Noble Midstream Partners Reports Third-Quarter 2020 Results

Nov 2, 2020 at 7:30 AM EST

Self-funding Operations with Joint Venture Pipeline Ramp

HOUSTON--(BUSINESS WIRE)--Nov. 2, 2020-- Noble Midstream Partners LP (NASDAQ: NBLX) (“Noble Midstream” or the “Partnership”) today reported third-quarter 2020 financial and operational results. The Partnership’s results are consolidated to include Noble Midstream’s 54.4% ownership of Black Diamond Gathering, LLC (“Black Diamond Gathering”). Equity Method Investments refer to Noble Midstream’s equity interests in joint ventures that are not wholly-owned by the Partnership.

Certain results are shown as “attributable to the Partnership,” which exclude the noncontrolling interests in Black Diamond Gathering retained by Greenfield Midstream1. 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.

Third-Quarter 2020 Operating Results and Highlights

  • Generated $36 million Net Income attributable to the Partnership, $72 million Net Cash Provided by Operating Activities, and $96 million in Adjusted Net EBITDA2
  • Self-funded quarterly operations, investing $8 million of organic capital and $43 million in Equity Method Investments
  • Gathered 315,000 barrels of gross oil and gas equivalent per day (Boe/d) and 156,000 barrels of produced water per day (Bw/d)
  • Transported more than 790,000 gross (181,000 net) barrels per day (Bbl/d) across intermediate and long-haul pipeline equity interests, up 10% sequentially

Robin Fielder, Chief Executive Officer of the Partnership, stated, “Noble Midstream generated operating cash flows in excess of our capital and equity method investments for the second-consecutive quarter through continued optimization and cost reductions. We are encouraged to see customer completion activity return and anticipate exiting 2020 with strong fourth-quarter activity. Along with full-year run-rate contribution from our transmission business, the Partnership is well-positioned for the future. We are excited to be a part of the Chevron organization and will work closely with our new parent to integrate our business and create unitholder value.”

 

3Q20

Gross Volumes

Actuals

Oil and Gas Gathered (MBoe/d)

315

Produced Water Gathered (MBw/d)

156

Fresh Water Delivered (MBw/d)

22

 

 

Financials (in millions)

 

Net Income Attributable to the Partnership

$36

Net Cash Provided by Operating Activities

$72

Adjusted Net EBITDA2

$96

Distributable Cash Flow2

$79

Distribution Coverage Ratio2

4.7x

Organic Capital, Excluding Equity Investments

$8

Resilient Gathering and Growing Transmission Businesses Drive Cash Flow Generation

Third-quarter 2020 revenues totaled $187 million, an increase of 28% sequentially, largely related to higher third-party crude oil sales, which when netted with cost of oil sales, equated to a gain of $4 million. Affiliate oil and gas gathering revenue of $81 million declined 4% sequentially as Noble Energy reduced completion activity. Third-party oil and gas gathering revenue of $21 million declined 3% sequentially.

Total operating expenses were $125 million with $20 million in direct operating expenses, down slightly quarter-over-quarter and 23% annually, as a result of continued cost-reduction measures and temporary reductions in customer activity levels. The Partnership identified roughly $20 million in annual, overall direct operating cost savings and anticipates that more than 50% are sustainable at current activity levels. Investment losses were $18 million, of which $12 million was related to the EPIC Y-Grade and BANGL joint venture described below.

The Partnership reported third-quarter 2020 Net Cash Provided by Operating Activities of $72 million and Adjusted Net EBITDA2 of $96 million, up slightly from second-quarter 2020. Maintenance capital expenditures and cash interest expense attributable to the Partnership totaled $7 million and $6 million, respectively, leading to $79 million Distributable Cash Flow2 attributable to the Partnership. Despite producer curtailments and lower basin activity levels, an increase in EBITDA2 from equity method investments benefited quarterly financials.

Noble Midstream invested $8 million in third-quarter organic capital expenditures. Equity method investments during the quarter totaled $43 million, including $24 million for EPIC Crude, $17 million for EPIC Y-Grade, $4 million for EPIC Propane, and a $2 million reimbursement at Delaware Crossing.

Curtailed Volumes Returned to Production and Completions Resuming

Noble Midstream connected two third-party wells during the quarter, located in the Delaware Basin.

In the Partnership's wholly-owned DJ Basin assets, oil and gas gathering averaged 171,000 Boe/d, up 6% sequentially, and produced water volumes averaged 29,000 Bw/d. Freshwater delivery averaged 22,000 Bw/d, and the Partnership delivered water to 9 third-party wells in September. DJ Basin capital expenditures totaled $2.3 million.

Black Diamond oil gathering throughput volumes averaged 72,000 Bo/d, excluding marketing volumes, down 9% sequentially, and oil sales volumes were 17,000 Bo/d. Net1 capital expenditures totaled $1.6 million. Total DJ Basin curtailed volumes averaged 11,000 Boew/d and returned to full production during the quarter.

In the Delaware Basin, quarterly oil and gas gathering throughput and produced water gathering volumes were 72,000 Boe/d and 127,000 Bw/d, respectively, both down 14% sequentially. Total Delaware Basin curtailments averaged 9,000 Boew/d and returned to production by August. Capital expenditures totaled $4.3 million.

Equity Method Investment Volumes Ramping

The Partnership averaged 790,000 gross Bbl/d (181,000 net) across its intermediate and long-haul transmission systems. Equity method investment volumes and cash flows are expected to grow in the fourth-quarter 2020 as activity returns to the DJ and Delaware basins and the first EPIC greenfield fractionator increases throughput.

EPIC Crude ended interim service in April 2020 and recorded its first full-service period in the third quarter with increasing mainline throughput volumes. The Partnership does not anticipate additional material equity method investment contributions for EPIC Crude.

The EPIC Y-Grade first greenfield fractionator commenced service at the end of the second-quarter 2020 and progressed toward nameplate capacity throughout the third quarter. During the quarter, EPIC Y-Grade announced an undivided joint interest (UJI) and joint venture transaction with BANGL, a consortium led by MPLX and Whitewater Midstream. The BANGL consortium purchased 30% of the pipeline capacity in the existing long-haul NGL pipeline and contracted a 10-year transportation and fractionation agreement to deliver Y-Grade natural gas liquids (NGLs) to a fractionation complex in Sweeny, Texas. The EPIC Y-Grade partners expect to partially reinvest the proceeds to convert its ethane line to Y-Grade service and extend it to Sweeny. This transaction should provide connectivity to another market, increase cash flow back to the partners, and allow EPIC Y-Grade to potentially defer a construction decision on the second greenfield fractionator.

Third-quarter 2020 Saddlehorn throughput averaged approximately 164,000 Bo/d, down slightly sequentially. Expansion remains on track for 2021, which is designed to add 100,000 Bbl/d of oil transportation. Volumes on the Advantage Pipeline system averaged 66,000 Bo/d, compared to 72,000 Bo/d during the second-quarter 2020, and generated $5.5 million in gross distributions to the joint venture partners during the quarter. Delaware Crossing averaged 20,000 Bbl/d in gathering and transportation volumes with essentially all third-party curtailed production back online in July.

Strong Balance Sheet and Liquidity

As of September 30, 2020, the Partnership had $422 million in liquidity and $1.6 billion in total debt. During the quarter, total debt balance increased slightly by $10 million to account for remaining equity method investment capital expenditures and working capital phasing. The Partnership anticipates to delever in the fourth-quarter 2020.

Noble Midstream has a current debt obligation of $500 million that matures July 31, 2021. The Partnership is evaluating opportunities with its parent to address this obligation.

On October 20, 2020, the Board of Directors of Noble Midstream’s general partner, Noble Midstream GP LLC, declared a third-quarter cash distribution of $0.1875 per unit, flat versus second-quarter 2020.

2020 Earnings and Cash Flow Guidance Raised as Fourth-Quarter Activity Increases

After minimal affiliate activity in the third-quarter 2020, Noble Midstream anticipates the resumption of affiliate well completions in the fourth quarter as well as third-party activity in the DJ and Delaware Basins. The Partnership estimates 17 to 20 well completions across its wholly-owned DJ Basin gathering systems. In Black Diamond, the Partnership still estimates more than 150 well connections this year with 25 to 30 connections expected in the fourth-quarter 2020. In the Delaware Basin, affiliate completion activity resumed in October, and the Partnership anticipates 8 to 10 well connections, including 1 to 3 third-party connections.

Noble Midstream is narrowing its 2020 organic capital expenditures expectations from $60 to $80 million to $70 to $80 million and is lowering the top end of its expected 2020 equity method investment range, now $240 to $250 million, from a top end of $260 million previously.

The Partnership anticipates the midpoint of its Net Income Attributable to the Partnership to be $125 million in 2020. Noble Midstream is increasing the midpoint of its expected 2020 Adjusted Net EBITDA2 by 1% to $385 to $400 million and the midpoint of the 2020 Distributable Cash Flow2 by 4% to $300 to $315 million. Distribution Coverage Ratio2 and Net Debt to Trailing Twelve Month (TTM) Adjusted Net EBITDA2 expectations were adjusted to >4.5x and 3.9x to 4.2x, respectively.

 

 

2020 Guidance

Financials (in millions)

 

 

 

 

Net Income

 

$125

Adjusted Net EBITDA 2

 

$385

-

$400

Distributable Cash Flow 2

 

$300

-

$315

Net Debt to TTM Adjusted Net EBITDA 2

 

3.9x

-

4.2x

Distribution Coverage Ratio 2

 

>4.5x

 

 

 

 

 

2020 Organic Capital

 

$70

-

$80

Equity Method Investment Capital

 

$240

-

$250

1 “Net” is equivalent to “attributable to the Partnership”.
2 Adjusted Net EBITDA, Distributable Cash Flow (DCF), Distribution Coverage Ratio and Net Debt to Trailing Twelve Month (TTM) Adjusted Net EBITDA 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 does not provide guidance on the reconciling items between forecasted Adjusted Net EBITDA, Distributable Cash Flow, Net Debt to TTM Adjusted Net EBITDA or Distribution Coverage Ratio and Net Cash Provided by Operating Activities due to the uncertainty regarding timing and estimates of certain of these items. Noble Midstream provides a range of such Non-GAAP financial measures to allow for the variability in timing and uncertainty of estimates of such reconciling items. Therefore, Noble Midstream cannot reconcile forecasted Adjusted Net EBITDA, Distributable Cash Flow, Net Debt to TTM Adjusted Net EBITDA or Distribution Coverage Ratio to Net Cash Provided by Operating Activities without unreasonable effort.

About Noble Midstream

Noble Midstream is a master limited partnership originally formed by Noble Energy, Inc. and majority-owned by Chevron Corp. to own, operate, develop and acquire domestic midstream infrastructure assets. Noble Midstream currently provides crude oil, natural gas, and water-related midstream services and owns equity interests in oil pipelines in the DJ Basin in Colorado and the Delaware Basin in Texas. Noble Midstream strives to be the midstream provider and partner of choice for its safe operations, reliability, and strong relationships while enhancing value for all stakeholders. For more information, please visit www.nblmidstream.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws. Words such as “estimate,” “anticipate,” “believe,” “project,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “on schedule,” “on track,” “strategy” and other similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Noble Midstream Partners LP’s (“Noble Midstream,” “we,” or “our”) current views about future events. 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 maintain market share and impact commodity pricing and the expected impact on our business, operations, earnings and results. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Noble Midstream does not assume any obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

Forward-looking statements are not guarantees of future performance, are based on certain assumptions, and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, that could cause actual results to differ materially from those projected. These risks include, without limitation, changes in general economic conditions, including without limitation the impacts of the COVID-19 pandemic; our customers’ ability to meet their drilling and development plans; 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; our ability to successfully implement our business plan; our ability to complete internal growth projects on time and on budget; the ability of third parties to complete construction of pipelines in which Noble Midstream holds equity interests on time and on budget; the price and availability of debt and equity; the availability and price of crude oil and natural gas to the consumer compared to the price of alternative and competing fuels; risks associated with the change in ownership of our General Partner; and other risks inherent in the Partnership’s business, including those described under “Risk Factors” and “Disclosure Regarding Forward-Looking Statements” in Noble Midstream’s 2019 Annual Report on Form 10-K and in subsequent reports that we file with the U.S. Securities and Exchange Commission (SEC).

Non-GAAP Financial Measures

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 and for the reasons why management believes non-GAAP measures provide useful information to investors.

Schedule 1

Noble Midstream Partners LP

Revenue and Throughput Volume Statistics

(unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2020

 

2019

 

2020

 

2019

DJ Basin

 

 

 

 

 

 

 

Crude Oil Sales Volumes (Bbl/d)

16,691

 

 

9,625

 

 

16,462

 

 

8,813

 

Crude Oil Gathering Volumes (Bbl/d)

172,393

 

 

181,486

 

 

177,210

 

 

179,392

 

Natural Gas Gathering Volumes (MMBtu/d)

525,417

 

 

496,238

 

 

497,965

 

 

458,087

 

Natural Gas Processing Volumes (MMBtu/d)

39,876

 

 

48,988

 

 

41,697

 

 

50,823

 

Produced Water Gathering Volumes (Bbl/d)

29,452

 

 

41,508

 

 

37,426

 

 

40,474

 

Fresh Water Delivery Volumes (Bbl/d)

22,125

 

 

134,629

 

 

92,873

 

 

177,565

 

 

 

 

 

 

 

 

 

Delaware Basin

 

 

 

 

 

 

 

Crude Oil Gathering Volumes (Bbl/d)

51,064

 

 

51,822

 

 

56,845

 

 

46,530

 

Natural Gas Gathering Volumes (MMBtu/d)

159,734

 

 

180,707

 

 

172,241

 

 

139,877

 

Produced Water Gathering Volumes (Bbl/d)

126,688

 

 

151,739

 

 

145,551

 

 

137,868

 

 

 

 

 

 

 

 

 

Total Gathering Systems

 

 

 

 

 

 

 

Crude Oil Sales Volumes (Bbl/d)

16,691

 

 

9,625

 

 

16,462

 

 

8,813

 

Crude Oil Gathering Volumes (Bbl/d)

223,457

 

 

233,308

 

 

234,055

 

 

225,922

 

Natural Gas Gathering Volumes (MMBtu/d)

685,151

 

 

676,945

 

 

670,206

 

 

597,964

 

Barrels of Oil Equivalent (Boe/d) (1)

314,822

 

 

322,872

 

 

324,674

 

 

306,508

 

Natural Gas Processing Volumes (MMBtu/d)

39,876

 

 

48,988

 

 

41,697

 

 

50,823

 

Produced Water Gathering Volumes (Bbl/d)

156,140

 

 

193,247

 

 

182,977

 

 

178,342

 

 

 

 

 

 

 

 

 

Total Fresh Water Delivery

 

 

 

 

 

 

 

Fresh Water Delivery Volumes (Bbl/d)

22,125

 

 

134,629

 

 

92,873

 

 

177,565

 

(1)

Includes crude oil sales volumes that are transported on our gathering systems and sold to third-party customers.

Schedule 2

Noble Midstream Partners LP

Consolidated Statement of Operations

(in thousands, except per unit amounts, unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

 

 

Gathering and Processing Affiliate

$

80,030

 

 

$

90,586

 

 

$

251,999

 

 

$

244,102

 

Gathering and Processing — Third Party

18,792

 

 

17,169

 

 

60,762

 

 

54,264

 

Fresh Water Delivery Affiliate

8,420

 

 

20,847

 

 

42,319

 

 

66,801

 

Fresh Water Delivery — Third Party

1,628

 

 

2,132

 

 

7,613

 

 

8,395

 

Crude Oil Sales — Third Party

76,173

 

 

48,870

 

 

187,750

 

 

133,522

 

Other — Affiliate

504

 

 

791

 

 

2,159

 

 

2,393

 

Other — Third Party

1,818

 

 

1,279

 

 

4,758

 

 

3,559

 

Total Revenues

187,365

 

 

181,674

 

 

557,360

 

 

513,036

 

Costs and Expenses

 

 

 

 

 

 

 

Cost of Crude Oil Sales

72,089

 

 

46,240

 

 

181,052

 

 

125,216

 

Direct Operating

19,654

 

 

25,688

 

 

66,543

 

 

88,996

 

Depreciation and Amortization

26,443

 

 

24,571

 

 

78,728

 

 

71,585

 

General and Administrative

6,244

 

 

4,373

 

 

18,176

 

 

13,905

 

Goodwill Impairment

 

 

 

 

109,734

 

 

 

Other Operating Expense (Income)

864

 

 

(469

)

 

4,726

 

 

(488

)

Total Operating Expenses

125,294

 

 

100,403

 

 

458,959

 

 

299,214

 

Operating Income

62,071

 

 

81,271

 

 

98,401

 

 

213,822

 

Other Expense (Income)

 

 

 

 

 

 

 

Interest Expense, Net of Amount Capitalized

6,437

 

 

3,952

 

 

19,927

 

 

11,502

 

Investment Loss, Net

18,068

 

 

5,621

 

 

26,207

 

 

5,028

 

Other Non-Operating Income

(1,336

)

 

 

 

 

 

 

Total Other Expense, Net

23,169

 

 

9,573

 

 

46,134

 

 

16,530

 

Income Before Income Taxes

38,902

 

 

71,698

 

 

52,267

 

 

197,292

 

Income Tax Expense

166

 

 

1,179

 

 

187

 

 

3,219

 

Net Income

38,736

 

 

70,519

 

 

52,080

 

 

194,073

 

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

 

 

4,136

 

 

 

 

11,237

 

Net Income Subsequent to the Drop-Down and Simplification

38,736

 

 

66,383

 

 

52,080

 

 

182,836

 

Less: Net Income (Loss) Attributable to Noncontrolling Interests

2,952

 

 

25,751

 

 

(42,043

)

 

62,236

 

Net Income Attributable to Noble Midstream Partners LP

35,784

 

 

40,632

 

 

94,123

 

 

120,600

 

Less: Net Income Attributable to Incentive Distribution Rights

 

 

5,820

 

 

 

 

13,967

 

Net Income Attributable to Limited Partners

$

35,784

 

 

$

34,812

 

 

$

94,123

 

 

$

106,633

 

 

 

 

 

 

 

 

 

Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic

 

 

 

 

 

 

 

Common Units

$

0.40

 

 

$

0.88

 

 

$

1.04

 

 

$

2.65

 

Subordinated Units

$

 

 

$

 

 

$

 

 

$

2.89

 

 

 

 

 

 

 

 

 

Net Income Attributable to Limited Partners Per Limited Partner Unit — Diluted

 

 

 

 

 

 

 

Common Units

$

0.40

 

 

$

0.88

 

 

$

1.04

 

 

$

2.64

 

Subordinated Units

$

 

 

$

 

 

$

 

 

$

2.89

 

 

 

 

 

 

 

 

 

Weighted Average Limited Partner Units Outstanding Basic

 

 

 

 

 

 

 

Common Units

90,170

 

 

39,604

 

 

90,162

 

 

31,855

 

Subordinated Units

 

 

 

 

 

 

7,747

 

 

 

 

 

 

 

 

 

Weighted Average Limited Partner Units Outstanding Diluted

 

 

 

 

 

 

 

Common Units

90,170

 

 

39,624

 

 

90,166

 

 

31,879

 

Subordinated Units

 

 

 

 

 

 

7,747

 

Schedule 3

Noble Midstream Partners LP

Consolidated Balance Sheet

(in thousands, unaudited)

 

 

September 30, 2020

 

December 31, 2019

ASSETS

 

 

 

Current Assets

 

 

 

Cash and Cash Equivalents

$

17,403

 

 

$

12,676

 

Accounts Receivable — Affiliate

48,966

 

 

42,428

 

Accounts Receivable — Third Party

45,051

 

 

44,093

 

Other Current Assets

8,474

 

 

8,730

 

Total Current Assets

119,894

 

 

107,927

 

Property, Plant and Equipment

 

 

 

Total Property, Plant and Equipment, Gross

2,063,911

 

 

2,006,995

 

Less: Accumulated Depreciation and Amortization

(297,181

)

 

(244,038

)

Total Property, Plant and Equipment, Net

1,766,730

 

 

1,762,957

 

Investments

899,468

 

 

660,778

 

Intangible Assets, Net

253,652

 

 

277,900

 

Goodwill

 

 

109,734

 

Other Noncurrent Assets

3,028

 

 

6,786

 

Total Assets

$

3,042,772

 

 

$

2,926,082

 

LIABILITIES, MEZZANINE EQUITY AND EQUITY

 

 

 

Current Liabilities

 

 

 

Accounts Payable — Affiliate

$

3,724

 

 

$

8,155

 

Accounts Payable — Trade

56,986

 

 

107,705

 

Current Portion of Debt

501,753

 

 

 

Other Current Liabilities

9,773

 

 

11,680

 

Total Current Liabilities

572,236

 

 

127,540

 

Long-Term Liabilities

 

 

 

Long-Term Debt

1,144,599

 

 

1,495,679

 

Asset Retirement Obligations

40,900

 

 

37,842

 

Other Long-Term Liabilities

3,963

 

 

4,160

 

Total Liabilities

1,761,698

 

 

1,665,221

 

Mezzanine Equity

 

 

 

Redeemable Noncontrolling Interest, Net

116,104

 

 

106,005

 

Equity

 

 

 

Common Units (90,171 and 90,136 units outstanding, respectively)

803,466

 

 

813,999

 

Noncontrolling Interests

361,504

 

 

340,857

 

Total Equity

1,164,970

 

 

1,154,856

 

Total Liabilities, Mezzanine Equity and Equity

$

3,042,772

 

 

$

2,926,082

 

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, Adjusted Net EBITDA, Distributable Cash Flow, Net Debt to Trailing Twelve Month Adjusted Net EBITDA and Distribution Coverage Ratio, all of which are non-GAAP measures which may be used periodically by management when discussing our financial results with investors and analysts.

We define Adjusted EBITDA as net income before income taxes, net interest expense, depreciation and amortization 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. We define Adjusted Net EBITDA as Adjusted EBITDA less the portion attributable to noncontrolling interests. We define Net Debt to Trailing Twelve Month Adjusted Net EBITDA as Total Debt less cash and cash equivalents divided by the Trailing Twelve Month Adjusted Net EBITDA. Net Debt to Trailing Twelve Month Adjusted Net EBITDA is an annualized leverage ratio used by management to assess our ability to incur and service debt and fund capital expenditures.

Adjusted EBITDA and Adjusted Net EBITDA are used as supplemental financial measures 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 Net 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.

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 available 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, Adjusted Net EBITDA, Net Debt to Trailing Twelve Month Adjusted Net 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, Adjusted Net EBITDA, Net Debt to Trailing Twelve Month Adjusted Net EBITDA, Distributable Cash Flow and Distribution Coverage Ratio is net income, and net debt to net income and net income to distributions as ratios. Adjusted EBITDA, Adjusted Net EBITDA, Net Debt to Trailing Twelve Month Adjusted Net EBITDA, Distributable Cash Flow and Distribution Coverage Ratio should not be considered alternatives to net income or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA, Adjusted Net EBITDA, Net Debt to Trailing Twelve Month Adjusted Net EBITDA, Distributable Cash Flow and Distribution Coverage Ratio exclude some, but not all, items that affect net income, and these measures may vary from those of other companies. As a result, Adjusted EBITDA, Adjusted Net EBITDA, Net Debt to Trailing Twelve Month Adjusted Net EBITDA, Distributable Cash Flow and Distribution Coverage Ratio as presented herein may not be comparable to similarly titled measures of other companies.

Noble Midstream does not provide guidance on the reconciling items between forecasted Adjusted Net EBITDA, Distributable Cash Flow, Net Debt to Trailing Twelve Month Adjusted Net EBITDA or Distribution Coverage Ratio and their most directly comparable GAAP reporting measures due to the uncertainty regarding timing and estimates of these items. Noble Midstream provides a range of such information to allow for the variability in timing and uncertainty of estimates of such reconciling items. Therefore, Noble Midstream cannot reconcile forecasted Adjusted Net EBITDA, Distributable Cash Flow, Net Debt to Trailing Twelve Month Adjusted Net EBITDA or Distribution Coverage Ratio without unreasonable effort.

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 September 30,

 

Trailing Twelve

 

2020

 

2019

 

Months

Reconciliation from Net Income (GAAP)

 

 

 

 

 

Net Income (GAAP)

$

38,736

 

$

70,519

 

 

$

103,474

Add:

 

 

 

 

 

Depreciation and Amortization

26,443

 

24,571

 

 

104,124

Interest Expense, Net of Amount Capitalized

6,437

 

3,952

 

 

24,661

Proportionate Share of Equity Method Investment EBITDA Adjustments

33,133

 

3,257

 

 

62,912

Goodwill Impairment

 

 

 

109,734

Other

364

 

656

 

 

12,871

Adjusted EBITDA (Non-GAAP)

105,113

 

102,955

 

 

417,776

Less:

 

 

 

 

 

Adjusted EBITDA Prior to Drop-Down and Simplification Transaction (1)

 

8,944

 

 

Adjusted EBITDA Subsequent to Drop-Down and Simplification Transaction

105,113

 

94,011

 

 

417,776

Less:

 

 

 

 

 

Adjusted EBITDA Attributable to Noncontrolling Interests (1)

9,002

 

34,507

 

 

30,225

Adjusted EBITDA Attributable to Noble Midstream Partners LP (Non-GAAP)

96,111

 

59,504

 

 

387,551

Add:

 

 

 

 

 

Distributions from Equity Method Investments Attributable to Noble Midstream Partners LP

6,624

 

1,711

 

 

 

Less:

 

 

 

 

 

Proportionate Share of Equity Method Investment EBITDA Attributable to Noble Midstream Partners LP

10,619

 

(3,518

)

 

 

Cash Interest Paid

6,195

 

8,662

 

 

 

Maintenance Capital Expenditures

7,128

 

5,789

 

 

 

Distributable Cash Flow of Noble Midstream Partners LP (Non-GAAP)

$

78,793

 

$

50,282

 

 

 

Distributions (Declared)

$

16,907

 

$

32,418

 

 

 

Distribution Coverage Ratio (Declared)

4.7x

 

1.6x

 

 

 

(1)

As a result of the Drop Down and Simplification Transaction in fourth quarter 2019, certain proforma adjustments have been factored to reflect the Adjusted EBITDA for the acquired assets for the full fourth quarter 2019. Furthermore, Adjusted EBITDA Attributable to Noncontrolling Interests has been recast for the quarter ended December 31, 2019 to only reflect Adjusted EBITDA attributable to the interests in Black Diamond Gathering retained by Greenfield Midstream.

Schedule 4 (Continued)

Noble Midstream Partners LP

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

 

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 September 30,

 

Trailing Twelve

 

2020

 

2019

 

Months

Reconciliation from Net Cash Provided by Operating Activities (GAAP)

 

 

 

 

 

Net Cash Provided by Operating Activities (GAAP)

$

71,959

 

 

$

101,617

 

 

$

386,516

 

Add:

 

 

 

 

 

Interest Expense, Net of Amount Capitalized

6,437

 

 

3,952

 

 

24,661

 

Changes in Operating Assets and Liabilities

21,965

 

 

2,655

 

 

8,066

 

Equity Method Investment EBITDA Adjustments

4,874

 

 

(5,229

)

 

(9,501

)

Other

(122

)

 

(40

)

 

8,034

 

Adjusted EBITDA (Non-GAAP)

105,113

 

 

102,955

 

 

417,776

 

Less:

 

 

 

 

 

Adjusted EBITDA Prior to Drop-Down and Simplification Transaction (1)

 

 

8,944

 

 

 

Adjusted EBITDA Subsequent to Drop-Down and Simplification Transaction

105,113

 

 

94,011

 

 

417,776

 

Less:

 

 

 

 

 

Adjusted EBITDA Attributable to Noncontrolling Interests (1)

9,002

 

 

34,507

 

 

30,225

 

Adjusted EBITDA Attributable to Noble Midstream Partners LP (Non-GAAP)

96,111

 

 

59,504

 

 

387,551

 

Add:

 

 

 

 

 

Distributions from Equity Method Investments Attributable to Noble Midstream Partners LP

6,624

 

 

1,711

 

 

 

Less:

 

 

 

 

 

Proportionate Share of Equity Method Investment EBITDA Attributable to Noble Midstream Partners LP

10,619

 

 

(3,518

)

 

 

Cash Interest Paid

6,195

 

 

8,662

 

 

 

Maintenance Capital Expenditures

7,128

 

 

5,789

 

 

 

Distributable Cash Flow of Noble Midstream Partners LP (Non-GAAP)

$

78,793

 

 

$

50,282

 

 

 

Distributions (Declared)

$

16,907

 

 

$

32,418

 

 

 

Distribution Coverage Ratio (Declared)

4.7x

 

 

1.6x

 

 

 

(1)

As a result of the Drop Down and Simplification Transaction in fourth quarter 2019, certain proforma adjustments have been factored to reflect the Adjusted EBITDA for the acquired assets for the full fourth quarter 2019. Furthermore, Adjusted EBITDA Attributable to Noncontrolling Interests has been recast for the quarter ended December 31, 2019 to only reflect Adjusted EBITDA attributable to the interests in Black Diamond Gathering retained by Greenfield Midstream.

Schedule 4 (Continued)

Noble Midstream Partners LP

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

 

Calculation of Net Debt to Trailing Twelve Months Adjusted Net EBITDA

(in thousands, unaudited)

 

 

September 30, 2020

Revolving Credit Facility, due March 9, 2023

745,000

Term Loan Credit Facility, due July 31, 2021

500,000

Term Loan Credit Facility, due August 23, 2022

400,000

Finance Lease Obligation

2,048

Total Debt

1,647,048

Less: Cash and Cash Equivalents

17,403

Net Debt

1,629,645

 

 

Trailing Twelve Months Adjusted Net EBITDA

387,551

 

 

Net Debt to Trailing Twelve Months Adjusted Net EBITDA

4.2x

Schedule 4 (Continued)

Noble Midstream Partners LP

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

 

Reconciliation of 2020 GAAP Guidance to 2020 Non-GAAP Guidance

(in millions, unaudited)

 

 

2020 Guidance

 

Full Year

Reconciliation from Net Income (GAAP) to Distributable Cash Flow (Non-GAAP)

 

Net Income (GAAP)

$

125

Add:

 

Depreciation and Amortization

105

Interest Expense, Net of Amount Capitalized

30

Proportionate Share of Equity Method Investment EBITDA Adjustments

50

Goodwill Impairment

110

Other

3

Adjusted EBITDA (Non-GAAP)

423

Adjusted EBITDA Attributable to Noncontrolling Interests

33

Adjusted EBITDA Attributable to Noble Midstream Partners LP

390

Plus:

 

Distributions from Equity Method Investments

25

Less:

 

Proportionate Share of Equity Method Investment Adjusted EBITDA

40

Maintenance Capital Expenditures and Cash Interest Paid

75

Distributable Cash Flow of Noble Midstream Partners LP

$

300

Distribution Coverage Ratio

>4.5x

 

Park Carrere
Investor Relations
(281) 872-3208
park.carrere@nblmidstream.com

Source: Noble Midstream Partners LP

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