considered as alternatives to GAAP measures, such as net income, operating income, cash flow from operating activities, or any other GAAP measure of financial performance.

           

Schedule 4 (Continued)

Noble Midstream Partners LP

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

 

 

Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)

and Distributable Cash Flow (Non-GAAP)

(in thousands, unaudited)

           
        Three Months Ended December 31,
        2017     2016
Reconciliation from Net Income (GAAP)                  
Net Income (GAAP)       $ 46,253         $ 35,191
Add:                  
Depreciation and Amortization       4,470         2,414
Interest Expense, Net of Amount Capitalized       642         266
Income Tax Provision       (13 )      
Unit-Based Compensation       209         42
Adjusted EBITDA (Non-GAAP)       51,561         37,913
Less:                  
Adjusted EBITDA Attributable to Noncontrolling Interests       3,438         10,501
Adjusted EBITDA Attributable to Noble Midstream Partners LP (Non-GAAP)       48,123         27,412
Less:                  
Cash Interest Paid       1,498         175
Maintenance Capital Expenditures      

3,836

        1,892
Distributable Cash Flow of Noble Midstream Partners LP (Non-GAAP)       $ 42,789         $ 25,345
Distributions (Declared)       $ 19,851         $ 13,782
Distribution Coverage Ratio (Declared)       2.2x         1.8x
             

Reconciliation of Net Cash Provided by Operating Activities (GAAP) to

Adjusted EBITDA (Non-GAAP) and Distributable Cash Flow (Non-GAAP)

(in thousands, unaudited)

             
        Three Months Ended December 31,
        2017     2016
Reconciliation from Net Cash Provided by Operating Activities (GAAP)                    
Net Cash Provided by Operating Activities (GAAP)       $ 41,868         $ 37,878  
Add:                    
Interest Expense, Net of Amount Capitalized       642         266  
Changes in Operating Assets and Liabilities       8,202         (137 )
Change in Income Tax Payable       (13 )        
Stock Based Compensation and Other       862         (94 )
Adjusted EBITDA (Non-GAAP)       51,561         $ 37,913  
Less:                    
Adjusted EBITDA Attributable to Noncontrolling Interests       3,438         10,501  
Adjusted EBITDA Attributable to Noble Midstream Partners LP (Non-GAAP)       48,123         27,412  
Less:                    
Cash Interest Paid       1,498         175  
Maintenance Capital Expenditures       3,836         1,892  
Distributable Cash Flow of Noble Midstream Partners LP (Non-GAAP)       $ 42,789         $ 25,345  
Distributions (Declared)       $ 19,851         $ 13,782  
Distribution Coverage Ratio (Declared)       2.2x         1.8x  
                     

1 Adjusted EBITDA and DCF are not Generally Accepted Accounting Principles (“GAAP”) measures. Definitions and reconciliations of these non-GAAP measures to their most directly comparable GAAP reporting measures appear in Schedule 4 of the financial tables which follow.

 

Noble Midstream Partners LP
Megan Repine
Investor Relations
(832) 639-7380
megan.repine@nblmidstream.com

 

Source: Noble Midstream Partners LP

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