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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
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
https://cdn.kscope.io/d075a40a5a660532a95a3127fdc671f0-nblxupdatedlogoa66.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’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
 
The Nasdaq Stock Market LLC
 
 
 
 
(Nasdaq Global Select Market)
Securities registered pursuant to section 12(g) of the Act: None 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 
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, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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 Act). Yes No
The aggregate market value of the registrant’s Common Units held by non-affiliates of the registrant as of June 30, 2019, the last business day of the registrant’s most recently completed second fiscal quarter was approximately $718.8 million.
The registrant had 90,239,656 Common Units as of January 31, 2020.
DOCUMENTS INCORPORATED BY REFERENCE: None




Table of Contents
 
PART I
Items 1. and 2.
Item 1A.
Item 1B.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.






Disclosure Regarding Forward-Looking Statements
This Annual Report on Form 10-K (“Form 10-K” or “Annual Report”) 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 words such as “anticipate,” “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.
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 Noble Midstream Partners LP’s 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. While you should not consider the following list to be a complete statement of all potential risks and uncertainties, some of the factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
the ability of our customers to meet their drilling and development plans;
changes in general economic conditions;
competitive conditions in our industry;
actions taken by third-party operators, gatherers, processors and transporters;
the demand for crude oil gathering, natural gas gathering and processing, produced water gathering, 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;
competition from the same and alternative energy sources;
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 gathering and processing 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-K. 
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, including the factors described under Item 1A. Risk Factors, below, 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 and other sections of this report, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.
All references to “Noble Midstream Partners,” “NBLX,” “the Partnership,” “us,” “our,” “we” or similar expressions, refer to Noble Midstream Partners LP, including its consolidated subsidiaries. References to “Noble” may refer to Noble Energy Inc. and/or its consolidated subsidiaries, depending on the context. Our consolidated financial statements have been retrospectively recast for all periods presented to include the historical results of NBL Midstream Holdings (“NBL Holdings”), as the acquisition of NBL Holdings by the Partnership in the Drop-Down and Simplification Transaction (as defined below) represents a transaction between entities under common control and resulted in a change in reporting entity. The selected financial data covering the periods prior to the aforementioned transactions may not necessarily be indicative of the actual results of operations had these entities been operated together during those periods.
For a summary of commonly used industry terms and abbreviations used in this report, see the Glossary.

2


PART I

Items 1. and 2. Business and Properties
Overview
We are a growth-oriented Delaware master limited partnership formed in December 2014 by our Parent, Noble, to own, operate, develop and acquire a wide range of domestic midstream infrastructure assets. We currently provide crude oil, natural gas, and water-related midstream services through long-term, fixed-fee contracts, as well as purchase crude oil from producers and sell crude oil to customers at various delivery points. Our business activities are conducted through four reportable segments: Gathering Systems (primarily includes crude oil gathering, natural gas gathering and processing, produced water gathering and crude oil sales), Fresh Water Delivery, Investments in Midstream Entities and Corporate. We often refer to the services of our Gathering Systems and Fresh Water Delivery reportable segments collectively as our midstream services.
Our current areas of focus are in the Denver-Julesburg Basin in Colorado (“DJ Basin”) and the Southern Delaware Basin position of the Permian Basin (“Delaware Basin”) in Texas. The locations of our current areas of focus are shown in the map below:
https://cdn.kscope.io/d075a40a5a660532a95a3127fdc671f0-areaoffocusmapa19.jpg
We are Noble’s primary vehicle for midstream operations in the onshore United States. We have acreage dedications spanning approximately 545,000 acres in the DJ Basin (with over 230,000 dedicated acres from Noble and the remaining dedicated acres from various third parties) and approximately 118,000 acres in the Delaware Basin (with 92,000 dedicated acres from Noble and the remaining from various third parties). In addition to our existing operations and acreage dedications, Noble has granted us rights of first refusal (“ROFRs”) on certain onshore United States acreage that may be acquired in the future.
We believe we are well positioned to (i) develop our infrastructure in a manner and on a timeline that will allow us to handle increasing volumes from our customers’ drilling programs on our dedicated properties and (ii) attract new customers in the DJ Basin, Delaware Basin and future areas of operation as we continue to expand our existing, build out new, or acquire midstream systems and facilities.

3


2019 Developments
Drop-Down and Simplification Transaction
On 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 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.” Our financial information has been recast to include the historical results of NBL Holdings for all periods presented. See Item 8. Financial Statements and Supplementary Data – Note 2. Summary of Significant Accounting Policies and Basis of Presentation for a detailed discussion. 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.
In the Drop-Down and Simplification Transaction, we acquired essentially all of Noble’s remaining midstream assets. As a result, we have enhanced our operational synergies and increased economic alignment in Noble’s growth basins, which lowers our cost of capital and supports strategic long-term growth and value creation.
The midstream assets we acquired include the Keota and Lilli gas processing plants and associated gas gathering pipelines in the East Pony IDP area of the DJ Basin (the “East Pony IDP”). These assets mark the Partnership’s first entry into DJ Basin gas processing. With the need for incremental gas processing capacity in the DJ Basin, the Keota and Lilli plants provide an additional opportunity for us to grow our third-party business. Additionally, we acquired the legacy Clayton Williams pipeline system, which includes more than 300 miles of oil, gas, and produced water gathering pipelines. These pipelines service Noble’s central and southern Delaware Basin positions and will provide additional opportunities to drive capital efficiency through new well connections and secure third-party dedications.
2019 Private Placement
On November 14, 2019, we entered into a Common Unit Purchase Agreement with certain institutional investors to sell 12,077,295 Common Units in a private placement for gross proceeds of approximately $250 million (the “2019 Private Placement”). Net proceeds totaled approximately $242.9 million, after deducting offering expenses of approximately $7.1 million. The 2019 Private Placement closed on November 21, 2019. Proceeds from the 2019 Private Placement were utilized to fund a portion of the cash consideration for the Drop-Down and Simplification Transaction.
Investment Activity
During 2019, we significantly expanded our strategic relationships and investments in the long-haul pipeline business.
On January 31, 2019, we exercised and closed our option with EPIC Midstream Holdings, LP (“EPIC”) to acquire a 15% interest in EPIC Y-Grade, LP (“EPIC Y-Grade”). During 2019, we made capital contributions to EPIC Y-Grade of $169.1 million.
On January 31, 2019, we exercised our option to acquire an interest in EPIC Crude Holdings, LP (“EPIC Crude”). On March 8, 2019, we closed our option with EPIC to acquire the 30% interest in EPIC Crude. During 2019, we made capital contributions to EPIC Crude of $351.2 million.
On February 7, 2019, we executed definitive agreements with Salt Creek Midstream LLC (“Salt Creek”) and completed the formation of Delaware Crossing LLC (“Delaware Crossing”). We own a 50% interest in Delaware Crossing. During 2019, we made capital contributions to Delaware Crossing of $70.3 million.
Saddlehorn Transportation Commitment and Investment Option
Our affiliate, Black Diamond Gathering LLC (“Black Diamond”) has 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 (“Western Midstream”). 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 with Saddlehorn. Black Diamond received an option to acquire an ownership interest of up to 20% in Saddlehorn. Black Diamond’s investment option was scheduled to expire in April 2020.

4


In February 2020, Black Diamond exercised its option, effective February 1, 2020, to acquire a 20% ownership interest in Saddlehorn for $155 million, $84 million net to the Partnership. After Black Diamond’s purchase, with Magellan and Plains each selling a 10% interest, 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.


5


Organizational Structure
The following diagram depicts our organizational structure as of December 31, 2019.

https://cdn.kscope.io/d075a40a5a660532a95a3127fdc671f0-orgstructure12312019.jpg


6


Our current areas of operation are in the DJ Basin and Delaware Basin. The following table provides a summary of our development areas within each basin, along with our dedicated services and customers as of December 31, 2019.
Company
Areas Served
NBLX Dedicated Service
Customers
Colorado River LLC (1)

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

Noble
San Juan River LLC (1)
East Pony IDP (DJ Basin)
Water Services
Noble
Green River DevCo LLC (1)
Mustang IDP (DJ Basin)
Crude Oil Gathering
Natural Gas Gathering
Water Services
Noble
Laramie River LLC (1)
Greeley Crescent IDP (DJ Basin)
Crude Oil Gathering
Water Services
Noble and Unaffiliated Third Party
Black Diamond Dedication Area (DJ Basin)
Crude Oil Gathering
Crude Oil Sales
Natural Gas Gathering
Noble and Unaffiliated Third Parties
Blanco River LLC (1)
Delaware Basin
Crude Oil Gathering
Natural Gas Gathering
Water Services
Noble and Unaffiliated Third Parties
Gunnison River DevCo LP
Bronco IDP (DJ Basin) (2)
Crude Oil Gathering
Water Services
Noble
Trinity River DevCo LLC
Delaware Basin
Natural Gas Compression
Crude Oil Transmission
Noble and Unaffiliated Third Parties (3)
Dos Rios DevCo LLC
Delaware Basin
Crude Oil Transmission
Y-Grade Transmission
Noble and Unaffiliated Third Parties (3)
Noble Midstream Holdings LLC
East Pony IDP (DJ Basin)
Natural Gas Gathering
Natural Gas Processing
Noble and Unaffiliated Third Parties
Delaware Basin
Crude Oil Gathering
Natural Gas Gathering
Water Services
Noble and Unaffiliated Third Parties
(1) 
On December 31, 2019, the general partner and limited partnership of each of the above companies was merged into a limited liability company (“LLC”).
(2) 
We currently have no midstream infrastructure assets in the Bronco IDP. We have dedications for any of Noble’s future production in this area.
(3) 
The unaffiliated third-party customers are served though investments in which we exert significant influence.
Our Relationship with Noble
One of our principal strengths is our relationship with Noble. Given Noble’s significant ownership interest in us and its intent to use us as its primary domestic midstream service provider in areas that have not previously been dedicated to other ventures, we believe that Noble will be incentivized to promote and support the successful execution of our business strategies; however, we can provide no assurances that we will benefit from our relationship with Noble. While our relationship with Noble is a significant strength, it is also a source of potential risks and conflicts. Noble accounts for a substantial portion of our revenues and the loss of Noble as a customer would have a material adverse effect on us. See Item 1A. Risk Factors.


7


Areas of Operation
The following diagram illustrates our infrastructure in the DJ Basin as of December 31, 2019:
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8


The following diagram illustrates our infrastructure in the Delaware Basin as of December 31, 2019:
https://cdn.kscope.io/d075a40a5a660532a95a3127fdc671f0-delawarebasina01.jpg

9


Reportable Segments
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. We are organized into the following reportable segments: Gathering Systems (primarily includes crude oil gathering, natural gas gathering and processing, produced water gathering and crude oil sales), Fresh Water Delivery, Investments in Midstream Entities and Corporate. We often refer to services of our Gathering Systems and Fresh Water Delivery segments collectively as our midstream services. The Investments in Midstream Entities segment includes our investments in Advantage Pipeline, L.L.C. (“Advantage”), Delaware Crossing, EPIC Y-Grade, EPIC Crude and White Cliffs Pipeline L.L.C. (“White Cliffs”). The Corporate segment includes all general Partnership activity not attributable to our operating subsidiaries. See Item 8. Financial Statements and Supplementary Data – Note 10. Segment Information.
Gathering Systems
Crude Oil Gathering
Our crude oil gathering system in the Wells Ranch IDP area of the DJ Basin (the “Wells Ranch IDP”) provides approximately 83 miles of shared crude oil and produced water gathering pipelines. Our crude oil gathering assets also include 96,000 Bbls of storage capacity at the Wells Ranch central gathering facility (“CGF”) where we are able to recover gas vapors from crude oil and deliver this natural gas to Noble for delivery to downstream third parties.
In the East Pony IDP, we gather crude oil meeting pipeline specifications and deliver it through approximately 34 miles of pipeline directly into the northern extension of the Wattenberg Oil Trunkline and the Northeast Colorado Lateral of the Pony Express Pipeline. Crude oil gathering of production from the East Pony IDP area is subject to FERC jurisdiction. See Items 1. and 2. Business and Properties - Regulations.
To service the Mustang IDP, we gather crude oil meeting pipeline specifications and deliver it through approximately 17 miles of pipeline into the Black Diamond Milton Terminal.
To service the Greeley Crescent IDP, we gather crude oil meeting pipeline specifications for an unaffiliated third party. We deliver the gathered crude oil through approximately 45 miles of pipeline to the Grand Mesa Pipeline via the Black Diamond Lucerne Terminal and directly to the White Cliffs pipeline system (the “White Cliffs Pipeline”).
To service the Black Diamond dedication area, we gather crude oil meeting pipeline specifications and deliver it through approximately 252 miles of pipeline to various delivery points. The Black Diamond system provides access to long-haul crude oil outlets including Grand Mesa Pipeline, Saddlehorn Pipeline, White Cliffs Pipeline and Pony Express Pipeline.
Our crude oil gathering systems in the Delaware Basin include approximately 126 miles of pipeline. We gather off-spec crude oil from well pad facilities, which is delivered to various CGFs. We have five operational CGFs in the Delaware Basin. The Billy Miner I and Jesse James CGFs were completed during 2017 and the Coronado, Collier and Billy Miner Train II CGFs were completed during 2018. The CGFs stabilize the crude oil to meet pipeline specifications and deliver to downstream pipelines leaving the Delaware Basin.
As part of the Drop-Down and Simplification Transaction, we acquired an approximately 127-mile crude oil gathering system servicing production from acreage in the Delaware Basin. This crude oil gathering system gathers crude oil meeting pipeline specifications from well pad facilities and terminates at various third-party pipeline connection points.
The table below sets forth our crude oil gathering throughput for the dates indicated.
 
Average Daily Throughput (Bbl/d)
 
Year Ended December 31,
 
2019
 
2018
 
2017
DJ Basin
182,121

 
143,095

 
61,864

Delaware Basin
49,842

 
34,032

 
7,385

Crude Oil Treating
We also operate a crude oil treating facility that services each of the IDP areas and additional wells outside of these areas. Crude oil is delivered to the facility by truck. If treatment is required, the crude oil is directed to, and received by, the treating facility to process the crude oil to meet pipeline specification. For access to the services provided at the crude oil treating facility, Noble pays monthly fees based on the number of producing vertical and horizontal wells located in the DJ Basin that are not connected to our gathering system, whether such wells fall within or outside of an IDP area.

10


The below sets forth the number of producing vertical and horizontal wells in the DJ Basin that are not connected to our gathering system and are subject to a monthly fee as of the dates indicated.
 
Number of Wells Subject to Monthly Fee
 
As of December 31,
 
2019
 
2018
 
2017
Producing Vertical Wells
1,001

 
1,257

 
1,753

Producing Horizontal Wells
339

 
406

 
471

Natural Gas Gathering
Our natural gas infrastructure assets in the Wells Ranch IDP consist of the Wells Ranch CGF and an approximately 54-mile natural gas pipeline system. This natural gas gathering system collects natural gas from separator facilities located at or near the wellhead and delivers the natural gas to the Wells Ranch CGF or other delivery points within the Wells Ranch IDP. We deliver the natural gas for further processing by third parties. Our Wells Ranch CGF also provides condensate separation and flash gas recovery. Condensate recovered from the natural gas that is gathered to the Wells Ranch CGF is stored on location and gas that is flashed from the crude oil is recovered, compressed and redelivered to downstream third parties with the gathered natural gas volumes.
Our natural gas infrastructure in the Mustang IDP consists of an approximately 15-mile natural gas pipeline system. This natural gas gathering system collects natural gas from separator facilities located at or near the wellhead and delivers the natural gas to delivery points within the Mustang IDP. The natural gas is then processed by third parties.
As part of the Drop-Down and Simplification Transaction, we acquired gas infrastructure in the East Pony IDP which consists of an approximately 234-mile natural gas pipeline system. This natural gas gathering system collects natural gas from the wellhead and delivers it to our Lilli and Keota gas processing plants or other third-party processing facilities.
Our natural gas infrastructure assets in the Delaware Basin consist of five CGFs as well as an approximately 104-mile natural gas pipeline system servicing production from the Delaware Basin. This natural gas gathering system collects natural gas from the wellhead from a high pressure separator and sends it to various CGFs. The CGFs dehydrate the natural gas, compress it, and send it downstream for processing.
As part of the Drop-Down and Simplification Transaction, we acquired an approximately 112-mile natural gas pipeline system servicing production from the acreage in the Delaware Basin. This natural gas gathering system collects natural gas from the wellhead and terminates at various third-party pipeline connection points.
The table below sets forth our natural gas gathering throughput for the dates indicated.
 
Average Daily Throughput (MMBtu/d)
 
Year Ended December 31,
 
2019
 
2018
 
2017
DJ Basin
476,605

 
308,929

 
228,768

Delaware Basin
155,155

 
78,875

 
16,172

Natural Gas Processing
As part of the Drop-Down and Simplification Transaction, we acquired natural gas processing infrastructure in the DJ Basin which includes the Lilli and Keota gas processing plants connected to our gas gathering pipelines. The Lilli natural gas processing plant has an 18 MMcf/d capacity with a cryo unit and gas fired compression. The Keota natural gas processing plant has a 30 MMcf/d capacity, expandable to 45 MMcf/d with a cryo unit, truck load-out for drip condensate and electricity driven compression. The processing plants compress the natural gas, remove contaminants and separate the natural gas into individual natural gas liquids (“NGL”) components. The natural gas and NGL components are then transferred to third-party pipelines.
The table below sets forth our natural gas processing throughput for the dates indicated.
 
Average Daily Throughput (MMBtu/d)
 
Year Ended December 31,
 
2019
 
2018
 
2017
DJ Basin
50,039

 
61,766

 
49,531


11


Produced Water Gathering
Our produced water gathering system in the Wells Ranch IDP gathers and processes liquids produced from operations and consists of a combination of separation and storage facilities, permanent pipelines, as well as pumps to transport produced water to disposal facilities. We operate an approximately 83-mile gathering pipeline system (which is a shared crude oil and produced water gathering pipeline) servicing the Wells Ranch IDP. At the Wells Ranch CGF, the incoming crude oil and produced water liquid stream is separated, stored, and treated before the produced water is delivered to a third-party pipeline for disposal.
Our produced water gathering system in the Mustang IDP gathers liquids produced from operations and consists of a combination of pumps and permanent pipelines to transport produced water to third-party disposal facilities. We operate an approximately 34-mile gathering pipeline system servicing the Mustang IDP.
Our produced water gathering system in the Greeley Crescent IDP gathers liquids produced from operations and consists of a combination of pumps and permanent pipelines to transport produced water to third-party disposal facilities. We operate an approximately 31-mile gathering pipeline system servicing the Greeley Crescent IDP.
Our produced water gathering system in the Delaware Basin gathers and processes liquids produced from operations and consists of stabilization facilities, and permanent pipelines, as well as pumps to transport produced water to third-party disposal facilities. We operate an approximately 118-mile gathering pipeline system servicing the Delaware Basin. At our CGFs, the incoming produced water is skimmed and pumped downstream to disposal wells.
As part of the Drop-Down and Simplification Transaction, we acquired an approximately 120-mile produced water gathering system servicing production from acreage in the Delaware Basin. This system gathers produced water to transport to third-party disposal locations.
We enter into and manage contracts with third-party providers for certain produced water services that we do not perform ourselves.
The table below sets forth our produced water gathering throughput for the dates indicated.
 
Average Daily Throughput (Bbl/d)
 
Year Ended December 31,
 
2019
 
2018
 
2017
DJ Basin
39,629

 
29,903

 
16,435

Delaware Basin
148,886

 
91,312

 
20,930

Fresh Water Delivery
Our fresh water services include distribution and storage services that are integral to our customers’ drilling and completion operations. Our fresh water systems in the DJ Basin contain an approximately 70-mile fresh water distribution system made up of buried pipelines, nine miles of which service the East Pony IDP, 22 miles of which service the Wells Ranch IDP, 12.5 miles which service the Mustang IDP, and 26 miles of which serve the Greeley Crescent IDP. In addition, our fresh water systems include fresh water storage facilities in the Wells Ranch IDP, East Pony IDP, and Mustang IDP, as well as temporary pipelines and pumping stations to transport fresh water throughout the pipeline networks. These systems are designed to deliver water on demand to hydraulic fracturing operations and reduce the costs of transporting water long distances by reducing or eliminating most trucking costs. The fresh water systems provide storage capacity that segregates raw fresh water from produced water that has been treated.
We do not own or hold title to the water nor do we own or operate fresh water sources, but instead our services are focused on the storage and distribution of the fresh water delivered to us by our customers.
The table below sets forth our fresh water delivery services throughput for the dates indicated.
 
Average Daily Throughput (Bbl/d)
 
Year Ended December 31,
 
2019
 
2018
 
2017
DJ Basin
164,524

 
175,754

 
155,990


12


Investments in Midstream Entities
Our Investments in Midstream Entities reportable segment includes our investments in Advantage, Delaware Crossing, EPIC Y-Grade, EPIC Crude and White Cliffs.
Advantage
We own a 50% interest in Advantage. We serve as the operator of the Advantage system, which includes a 70-mile crude oil pipeline in the Southern Delaware Basin from Reeves County, Texas to Crane County, Texas, with a capacity of 200 MBbl/d and 490,000 barrels of storage capacity.
Delaware Crossing
Delaware Crossing 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.
EPIC Crude
EPIC Crude is constructing an approximately 700-mile pipeline with a capacity of 600 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 (“FERC”) on April 12, 2019. Construction on the project is anticipated to be complete in the first quarter of 2020.
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. Interim crude services commenced during the third quarter of 2019.
White Cliffs
We own a 3.33% interest in White Cliffs (the “White Cliffs Interest”). The White Cliffs Pipeline consists of two 527-mile pipelines, one for crude oil transport and one that is currently being converted to NGL service, that extend from the DJ Basin to Cushing, Oklahoma, with a capacity of approximately 215,000 Bbl/d.
Corporate
Our Corporate segment includes all general Partnership activity and expenses not attributable to our operating subsidiaries. This includes primarily expenses related to debt, such as interest and other debt-related costs, legal and financial advisory expenses and general and administrative expenses, including the annual general and administrative fee we pay to Noble for certain administrative and operational support services provided to us.
Regulations
The midstream services we provide are subject to regulations that may affect certain aspects of our business and the market for our services.
Colorado Oil and Gas Regulation
For some time, initiatives have been underway in the State of Colorado to limit or ban crude oil and natural gas exploration, development or operations. During first quarter 2019, Senate Bill 19-181 (“SB 181”) was passed by the State Legislature. On April 16, 2019, 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 (“COGCC”) to prioritize public health and environmental concerns in its decisions, instructing the COGCC 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 COGCC publishes new rules in keeping with SB 181. Additionally, certain groups have submitted new ballot proposals for the 2020 election year, including proposals for increased drilling setbacks and increased bonding requirements.
Nevertheless, at this time, we are not aware of any significant changes to Noble’s or other third-party customers’ development plans. 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

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decreased demand for our services, which could have a material adverse effect on our cash flows, results of operations, financial condition, and liquidity.
Safety and Maintenance Regulation
We are subject to regulation by the United States Department of Transportation (“DOT”) under multiple pipeline safety laws, including the Hazardous Liquids Pipeline Safety Act of 1979 (“HLPSA”), the Natural Gas Pipeline Safety Act of 1968 (“NGPSA”) and comparable state statutes. These regulations include potential fines and penalties for violations.
The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, also known as the Pipeline Safety and Job Creation Act, enacted in 2012, amended the HLPSA and NGPSA and increased safety regulation. This legislation establishes additional safety requirements for newly constructed pipelines, and requires studies of certain safety issues that could result in the adoption of new regulatory requirements for existing pipelines, including the expansion of integrity management, use of automatic and remote-controlled shut-off valves, leak detection systems, sufficiency of existing regulation of gathering pipelines, use of excess flow valves, verification of maximum allowable operating pressure, incident notification, and other pipeline-safety related requirements. The Pipeline and Hazardous Materials Safety Administration (“PHMSA”) has undertaken rulemaking to address many areas of this legislation.
For example, in October 2019, PHMSA published three final rules that create or expand reporting, inspection, maintenance, and other pipeline safety obligations. We are in the process of assessing the impact of these rules on our future costs of operations and revenues from operations. PHMSA is working on two additional rules related to gas pipeline safety that are expected to modify pipeline repair criteria and extend regulatory safety requirements to certain gathering lines in rural areas. These additional rulemakings are expected to be effective by mid-2020. The adoption of these or other regulations requiring more comprehensive or stringent safety standards could require us to install new or modified safety controls, pursue additional capital projects, or conduct maintenance programs on an accelerated basis, any or all of which tasks could result in our incurring increased operating costs that could have a material adverse effect on our results of operations or financial position.
States are largely preempted by federal law from regulating pipeline safety but may assume responsibility for enforcing intrastate pipeline regulations at least as stringent as the federal standards. The Colorado Public Utilities Commission is the agency vested with intrastate natural gas pipeline regulatory and enforcement authority in Colorado. The Colorado Public Utilities Commission’s regulations adopt by reference the minimum federal safety standards for the transportation of natural gas. We do not anticipate any significant problems in complying with applicable federal and state laws and regulations in Colorado. Our natural gas gathering pipelines have ongoing inspection and compliance programs designed to keep the facilities in compliance with pipeline safety and pollution control requirements.
In addition, we are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”), and comparable state statutes, whose purpose is to protect the health and safety of workers, both generally and within the pipeline industry. Moreover, the OSHA hazard communication standard, the Environmental Protection Agency (“EPA”) community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens. We and the entities in which we own an interest are also subject to OSHA process safety management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals. Also, the Department of Homeland Security and other agencies such as the EPA continue to develop regulations concerning the security of industrial facilities, including crude oil and natural gas facilities. We are subject to a number of requirements and must prepare federal response plans to comply. We must also prepare risk management plans under the regulations promulgated by the EPA to implement the requirements under the Clean Air Act (“CAA”) to prevent the accidental release of extremely hazardous substances. We have an internal program of inspection designed to monitor and enforce compliance with safeguard and security requirements.
FERC and State Regulation of Natural Gas and Crude Oil Pipelines
The FERC’s regulation of crude oil and natural gas pipeline transportation services and natural gas sales in interstate commerce affects certain aspects of our business and the market for our products and services.
Natural Gas Gathering Pipeline Regulation
Section 1(b) of the Natural Gas Act of 1938 (“NGA”) exempts natural gas gathering facilities from the jurisdiction of the FERC under the NGA. We believe that our natural gas gathering facilities meet the traditional tests the FERC has used to establish a pipeline’s status as a gathering pipeline and therefore our natural gas gathering facilities should not be subject to FERC jurisdiction. However, the distinction between FERC-regulated transmission services and federally unregulated gathering services has been the subject of frequent litigation and varying interpretations and the FERC determines whether facilities are gathering facilities on a case by case basis, so the classification and regulation of our gathering facilities may be subject to change based on future determinations by the FERC, the courts, or Congress. If the FERC were to determine that some or all of our gathering facilities or the services provided by us are not exempt from FERC regulation, the rates for, and

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terms and conditions of, services provided by such facilities would be subject to regulation by the FERC, which could in turn decrease revenue, increase operating costs, and depending upon the facility in question, adversely affect our results of operations and cash flows.
The Energy Policy Act of 2005 (“EPAct 2005”) amended the NGA to add an anti-market manipulation provision. Pursuant to the FERC’s rules promulgated under EPAct 2005, it is unlawful for any entity, directly or indirectly, in connection with the purchase or sale of natural gas subject to the jurisdiction of the FERC, or the purchase or sale of transportation services subject to FERC jurisdiction: (1) to use or employ any device, scheme or artifice to defraud; (2) to make any untrue statement of material fact or omit a material fact; or (3) to engage in any act or practice that operates as a fraud or deceit upon any person. EPAct 2005 provided the FERC with substantial enforcement authority, including the power to assess civil penalties of up to $1,291,894 per day per violation, to order disgorgement of profits and to recommend criminal penalties. Failure to comply with the NGA, EPAct 2005 and the other federal laws and regulations governing our business can result in the imposition of administrative, civil and criminal penalties.
Colorado regulation of gathering facilities includes various safety, environmental and ratable take requirements. Our purchasing, gathering and intrastate transportation operations are subject to Colorado’s ratable take statute, which provides that each person purchasing or taking for transportation crude oil or natural gas from any owner or producer shall purchase or take ratably, without discrimination in favor of any owner or producer over any other owner or producer in the same common source of supply offering to sell his crude oil or natural gas produced therefrom to such person. This statute has the effect of restricting our right as an owner of gathering facilities to decide with whom we contract to transport natural gas. The ratable take statute is in the enabling legislation of the COGCC.
The COGCC regulations require operators of natural gas gathering lines to file several forms and provide financial assurance, and they also impose certain requirements on gathering system waste. Moreover, the COGCC retains authority to regulate the installation, reclamation, operation, maintenance, and repair of gathering systems should the agency choose to do so. Should the COGCC exercise this authority, the consequences for the Partnership will depend upon the extent to which the authority is exercised. We cannot predict what effect, if any, the exercise of such authority might have on our operations.
Our natural gas gathering facilities are not subject to rate regulation or open access requirements by the Colorado Public Utilities Commission. However, the Colorado Public Utilities Commission requires us to register as pipeline operators, pay assessment and registration fees, undergo inspections and report annually on the miles of pipeline we operate.
Crude Oil Pipeline Regulation
Pipelines that transport crude oil in interstate commerce are subject to regulation by the FERC pursuant to the Interstate Commerce Act (“ICA”), the Energy Policy Act of 1992, and related rules and orders. The ICA requires, among other things, that tariff rates for common carrier crude oil pipelines be “just and reasonable” and not unduly discriminatory and that such rates and terms and conditions of service be filed with the FERC. The ICA permits interested persons to challenge proposed new or changed rates. The FERC is authorized to suspend the effectiveness of such rates for up to seven months. If the FERC finds that the new or changed rate is unlawful, it may require the carrier to pay refunds for the period that the rate was in effect. The FERC may also investigate, upon complaint or on its own motion, rates that are already in effect and may order a carrier to change its rates prospectively. Upon an appropriate showing, a shipper may obtain reparations for damages sustained for a period of up to two years prior to the filing of a complaint. The rates charged for crude oil pipeline services are generally increased annually based on a FERC-approved indexing methodology, which allows a pipeline to charge rates up to a prescribed ceiling that changes annually based on the year-to-year change in the Producer Price Index, or PPI. A rate increase within the indexed rate ceiling is presumed to be just and reasonable unless a protesting party can demonstrate that the rate increase is substantially in excess of the pipeline’s operating costs. During the five-year period commencing July 1, 2011 and ending June 30, 2016, pipelines have been permitted by the FERC to adjust these indexed rate ceilings annually by the PPI plus 2.65%. On December 17, 2015, the FERC issued an order establishing a new index level of PPI plus 1.23% for the five-year period commencing July 1, 2016. As an alternative to this indexing methodology, pipelines may also choose to support changes in their rates based on a cost-of-service methodology, by obtaining advance approval to charge “market-based rates,” or by charging “settlement rates” agreed to by all affected shippers.
Currently, we operate multiple pipeline gathering systems that transport crude oil in interstate commerce. We have been granted a temporary waiver of the tariff and reporting requirements for these crude oil gathering systems. Therefore, currently the FERC’s regulation of these crude oil gathering systems is limited to requiring us to maintain our books and records consistent with the FERC’s record keeping requirements. The classification and regulation of these crude oil gathering pipelines are subject to change based on changed circumstances on the pipeline or on future determinations by the FERC, federal courts, Congress or by regulatory commissions, courts or legislatures in the states in which our crude oil gathering pipelines are located. If it is determined that some or all of our crude oil gathering pipeline systems are subject to the FERC’s jurisdiction under the ICA, and are not otherwise exempt from any applicable regulatory requirements, such systems could be subject to

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cost-of-service rates and common carrier requirements that could adversely affect the results of our operations on and revenues associated with those systems.
In addition, we own interests in other crude oil gathering pipelines that do not provide interstate services and are not subject to regulation by the FERC. These pipelines regulated by the Railroad Commission of Texas (the “RRC”), and have common-carrier pipeline tariffs on file with the RRC. However, the distinction between FERC-regulated interstate pipeline transportation, on the one hand, and intrastate pipeline transportation, on the other hand, is a fact-based determination. The classification and regulation of these crude oil gathering pipelines are subject to change based on future determinations by the FERC, federal courts, Congress or by regulatory commissions, courts or legislatures in the states in which our crude oil gathering pipelines are located. We cannot provide assurance that the FERC will not in the future, either at the request of other entities or on its own initiative, determine that some or all of our gathering pipeline systems and the services we provide on those systems are within the FERC’s jurisdiction. If it was determined that some or all of our gathering pipeline systems are subject to the FERC’s jurisdiction under the ICA, and are not otherwise exempt from any applicable regulatory requirements, the imposition of possible cost-of-service rates and common carrier requirements on those systems could adversely affect the results of our operations on and revenue associated with those systems.
Other Crude Oil and Natural Gas Regulation
The State of Colorado is engaged in a number of initiatives that may impact our operations directly or indirectly. Noble has been an active industry participant in discussions with local governments in Colorado, civic entities, and environmental organizations on initiatives relating to oil and gas development in communities, which discussions can directly or indirectly affect public policy relating to midstream services. We continue to monitor proposed and new regulations and legislation in all our operating jurisdictions to assess the potential impact on our company.
Environmental Matters
General
Our gathering pipelines, crude oil treating facilities and produced water facilities are subject to certain federal, state and local laws and regulations governing the emission or discharge of materials into the environment or otherwise relating to the protection of the environment.
As an owner or operator of these facilities, we comply with these laws and regulations at the federal, state and local levels. These laws and regulations can restrict or impact our business activities in many ways, such as:
requiring the acquisition of permits to conduct regulated activities;
restricting the way we can handle or dispose of our materials or wastes;
limiting or prohibiting construction, expansion, modification and operational activities based on National Ambient Air Quality Standards (“NAAQS”) and in sensitive areas, such as wetlands, coastal regions or areas inhabited by endangered species;
requiring remedial action to mitigate pollution conditions caused by our operations or attributable to former operations;
enjoining, or compelling changes to, the operations of facilities deemed not to be in compliance with permits issued pursuant to such environmental laws and regulations;
requiring noise, lighting, visual impact, odor or dust mitigation, setbacks, landscaping, fencing and other measures; and
limiting or restricting water use.
Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements and the issuance of orders enjoining current and future operations. Certain environmental statutes impose strict joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed or otherwise released.
Climate Change and Air Quality Standards
Our operations are subject to the CAA and comparable state and local requirements. The CAA contains provisions that may result in the imposition of certain pollution control requirements with respect to air emissions from our operations. We may be required to incur certain capital expenditures for air pollution control equipment in connection with maintaining or obtaining pre-construction and operating permits and approvals addressing other air emission-related issues.
In the United States, no comprehensive climate change legislation has been implemented at the federal level. However, following the U.S. Supreme Court finding that greenhouse gas (“GHG”) emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, implement New Source Performance Standards directing the reduction of

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methane from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States. Following the change in presidential administrations, there have been attempts to modify certain of these regulations, and litigation is ongoing.
Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of GHG emissions. At the international level, there is a non-binding agreement, the United Nations-sponsored “Paris Agreement,” for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020, although the United States has announced its withdrawal from such agreement, effective November 4, 2020. The adoption and implementation of new or more stringent legislation or regulations could result in increased costs of compliance or costs of consuming, and thereby reduce demand for, oil and natural gas, which could reduce demand for our services and products.
Concern over the threat of climate change may also result in political action deleterious to our interests. For example, various pledges to curtail oil and gas operations have been made by candidates running for the Democratic nomination for President of the United States in 2020. Separately, increased attention to climate change risks has increased the possibility of claims brought by public and private entities against oil and gas companies in connection with their GHG emissions. While courts have generally declined to assign direct liability for climate change to large sources of GHG emissions, new claims for damages and increased government scrutiny, especially from state and local governments, will likely continue. Moreover, to the extent societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to the company’s causation of or contribution to the asserted damage, or to other mitigating factors.
There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate change may elect in the future to shift some or all of their investments into non-energy related sectors. Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies. Additionally, the lending practices of institutional lenders have been the subject of intensive lobbying efforts in recent years, oftentimes public in nature, by environmental activists, proponents of the international Paris Agreement, and foreign citizenry concerned about climate change not to provide funding for fossil fuel producers. Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities. One or more of these developments could have a material adverse effect on our business, financial condition and results of operation.
Hazardous Substances and Waste
Our operations are subject to environmental laws and regulations relating to the management and release of hazardous substances or solid wastes, including petroleum hydrocarbons. These laws generally regulate the generation, storage, treatment, transportation and disposal of solid and hazardous waste, and may impose strict, joint and several liability for the investigation and remediation of areas at a facility where hazardous substances may have been released or disposed. For instance, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the Superfund law, and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include current and prior owners or operators of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Under CERCLA, these persons may be subject to joint and several strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. Despite the “petroleum exclusion” of CERCLA Section 101(14) that currently encompasses crude oil and natural gas, we may nonetheless handle hazardous substances within the meaning of CERCLA, or similar state statutes, in the course of our ordinary operations and, as a result, may be jointly and severally liable under CERCLA for all or part of the costs required to clean up sites at which these hazardous substances have been released into the environment.
We also generate solid wastes, including hazardous wastes that are subject to the requirements of the Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes. While RCRA regulates both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. Certain petroleum production wastes are excluded from RCRA’s hazardous waste regulations. However, it is possible that these wastes, which could include wastes currently generated during our operations, will in the future be designated as hazardous wastes and therefore be subject to more rigorous and costly disposal requirements. Any such changes in the laws and regulations could have a material adverse effect on our maintenance capital expenditures and operating expenses.
We currently own or lease properties where petroleum hydrocarbons are being or have been handled for many years. Although we have utilized operating and disposal practices that were standard in the industry at the time, petroleum

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hydrocarbons or other wastes may have been disposed of or released on or under the properties owned or leased by us or on or under the other locations where these petroleum hydrocarbons and wastes have been taken for treatment or disposal. In addition, certain of these properties have been operated by third parties whose treatment and disposal or release of petroleum hydrocarbons or other wastes was not under our control. These properties and wastes disposed thereon may be subject to CERCLA, RCRA and analogous state laws. Under these laws, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater) or to perform remedial operations to prevent future contamination. We are not currently aware of any facts, events or conditions relating to the application of such requirements that could reasonably have a material impact on our operations or financial condition.
Water
The Federal Water Pollution Control Act of 1972, also referred to as the Clean Water Act (“CWA”), and analogous state laws impose restrictions and strict controls regarding the discharge of pollutants into navigable waters. Pursuant to the CWA and analogous state laws, permits must be obtained to discharge pollutants into state and federal waters. Provisions of the CWA require authorization from the U.S. Army Corps of Engineers (the “Corps”) prior to the placement of dredge or fill material into jurisdictional waters. On June 29, 2015, the EPA and the Corps published the final rule defining the scope of the EPA’s and Corps’ jurisdiction, known as the “Clean Water Rule.” Following the change in U.S. Presidential Administrations, there have been several attempts to modify or eliminate this rule. Most recently, in September 2019, the EPA and Corps rescinded the 2015 Clean Water Rule. Legal challenges have occurred for both the 2015 rule and the 2019 rescission. As a result, the scope of jurisdiction under the CWA is uncertain at this time. To the extent a rule expands the scope of the CWA’s jurisdiction, we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas.
The CWA also requires implementation of spill prevention, control and countermeasure plans, also referred to as “SPCC plans,” in connection with on-site storage of threshold quantities of crude oil. In some instances, we may also be required to develop a facility response plan that demonstrates our facility’s preparedness to respond to a worst-case crude oil discharge. The CWA imposes substantial potential civil and criminal penalties for non-compliance. The EPA has promulgated regulations that require us to have permits in order to discharge certain types of stormwater. The EPA recently issued a revised general stormwater permit for industrial activities that, among other things, enhances provisions related to threatened endangered species eligibility procedures. The EPA has entered into agreements with certain states in which we operate whereby the permits are issued and administered by the respective states. These permits may require us to monitor and sample the stormwater discharges. State laws for the control of water pollution also provide varying civil and criminal penalties and liabilities.
The Oil Pollution Act of 1990 (“OPA”) addresses prevention, containment and cleanup, and liability associated with crude oil pollution. OPA applies to vessels, offshore platforms, and onshore facilities, including terminals, pipelines, and transfer facilities. OPA subjects owners of such facilities to strict liability for containment and removal costs, natural resource damages, and certain other consequences of crude oil spills into jurisdictional waters. Any unpermitted release of petroleum or other pollutants from our operations could result in government penalties and civil liability under OPA.
Colorado Water Quality Control Act
In January 2017, we received a Notice of Violation/Cease and Desist Order (“NOV/CDO”), advising us of alleged violations of the Colorado Water Quality Control Act (“CWQCA”), and its implementing regulations as it relates to construction activities associated with oil and gas exploration and/or production within our Wells Ranch IDP located in Weld County, Colorado, or applicable permit (“Permit”).  The NOV/CDO further ordered us to cease and desist from all violations of the CWQCA, the regulations and the Permit and to undertake certain corrective actions. In October 2019, we resolved by Compliance Order on Consent (“COC”) with the Colorado Department of Public Health & Environment allegations of noncompliance with the CWQCA relating to the Permit. The COC required us to pay a penalty of $26,000 and to contribute $53,000 toward a State-managed supplemental environmental project. The resolution of this action did not have a material adverse effect on our financial position, results of operations or cash flows.
Hydraulic Fracturing
We do not conduct hydraulic fracturing operations, but substantially all of Noble’s crude oil and natural gas production on our dedicated acreage is developed from unconventional sources, such as shale, that require hydraulic fracturing as part of the completion process. The majority of our fresh water services business is related to the storage and transportation of water for use in hydraulic fracturing. Hydraulic fracturing is a well stimulation process that utilizes large volumes of water and sand combined with fracturing chemical additives that are pumped into a well at high pressure to crack open previously impenetrable rock to release hydrocarbons. Hydraulic fracturing is typically regulated by state oil and gas commissions and similar agencies. Some states and local governments, including those in which we operate, have adopted, and other states are considering adopting, regulations that could impose more stringent chemical disclosure or well construction requirements on hydraulic fracturing operations, or otherwise seek to ban some or all of these activities. For example, in Colorado, state ballot

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and other regulatory initiatives have been proposed from time to time to impose additional restrictions or bans on hydraulic fracturing or other facets of crude oil and natural gas exploration, production or related activities. Any new limitations or prohibitions on oil and gas exploration and production activities could result in decreased demand for our midstream services and have a material adverse effect on our cash flows, results of operations, financial condition, and liquidity. At the federal level, however, several agencies have asserted jurisdiction over certain aspects of the hydraulic fracturing process. For example, the EPA, has moved forward with various regulatory actions, including the issuance of new regulations requiring green completions for hydraulically fractured wells, and emission requirements for certain midstream equipment. Also, in June 2016, the EPA finalized rules which prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants. Certain environmental groups have also suggested that additional laws may be needed to more closely and uniformly regulate the hydraulic fracturing process. We cannot predict whether any such legislation will be enacted and if so, what its provisions would be. Additional levels of regulation and permits required through the adoption of new laws and regulations at the federal, state or local level could lead to delays, increased operating costs and process prohibitions that could reduce the volumes of crude oil and natural gas that move through our gathering systems and decrease demand for our water services, which in turn could materially adversely impact our revenues.
Title to Our Properties
Many of our real estate interests in land were acquired pursuant to easements, rights-of-way, permits, surface use agreements, joint use agreements, licenses and other grants or agreements from landowners, lessors, easement holders, governmental authorities, or other parties controlling the surface or subsurface estates of such land, or, collectively, Real Estate Agreements, that were issued to or entered into by Noble, one of its affiliates or one of its predecessors-in-interest and transferred to us in December of 2015. Since that time, we have been acquiring additional Real Estate Agreements in our own name or by transfer from Noble. The Real Estate Agreements and related interests that we have taken by assignment were acquired without any material challenge known to us relating to the title to the land upon which the assets are located, and we believe that we have satisfactory rights and interests to conduct our operations on such lands. We have no knowledge of any challenge to the underlying title of any material real estate interests held by us or to our title to any material real property agreements, and we believe that we have satisfactory title to all of our material real estate interests.
We hold various rights and interests to receive, deliver and handle water in connection with Noble’s production operations, or, collectively, Water Interests, that also were obtained by Noble or its predecessor in interest and transferred to us. Pursuant to these Water Interests, Noble retains title to the water. We are not aware of any challenges to any Water Interests or to the use of any water or water rights related to Water Interests. With respect to our third-party customer, we will not take title to the water that we handle and will only have the right to receive, deliver and handle such water.
Under our omnibus agreement, Noble will indemnify us for any failure to have certain real estate interests, Real Estate Agreements or Water Interests necessary to own and operate our assets in substantially the same manner that they were owned and operated prior to the closing of the initial public offering (“IPO”). Noble’s indemnification obligation will be limited to losses for which we notify Noble prior to the third anniversary of the closing of the IPO and will be subject to a $500,000 aggregate deductible before we are entitled to indemnification.
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. 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 weather may also impact or slow the ability of Noble and other customers to execute their drilling and development plans and increase operating expenses associated with repairs or anti-freezing operations.
Customers
For the year ended December 31, 2019, revenues from Noble and its affiliates comprised 81% and 59% of our midstream services revenues and total revenues, respectively. There were no individually significant revenues from a third-party in 2019.
For the year ended December 31, 2018, revenues from Noble and its affiliates comprised 81% and 61% of our midstream services revenues and total revenues, respectively. Revenues from a single third-party customer comprised 66% and 17% of our crude oil sales revenues and total revenues, respectively.
For the year ended December 31, 2017, revenues from Noble and its affiliates comprised 94% of both of our midstream services revenues and total revenues. There were no individually significant revenues from a third-party in 2017.

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Competition
As a result of our relationship with Noble and the long-term dedications to our midstream assets, we do not compete with other midstream companies to provide Noble with midstream services to its existing upstream assets in Weld County, Colorado, and we will not compete for Noble’s business as it continues to develop upstream production in Weld County, Colorado.
However, in the Delaware Basin, Noble is currently using third-party service providers for certain midstream services, and Noble will continue using the third-party service providers until the expiration or termination of certain pre-existing dedications to those third-party service providers. After the expiration of such dedications, we will not compete for Noble’s business in the Delaware Basin. However, we will face competition in providing services on the acreage that is subject to our ROFR rights because Noble is only required to dedicate such acreage to us if we are able to offer services to Noble on the same or better terms as the applicable third-party service provider.
As we continue to expand our midstream services, we will face a high level of competition, including major integrated crude oil and natural gas companies, interstate and intrastate pipelines, and companies that gather, compress, treat, process, transport, store or market natural gas. As we seek to continue to provide midstream services to additional third-party producers, we will also face a high level of competition. Competition is often the greatest in geographic areas experiencing robust drilling by producers and during periods of high commodity prices for crude oil, natural gas or NGLs.
Employees
The officers of our general partner, Noble Midstream GP LLC (“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. As of December 31, 2019, Noble employed approximately 240 people who provide direct support to our operations pursuant to the operational services and secondment agreement and omnibus agreement.
Office
The principal office of our Partnership is located at 1001 Noble Energy Way, Houston, Texas 77070.
Insurance
Our business is subject to all of the inherent and unplanned operating risks normally associated with the gathering and treating of water, crude oil and natural gas and the distribution and storage of water. Such risks include weather, fire, explosion, pipeline disruptions and mishandling of fluids, any of which could result in damage to, or destruction of, gathering and storage facilities and other property, environmental pollution, injury to persons or loss of life. As protection against financial loss resulting from many, but not all of these operating hazards, pursuant to the terms of the omnibus agreement, we have insurance coverage, including certain physical damage, business interruption, employer’s liability, third-party liability and worker’s compensation insurance. Our General Partner believes this insurance is appropriate and consistent with industry practice. We cannot, however, assure you that this insurance will be adequate to protect us from all material expenses related to potential future claims for personal and property damage or that these levels of insurance will be available in the future at economical prices. Our insurance coverage is purchased through a captive insurance company that is an affiliate of Noble. Most of this captive insurance is reinsured into the commercial market. To the extent Noble experiences covered losses under the excess liability insurance policies, the limit of our coverage for potential losses may be decreased.
Available Information
Our Common Units are listed and traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “NBLX.” Our website is www.nblmidstream.com. We make our periodic reports and other information filed with or furnished to the U.S. Securities and Exchange Commission, or SEC, available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Alternatively, you may access these reports at the SEC’s website at www.sec.gov. Information on our website or any other website is not incorporated by reference into this Annual Report and does not constitute a part of this Annual Report.
Our Audit Committee charter is also posted on our website under “About Us – Corporate Governance” and is available in print upon request made by any unitholder to the Investor Relations Department. Copies of our Code of Conduct and Code of Ethics for Financial Officers, or the Codes, are also posted on our website under the “Corporate Governance” section. Within the time period required by the SEC and Nasdaq, as applicable, we will post on our website (www.nblmidstream.com/about-us/corporate-governance/) any modifications to the Codes and any waivers applicable to senior officers as defined in the applicable Code, as required by the Sarbanes-Oxley Act of 2002.


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Item 1A.    Risk Factors
Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should carefully consider the following risk factors and all other information set forth in this Annual Report.
If any of the following risks were to occur, our business, financial condition, results of operations, cash flows and ability to make cash distributions could be materially adversely affected. In that case, the trading price of our Common Units could decline, and you could lose all or part of your investment.
Risks Related to Our Business
We derive a substantial portion of our revenue from Noble. If Noble changes its business strategy, alters its current drilling and development plan on our dedicated acreage, or otherwise significantly reduces the volumes of crude oil, natural gas, produced water or fresh water with respect to which we perform midstream services, our revenue would decline and our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders would be materially and adversely affected.
A substantial portion of our commercial agreements are with Noble or its affiliates. Accordingly, because we derive a substantial portion of our revenue from our commercial agreements with Noble, we are subject to the operational and business risks of Noble, the most significant of which include the following:
a reduction in or slowing of Noble’s drilling and development plan on our dedicated acreage, which would directly and adversely impact demand for our midstream services;
the volatility of crude oil, natural gas and NGL prices, which could have a negative effect on Noble’s drilling and development plan on our dedicated acreage or Noble’s ability to finance its operations and drilling and completion costs on our dedicated acreage;
the availability of capital on an economic basis to fund Noble’s exploration and development activities;
drilling and operating risks, including potential environmental liabilities, associated with Noble’s operations on our dedicated acreage;
downstream processing and transportation capacity constraints and interruptions, including the failure of Noble to have sufficient contracted processing or transportation capacity; and
adverse effects of increased or changed governmental and environmental regulation or enforcement of existing regulation.
In addition, we are indirectly subject to the business risks of Noble generally and other factors, including, among others:
Noble’s financial condition, credit ratings, leverage, market reputation, liquidity and cash flows;
Noble’s ability to maintain or replace its reserves;
adverse effects of governmental and environmental regulation on Noble’s upstream operations; and
losses from pending or future litigation.
Further, we have no control over Noble’s business decisions and operations, and Noble is under no obligation to adopt a business strategy that is favorable to us. Thus, we are subject to the risk of cancellation of planned development, breach of commitments with respect to future dedications; and other non-payment or non-performance by Noble, including with respect to our commercial agreements, which do not contain minimum volume commitments. Noble is currently conducting development drilling activities in both the DJ and Delaware Basins. A decrease in development drilling and completion activities on our dedicated acreage could result in lower throughput on our midstream infrastructure. Furthermore, we cannot predict the extent to which Noble’s businesses would be impacted if conditions in the energy industry were to deteriorate nor can we estimate the impact such conditions would have on Noble’s ability to execute its drilling and development plan on our dedicated acreage or to perform under our commercial agreements. Any material non-payment or non-performance by Noble 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. Our long-term commercial agreements with Noble carry initial terms for 15 years, and there is no guarantee that we will be able to renew or replace these agreements on equal or better terms, or at all, upon their expiration. Our ability to renew or replace our commercial agreements following their expiration at rates sufficient to maintain our current revenues and cash flows could be adversely affected by activities beyond our control, including the activities of our competitors and Noble.
In addition to our commercial agreements with Noble, we provide midstream services and crude oil sales for unaffiliated, non-investment grade third-party customers. We may engage in significant business with new third-party customers or enter into material commercial contracts with customers for which we do not have material commercial arrangements or commitments today and who may not have investment grade credit ratings. Each of the risks indicated above applies to our current third-party customers and to the extent we derive substantial income from or commit to capital projects to service new or existing customers, each of the risks indicated above would apply to such arrangements and customers.

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In the event any customer, including Noble, elects to sell acreage that is dedicated to us to a third party, the third party’s financial condition could be materially worse than the customer with whom we have contracted, and thus we could be subject to the nonpayment or nonperformance by the third party.
The third party may be subject to its own operating and regulatory risks, which increases the risk that it may default on its obligations to us. Any material nonpayment or nonperformance by the third party could reduce our ability to make distributions to our unitholders.
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.
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;
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;
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:
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 increase 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.
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 be affected by, among other things:

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the availability and cost of capital;
prevailing and projected crude oil, natural gas and NGL prices;
demand for crude oil, natural gas and NGLs;
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 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.
If our customers do not maintain their drilling activities on our dedicated acreage, the demand for our fresh water services could be reduced, which could have a material adverse effect on our results of operations, cash flows and ability to make distributions to our unitholders.
The fresh water services we provide to our customers assist in their drilling activities. If our customers do not maintain their drilling activities on our dedicated acreage, their demand for our fresh water services will be reduced regardless of whether we continue to provide our other midstream services on their production. If the demand for our fresh water services declines for this or any other reason, our results of operations, cash flows and ability to make distributions to our unitholders could be materially adversely affected.
Our midstream assets are currently primarily located in the DJ Basin in Colorado and the Delaware Basin in Texas, making us vulnerable to risks associated with operating in a limited geographic area.
As a result of this concentration, we will be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from wells in these areas caused by governmental regulation, market limitations, water shortages, drought related conditions or other weather-related conditions or interruption of the processing or transportation of crude oil and natural gas. If any of these factors were to impact the DJ Basin or Delaware Basin more than other producing regions, our business, financial condition, results of operations and ability to make cash distributions could be adversely affected relative to other midstream companies that have a more geographically diversified asset portfolio.
We cannot predict the rate at which our customers will develop acreage that is dedicated to us or the areas they will decide to develop.
Our acreage dedication and commitments from our customers cover midstream services in a number of areas that are at the early stages of development, in areas that our customers are still determining whether to develop and in areas where we may have to acquire operating assets from third parties. In addition, our customers own acreage in areas that are not dedicated to us. We cannot predict which of these areas our customers will determine to develop and at what time. Our customers may decide to explore and develop areas where the acreage is not dedicated to us. Our customers’ decisions to develop acreage that is not dedicated to us may adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions.
While we have been granted a right of first refusal to provide midstream services on certain acreage that Noble currently owns and on all acreage that Noble acquires onshore in the U.S., portions of this acreage may be subject to preexisting dedications that may require Noble to use third parties for midstream services.
Portions of this acreage may be subject to preexisting dedications, rights of first refusal, rights of first offer and other preexisting encumbrances that require Noble to use third parties for midstream services, and, as a result, Noble may be precluded from offering us the opportunity to provide these midstream services on this acreage. Because we do not have visibility as to which acreage Noble may acquire or divest, and what existing dedications, rights of first refusal, rights of first

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offer or other overriding rights may exist on such acreage, we are unable to predict the value, if any, of our ROFR to provide midstream services on Noble’s acreage onshore in the United States.
We may not be able to economically accept an offer from Noble for us to provide services or purchase assets with respect to which we have a right of first refusal.
Noble is required to offer us, prior to contracting for such opportunity with a third party, the opportunity to provide the midstream services covered by our commercial agreements, which include crude oil gathering, natural gas gathering, produced water gathering, fresh water services and crude oil treating, as well as services of a type provided at natural gas processing plants on certain acreage located in the United States that Noble currently owns or in the future acquires or develops. In addition, Noble is required to offer us, prior to contracting for such opportunity with a third party, the ownership interest in any midstream assets that are located on the acreage for which Noble has granted us a ROFR to provide services. The acreage and assets subject to this ROFR may be located in areas far from our existing infrastructure or may otherwise be undesirable in the context of our business. In addition, we can make no assurances that the terms at which Noble offers us the opportunity to provide these services or purchase these assets will be acceptable to us. Furthermore, another midstream service provider or third party may be willing to accept an offer from Noble that we are unwilling to accept. Our inability to take advantage of the opportunities with respect to such acreage or assets could adversely affect our growth strategy or our ability to maintain or increase our cash distribution level.
We may be unable to grow by acquiring midstream assets retained, acquired or developed by Noble, which could limit our ability to increase our distributable cash flow.
Part of our strategy for growing our business and increasing distributions to our unitholders is dependent upon our ability to make acquisitions that increase our distributable cash flow. Noble is under no obligation to offer to sell us additional assets, we are under no obligation to buy any additional assets from Noble and we do not know when or if Noble will decide to make any offers to sell assets to us.
An acquisition from Noble or a third party may reduce, rather than increase, our distributable cash flow or may disrupt our business.
Even if we make acquisitions that we believe will be accretive, these acquisitions may nevertheless result in a decrease in our distributable cash flow.  Any acquisition involves potential risks that may disrupt our business, including the following, among other things:
mistaken assumptions about volumes or the timing of those volumes, revenues or costs, including synergies;
an inability to successfully integrate the acquired assets or businesses;
the assumption of unknown liabilities;
exposure to potential lawsuits;
limitations on rights to indemnity from the seller;
the diversion of management’s and employees’ attention from other business concerns;
unforeseen difficulties operating in new geographic areas; and
customer or key employee losses at the acquired businesses.
We may not be able to attract dedications of additional third-party volumes, in part because our industry is highly competitive, which could limit our ability to grow and increase our dependence on Noble.
Part of our long-term growth strategy includes continuing to diversify our customer base by identifying additional opportunities to offer services to third parties in our areas of operation. To date and over the near term, a substantial portion of our revenues have been and will be earned from Noble relating to its operated wells on our dedicated acreage. Our ability to increase throughput on our midstream systems and any related revenue from third parties is subject to numerous factors beyond our control, including competition from third parties and the extent to which we have available capacity when requested by third parties. Any lack of available capacity on our systems for third-party volumes will detrimentally affect our ability to compete effectively with third-party systems for crude oil and natural gas from reserves associated with acreage other than our then-current dedicated acreage. In addition, some of our competitors for third-party volumes have greater financial resources and access to larger supplies of crude oil and natural gas than those available to us, which could allow those competitors to price their services more aggressively than we do.
Our efforts to attract additional third parties as customers may be adversely affected by our relationship with Noble and the fact that a substantial majority of the capacity of our midstream systems will be necessary to service its production on our dedicated acreage and our desire to provide services pursuant to fee-based agreements. As a result, we may not have the capacity to provide services to additional third parties and/or potential third-party customers may prefer to obtain services pursuant to other forms of contractual arrangements under which we would be required to assume direct commodity exposure. In addition, potential third-party customers who are significant producers of crude oil and natural gas may develop their own

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midstream systems in lieu of using our systems. All of these competitive pressures could have a material adverse effect on our business, results of operations, financial condition, cash flows and ability to make cash distributions to our unitholders.
To maintain and grow our business, we will be required to make substantial capital expenditures. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to make cash distributions may be diminished or our financial leverage could increase.
In order to maintain and grow our business, we will need to make substantial capital expenditures to fund growth capital expenditures, to purchase or construct new midstream systems, or to fulfill our commitments to service acreage committed to us by our customers. If we do not make sufficient or effective capital expenditures, we will be unable to maintain and grow our business and, as a result, we may be unable to maintain or raise the level of our future cash distributions over the long term. To fund our capital expenditures, we will be required to use cash from our operations, incur debt or sell additional Common Units or other equity securities. Using cash from our operations will reduce cash available for distribution to our unitholders. Our ability to obtain bank financing or our ability to access the capital markets for future equity or debt offerings may be limited by our financial condition at the time of any such financing or offering and the covenants in our existing debt agreements, as well as by general economic conditions, contingencies and uncertainties that are beyond our control. Also, due to our relationship with Noble, our ability to access the capital markets, or the pricing or other terms of any capital markets transactions, may be adversely affected by any impairment to the financial condition of Noble or adverse changes in Noble’s credit ratings. Any material limitation on our ability to access capital as a result of such adverse changes to Noble could limit our ability to obtain future financing under favorable terms, or at all, or could result in increased financing costs in the future. Similarly, material adverse changes affecting Noble could negatively impact our unit price, limiting our ability to raise capital through equity issuances or debt financing, or could negatively affect our ability to engage in, expand or pursue our business activities, or could also prevent us from engaging in certain transactions that might otherwise be considered beneficial to us.
Even if we are successful in obtaining the necessary funds to support our growth plan, the terms of such financings could limit our ability to pay distributions to our unitholders. In addition, incurring additional debt may significantly increase our interest expense and financial leverage, and issuing additional limited partner interests may result in significant unitholder dilution and would increase the aggregate amount of cash required to maintain the then current distribution rate, which could materially decrease our ability to pay distributions at the then prevailing distribution rate. While we have historically received funding from Noble, none of Noble, our General Partner or any of their respective affiliates is committed to providing any direct or indirect financial support to fund our growth.
The amount of cash we have available for distribution to our unitholders depends primarily on our cash flow and not solely on our profitability, which may prevent us from making distributions, even during periods in which we record net income.
The amount of cash we have available for distribution depends primarily upon our cash flow and not solely on our profitability, which will be affected by non-cash items. As a result, we may make cash distributions during periods when we record a net loss for financial accounting purposes, and conversely, we might fail to make cash distributions during periods when we record net income for financial accounting purposes.
Increased competition from other companies that provide midstream services, or from alternative fuel sources, could have a negative impact on the demand for our services, which could adversely affect our financial results.
Our ability to renew or replace existing contracts at rates sufficient to maintain current revenues and cash flows could be adversely affected by the activities of our competitors. Our systems compete for third-party customers primarily with other crude oil and natural gas gathering systems and fresh and saltwater service providers. Some of our competitors have greater financial resources and may now, or in the future, have access to greater supplies of crude oil and natural gas than we do. Some of these competitors may expand or construct gathering systems that would create additional competition for the services we would provide to third-party customers. In addition, potential third-party customers may develop their own gathering systems instead of using ours. Moreover, Noble and its affiliates are not limited in their ability to compete with us outside of our dedicated area.
Further, hydrocarbon fuels compete with other forms of energy available to end-users, including electricity and coal. Increased demand for such other forms of energy at the expense of hydrocarbons could lead to a reduction in demand for our services.
All of these competitive pressures could make it more difficult for us to retain our existing customers or attract new customers as we seek to expand our business, which could have a material adverse effect on our business, financial condition, results of operations and ability to make quarterly cash distributions to our unitholders. In addition, competition could intensify the negative impact of factors that decrease demand for natural gas in the markets served by our systems, such as adverse economic conditions, weather, higher fuel costs and taxes or other governmental or regulatory actions that directly or indirectly increase the cost or limit the use of natural gas.

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Our construction of new midstream assets may not result in revenue increases and may be subject to regulatory, environmental, political, contractual, legal and economic risks, which could adversely affect our cash flows, results of operations and financial condition and, as a result, our ability to distribute cash to unitholders.
The construction of additions or modifications to our existing systems and the expansion into new production areas to service Noble or our third-party customer involve numerous regulatory, environmental, political and legal uncertainties beyond our control, may require the expenditure of significant amounts of capital, and we may not be able to construct in certain locations due to setback requirements or expand certain facilities that are deemed to be part of a single source. Regulations clarifying how oil and gas production facility emissions must be aggregated under the CAA permitting program were finalized in June 2016. This action clarified certain permitting requirements, yet could still impact permitting and compliance costs. Moreover, Colorado has its own test for aggregating emission sources, and aggressive application of state preconstruction permitting requirements could result in delays and additional costs for midstream construction projects. Financing may not be available on economically acceptable terms or at all. As we build infrastructure to meet our customers’ needs, we may not be able to complete such projects on schedule, at the budgeted cost or at all.
Our revenues may not increase immediately (or at all) upon the expenditure of funds on a particular project. We may construct facilities to capture anticipated future production growth from Noble or another customer in an area where such growth does not materialize. As a result, new midstream assets may not be able to attract enough throughput to achieve our expected investment return, which could adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions.
The construction of additions to our existing assets may require us to obtain new permits or approvals, rights-of-way, surface use agreements or other real estate agreements prior to constructing new pipelines or facilities. We may be unable to timely obtain such rights-of-way to connect new crude oil, natural gas and water sources to our existing infrastructure or capitalize on other attractive expansion opportunities. Additionally, it may become more expensive for us to obtain new rights-of-way or to expand or renew existing rights-of-way, leases or other agreements, and our fees may only be increased above the annual year-over-year increase by mutual agreement between us and our customer. If the cost of renewing or obtaining new agreements increases, our cash flows could be adversely affected.
We are subject to regulation by multiple governmental agencies, which could adversely impact our business, results of operations and financial condition.
We are subject to regulation by multiple federal, state and local governmental agencies. Proposals and proceedings that affect the midstream industry are regularly considered by Congress, as well as by state legislatures and federal and state regulatory commissions, agencies and courts. We cannot predict when or whether any such proposals or proceedings may become effective or the magnitude of the impact changes in laws and regulations may have on our business. However, additions to the regulatory burden on our industry can increase our cost of doing business and affect our profitability.
The rates of our regulated assets are subject to review and reporting by federal regulators, which could adversely affect our revenues.
Our crude oil gathering system servicing the East Pony IDP transports crude oil in interstate commerce. In addition, the Black Diamond crude oil gathering system, Empire Pipeline crude oil gathering system and Green River crude oil gathering system, completed in 2018, transport crude oil in interstate commerce.
Pipelines that transport crude oil in interstate commerce are, among other things, subject to rate regulation by the FERC, unless such rate requirements are waived. We have received a waiver of the FERC’s tariff requirements for all of these crude oil gathering systems listed above. These temporary waivers are subject to revocation in certain circumstances. We are required to inform the FERC of any change in circumstances upon which the waivers were granted. Should the circumstances change, the FERC could find that transportation on these systems no longer qualify for a waiver. FERC could, either at the request of other entities or on its own initiative, assert that some or all of our pipelines no longer qualify for a waiver. In the event that the FERC were to determine that these crude oil gathering systems no longer qualified for the waiver, we would likely be required to comply with the tariff and reporting requirements, including filing a tariff with the FERC and providing a cost justification for the applicable transportation rates, and providing service to all potential shippers, without undue discrimination. A revocation of the temporary waivers for these pipelines could adversely affect the results of our revenues.
We may be required to respond to requests for information from government agencies, including compliance audits conducted by the FERC.
The FERC’s ratemaking policies are subject to change and may impact the rates charged and revenues received on our FERC jurisdictional pipelines that have tariffs on file, including White Cliffs Pipeline, EPIC Y-Grade, EPIC Crude and the gathering systems listed above in the event the temporary waivers do not remain in effect, and any other natural gas or liquids pipeline that is determined to be under the jurisdiction of the FERC. Pipelines may utilize the FERC oil pipeline indexing methodology which, as currently in effect, allows common carriers to change their rates within

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prescribed ceiling levels that are tied to changes in the Producer Price Index. The FERC’s establishment of a just and reasonable rate, including the determination of the oil pipeline index, is based on many components, and tax-related changes will affect two such components, the allowance for income taxes and the amount for accumulated deferred income taxes (“ADIT”). The FERC’s oil pipeline index is reviewed every five years. On March 15, 2018, as clarified on July 18, 2018, the FERC issued a Revised Policy Statement on Treatment of Income Taxes (“Revised Policy Statement”) stating, among other things, that it will no longer permit master limited partnerships to recover an income tax allowance in their cost-of-service-rates. To the extent a regulated entity is permitted to include an income tax allowance in its cost-of-service, the FERC directed entities to calculate the income tax allowance at the reduced 21% maximum corporate tax rate established by the Tax Cuts and Jobs Act of 2017. Further, should such regulated entity not include an income tax allowance in their cost-of-service rates, such entity may also elect to exclude the ADIT balance from the rate calculation. The impacts of the Revised Policy Statement and the Tax Cuts and Jobs Act of 2017 on the costs of FERC-regulated oil and NGL pipelines will be reflected in the FERC’s next five-year review of the oil pipeline index, which will be initiated in 2020 to generate the index level to be effective July 1, 2021. Accordingly, if any of our waivers are revoked, the FERC’s Revised Policy Statement may result in an adverse impact on our revenues associated with the transportation and storage if we are required to set and charge cost-based rates in the future, including indexed rates.
Federal and state legislative and regulatory initiatives relating to pipeline safety that require the use of new or more stringent safety controls or result in more stringent enforcement of applicable legal requirements could subject us to increased capital costs, operational delays and costs of operation.
The Pipeline Safety and Job Creation Act, is the most recent federal legislation to amend the NGPSA, and the HLPSA, which are pipeline safety laws, requiring increased safety measures for natural gas and hazardous liquids pipelines. Among other things, the Pipeline Safety and Job Creation Act directs the Secretary of Transportation to promulgate regulations relating to expanded integrity management requirements, automatic or remote-controlled valve use, excess flow valve use, leak detection system installation, material strength testing, and verification of the maximum allowable pressure of certain pipelines.
Changes to existing pipeline safety regulations may result in increased operating and compliance costs. For example, in October 2019, PHMSA published three final rules that create or expand reporting , inspection, maintenance, and other pipeline safety obligations. We are in the process of assessing the impact of these rules on our future costs of operations and revenue from operations.
PHMSA is working on two additional rules related to gas pipeline safety that are expected to modify pipeline repair criteria and extend regulatory safety requirements to certain gathering lines in rural areas. These additional rulemakings are expected to be effective by mid-2020. The adoption of these or other regulations requiring more comprehensive or stringent safety standards could require us to install new or modified safety controls, pursue additional capital projects, or conduct maintenance programs on an accelerated basis, any or all of which tasks could result in our incurring increased operating costs that could have a material adverse effect on our results of operations or financial position.
We may be unable to make attractive acquisitions or successfully integrate acquired businesses, assets or properties, and any inability to do so may disrupt our business and hinder our ability to grow.
We may not be able to identify attractive acquisition opportunities. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on commercially acceptable terms. No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets.
The success of any completed acquisition will depend on our ability to integrate effectively the acquired business, asset or property into our existing operations. The process of integrating acquired businesses, assets and properties may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. Our failure to achieve consolidation savings, to incorporate the acquired businesses, assets and properties into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition and results of operations.
Our investments in joint ventures involve numerous risks that may affect the ability of such joint ventures to make distributions to us.
We conduct some of our operations through joint ventures in which we share control with our joint venture participants. Our joint venture participants may have economic, business or legal interests or goals that are inconsistent with ours, or those of the joint venture. Furthermore, our joint venture participants may be unable to meet their economic or other obligations, and we may be required to fulfill those obligations alone. Failure by us, or an entity in which we have a joint venture interest, to adequately manage the risks associated with such joint ventures could have a material adverse effect on the financial condition or results of operations of our joint ventures and, in turn, our business and operations. In addition, should any of these risks materialize, it could have a material adverse effect on the ability of the joint venture to make future distributions to us.

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If third-party pipelines or other facilities interconnected to our midstream systems become partially or fully unavailable, or if the volumes we gather or treat do not meet the quality requirements of such pipelines or facilities, our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders could be adversely affected.
Our midstream systems are connected to other pipelines or facilities, the majority of which are owned by third parties. The continuing operation of such third-party pipelines or facilities is not within our control. If any of these pipelines or facilities becomes unable to transport, treat or process natural gas or crude oil, or if the volumes we gather or transport do not meet the quality requirements of such pipelines or facilities, our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders could be adversely affected.
Our exposure to commodity price risk may change over time and we cannot guarantee the terms of any existing or 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 volumetric fees, 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. 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.
Our contracts are subject to renewal risks.
We are a party to certain long term, fixed fee contracts with terms of various durations. As these contracts expire, we will have to negotiate extensions or renewals with existing suppliers and customers or enter into new contracts with other suppliers and customers. We may not be able to obtain new contracts on favorable commercial terms, if at all. We also may be unable to maintain the economic structure of a particular contract with an existing customer or maintain the overall mix of our contract portfolio. The extension or replacement of existing contracts depends on a number of factors beyond our control, including:
the level of existing and new competition to provide services to our markets;
the macroeconomic factors affecting our current and potential customers;
the balance of supply and demand, on a short-term, seasonal and long-term basis, in our markets;
the extent to which the customers in our markets are willing to contract on a long-term basis; and
the effects of federal, state or local regulations on the contracting practices of our customers.
Our inability to renew our existing contracts on terms that are favorable or to successfully manage our overall contract mix over time may have a material adverse effect on our business, results of operations and financial condition.
Restrictions in our revolving credit facility and term loan credit facility could adversely affect our business, financial condition, results of operations and ability to make quarterly cash distributions to our unitholders.
Our revolving credit facility and term loan credit facility limit our ability to, among other things:
incur or guarantee additional debt;
redeem or repurchase units or make distributions under certain circumstances;
make certain investments and acquisitions;
incur certain liens or permit them to exist;
enter into certain types of transactions with affiliates;
merge or consolidate with another company; and
transfer, sell or otherwise dispose of assets.
Our revolving credit facility and term loan credit facility also contain covenants requiring us to maintain certain financial ratios.
The provisions of our revolving credit facility and term loan credit facility may affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of our revolving credit facility and term loan credit facility could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, and our unitholders could experience a partial or total loss of their investment. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.

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Increased regulation of hydraulic fracturing could result in reductions or delays in crude oil and natural gas production by our customers, which could reduce the throughput on our gathering and other midstream systems, which could adversely impact our revenues.
We do not conduct hydraulic fracturing operations, but substantially all of Noble’s crude oil and natural gas production on our dedicated acreage is developed from unconventional sources that require hydraulic fracturing as part of the completion process. The majority of our fresh water services business is related to the storage and transportation of water for use in hydraulic fracturing. Hydraulic fracturing is a well stimulation process that utilizes large volumes of water and sand combined with fracturing chemical additives that are pumped into a well at high pressure to crack open previously impenetrable rock to release hydrocarbons.
Hydraulic fracturing is typically regulated by state oil and gas commissions and similar agencies. Some states and local governments, including those in which we operate, have adopted, and other states are considering adopting, regulations that could impose more stringent chemical disclosure or well construction requirements on hydraulic fracturing operations, or otherwise seek to ban some or all of these activities. For example, in Colorado, state ballot and other regulatory initiatives have been proposed from time to time to impose additional restrictions or bans on hydraulic fracturing or other facets of crude oil and natural gas exploration, production or related activities. For example, in November 2018, Colorado voters considered a ballot measure known as Proposition #112 that, if passed, would have significantly limited, or even prevented, the future development of crude oil and natural gas in areas where we perform midstream services by imposing strict setback requirements for operations near occupied structures or environmental sensitive areas. While the proposition was not approved by voters, Colorado’s new governor, Jared Polis, has previously supported enhanced setback requirements. We cannot predict whether any similar ballot initiatives will be proposed in the future or what actions the new Governor may take with respect to the regulation of hydraulic fracturing.
During first quarter 2019, SB 181 was passed by the State Legislature. On April 16, 2019, the Governor signed the bill into law. The legislation makes sweeping changes in Colorado oil and gas law, including, among other matters, requiring the COGCC to prioritize public health and environmental concerns in its decisions, instructing the COGCC 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 COGCC publishes new rules in keeping with SB 181. Additionally, activist groups have submitted new ballot proposals for the 2020 election year, including proposals for increased drilling setbacks and increased bonding requirements.
Nevertheless, at this time, we are not aware of any significant changes to Noble’s or other third-party customers’ development plans. 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.
Any new limitations or prohibitions on oil and gas exploration and production activities could result in decreased demand for our midstream services and have a material adverse effect on our cash flows, results of operations, financial condition, and liquidity. At the federal level, several agencies have asserted jurisdiction over certain aspects of the hydraulic fracturing process. For example, the EPA has moved forward with various regulatory actions, including the issuance of new regulations requiring green completions for hydraulically fractured wells, and emission requirements for certain midstream equipment. Also, in June 2016, the EPA finalized rules which prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants. Certain environmental groups have also suggested that additional laws may be needed to more closely and uniformly regulate the hydraulic fracturing process. We cannot predict whether any such legislation will be enacted and if so, what its provisions would be. Additional levels of regulation and permits required through the adoption of new laws and regulations at the federal, state or local level could lead to delays, increased operating costs and process prohibitions that could reduce the volumes of crude oil and natural gas that move through our gathering systems and decrease demand for our water services, which in turn could materially adversely impact our revenues.
We, Noble or any third-party customers may incur significant liability under, or costs and expenditures to comply with, environmental and worker health and safety regulations, which are complex and subject to frequent change.
As an owner and operator of gathering systems, we are subject to various federal, state and local laws and regulations relating to the discharge of materials into, and protection of, the environment and worker health and safety. Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring costly response actions. These laws and regulations may impose numerous obligations that are applicable to our and our customers’ operations, including the acquisition of permits to conduct regulated activities, the incurrence of capital or operating expenditures to limit or prevent releases of materials from our or our customers’ operations, the imposition of specific standards addressing worker protection, and the imposition of substantial liabilities and remedial obligations for pollution or contamination resulting from our and our customers’ operations. Failure to comply with these laws, regulations and permits may result in joint and several or strict liability or the assessment of

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administrative, civil and criminal penalties, the imposition of remedial obligations, or the issuance of injunctions or administrative orders limiting or preventing some or all of our operations. Private parties, including the owners of the properties through which our gathering systems pass, may also have the right to pursue legal actions to enforce compliance, as well as to seek damages for non-compliance, with environmental laws and regulations or for personal injury or property damage. We may not be able to recover all or any of these costs from insurance. In addition, we may experience a delay in obtaining or be unable to obtain required permits, which may cause us to lose potential and current customers, interrupt our operations or limit our growth and revenues, which in turn could affect the amount of cash we have available for distribution. We cannot provide any assurance that changes in or additions to public policy regarding the protection of the environment and worker health and safety will not have a significant impact on our operations and the amount of cash we have available for distribution.
Our operations also pose risks of environmental liability due to leakage, migration, releases or spills to surface or subsurface soils, surface water or groundwater. Certain environmental laws impose strict as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released. We may be required to remediate contaminated properties currently or formerly operated by us regardless of whether such contamination resulted from the conduct of others or from consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations. Moreover, the trend of more expansive and stringent environmental legislation and regulations applied to the crude oil and natural gas industry could continue, potentially resulting in increased costs of doing business and consequently affecting the amount of cash we have available for distribution. For example, in June 2015, the EPA and the Corps, issued a final rule under the CWA, defining the scope of the EPA’s and the Corps’ jurisdiction over waters of the United States. Following the change in U.S. Presidential Administrations, there have been several attempts to modify or eliminate this rule, also known as the Clean Water Rule. Most recently, in September 2019, the EPA and Corps rescinded the 2015 Clean Water Rule. Legal challenges have occurred for both the 2015 rule and the 2019 rescission. Therefore, the scope of jurisdiction under CWA is uncertain at this time. To the extent a rule expands the scope of the CWA’s jurisdiction, we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas. Such potential regulations or litigation could increase our operating costs, reduce our liquidity, delay or halt our operations or otherwise alter the way we conduct our business, which could in turn have a material adverse effect on our business, financial condition and results of operations. See Items 1. and 2. Business and Properties – Regulations.
Our and our customers’ operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the products and services we provide.
The threat of climate change continues to attract considerable attention in the United States and in foreign countries. Numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of GHGs as well as to restrict or eliminate such future emissions. As a result, our operations as well as the operations of our oil and natural gas exploration and production customers are subject to a series of regulatory, political, litigation, and financial risks associated with the production and processing of fossil fuels and emission of GHGs.
In the United States, no comprehensive climate change legislation has been implemented at the federal level. However, following the U.S. Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, implement New Source Performance Standards directing the reduction of methane from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States. Following the change in presidential administrations, there have been attempts to modify certain of these regulations, and litigation is ongoing.
Additionally, various states and groups of states have adopted or are considering adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of GHG emissions. At the international level, there is a non-binding agreement, the United Nations-sponsored “Paris Agreement,” for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020, although the United States has announced its withdrawal from such agreement, effective November 4, 2020. The adoption and implementation of new or more stringent legislation or regulations could result in increased costs of compliance or costs of consuming, and thereby reduce demand for, oil and natural gas, which could reduce demand for our services and products.
Concern over the threat of climate change may also result in political action deleterious to our interests. For example, various pledges to curtail oil and gas operations have been made by candidates running for the Democratic nomination for President of

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the United States in 2020. Separately, increased attention to climate change risks has increased the possibility of claims brought by public and private entities against oil and gas companies in connection with their GHG emissions. While courts have generally declined to assign direct liability for climate change to large sources of GHG emissions, new claims for damages and increased government scrutiny, especially from state and local governments, will likely continue. Moreover, to the extent societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to the company’s causation of or contribution to the asserted damage, or to other mitigating factors.
There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate change may elect in the future to shift some or all of their investments into non-energy related sectors. Institutional lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not to provide funding for fossil fuel energy companies. Additionally, the lending practices of institutional lenders have been the subject of intensive lobbying efforts in recent years, oftentimes public in nature, by environmental activists, proponents of the international Paris Agreement, and foreign citizenry concerned about climate change not to provide funding for fossil fuel producers. Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development or production activities. One or more of these developments could have a material adverse effect on our business, financial condition and results of operation.
Finally, it should be noted that many scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events; if any such effects were to occur, they could have an adverse effect on our operations or our customers’ exploration and production operations, which in turn could affect demand for our services. See Items 1. and 2. Business and Properties – Regulations.
Certain plant or animal species are or could be designated as endangered or threatened, which could have a material impact on our and Noble’s operations.
The ESA restricts activities that may affect endangered or threatened species or their habitats. Many states have analogous laws designed to protect endangered or threatened species. Such protections, and the designation of previously undesignated species under such laws, may affect our and Noble’s operations by imposing additional costs, approvals and accompanying delays. For example, the Bureau of Land Management has deferred the sale of leases on certain lands due to concerns about protections for the greater sage grouse, a species that, while not currently listed, has been the subject of long-term and recently renewed calls for protection under the ESA.
A change in the jurisdictional characterization of some of our assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of our assets, which may cause our operating expenses to increase, limit the rates we charge for certain services and decrease the amount of cash we have available for distribution.
Section 1(b) of the Natural Gas Act of 1938 (“NGA”) exempts natural gas gathering facilities from regulation as a natural gas company by FERC under the NGA. Although the FERC has not made a formal determination with respect to the facilities we consider to be natural gas gathering pipelines, we believe that our natural gas gathering pipelines meet the traditional tests that the FERC has used to determine that a pipeline is a gathering pipeline and are therefore not subject to FERC jurisdiction. The distinction between FERC-regulated transmission services and federally unregulated gathering services, however, has been the subject of substantial litigation, and the FERC determines whether facilities are gathering facilities on a case-by-case basis, so the classification and regulation of our gathering facilities is subject to change based on future determinations by the FERC, the courts or Congress. If the FERC were to consider the status of an individual facility and determine that the facility or services provided by it are not exempt from FERC regulation under the NGA and that the facility provides interstate service, the rates for, and terms and conditions of, services provided by such facility would be subject to regulation by the FERC under the NGA or the Natural Gas Policy Act, or NGPA. Such regulation could decrease revenue, increase operating costs, and, depending upon the facility in question, adversely affect our results of operations and cash flows. In addition, if any of our facilities were found to have provided services or otherwise operated in violation of the NGA or NGPA, this could result in the imposition of substantial civil penalties, as well as a requirement to disgorge revenues collected for such services in excess of the maximum rates established by the FERC.
Subject to the foregoing, our natural gas gathering pipelines are exempt from the jurisdiction of the FERC under the NGA, but FERC regulation may indirectly impact gathering services. The FERC’s policies and practices across the range of its crude oil and natural gas regulatory activities, including, for example, its policies on interstate open access transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets. In recent years, the FERC has pursued pro-competitive policies in its regulation of interstate crude oil and natural gas pipelines. However, we cannot assure that the FERC will continue to pursue this approach as it considers matters such as pipeline rates and rules and policies that may indirectly affect the natural gas gathering services.

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Natural gas gathering may receive greater regulatory scrutiny at the state level. Therefore, our natural gas gathering operations could be adversely affected should they become subject to the application of state regulation of rates and services. Our gathering operations could also be subject to safety and operational regulations relating to the design, construction, testing, operation, replacement and maintenance of gathering facilities. We cannot predict what effect, if any, such changes might have on our operations, but we could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes.
In addition, certain of our crude oil gathering pipelines do not provide interstate services and therefore are not subject to regulation by the FERC pursuant to the ICA. The distinction between FERC-regulated crude oil interstate pipeline transportation, on the one hand, and crude oil intrastate pipeline transportation, on the other hand, also is a fact-based determination. The classification and regulation of these crude oil gathering pipelines are subject to change based on changed circumstances on the pipeline or on future determinations by the FERC, federal courts, Congress or by regulatory commissions, courts or legislatures in the states in which our crude oil gathering pipelines are located. We cannot provide assurance that the FERC will not in the future, either at the request of other entities or on its own initiative, determine that some or all of our gathering pipeline systems and the services we provide on those systems are within the FERC’s jurisdiction. If it is determined that some or all of our crude oil gathering pipeline systems are subject to the FERC’s jurisdiction under the ICA, and are not otherwise exempt from any applicable regulatory requirements, the imposition of possible cost-of-service rates and common carrier requirements on those systems could adversely affect the results of our operations on and revenues associated with those systems.
Our business involves many hazards and operational risks, some of which may not be fully covered by insurance. The occurrence of a significant accident or other event that is not fully insured could curtail our operations and have a material adverse effect on our ability to make cash distributions and, accordingly, the market price for our Common Units.
Our operations are subject to all of the hazards inherent in the gathering of crude oil, natural gas and produced water and the delivery and storage of fresh water, including:
damage to, loss of availability of and delays in gaining access to pipelines, centralized gathering facilities, pump stations, related equipment and surrounding properties caused by design, installation, construction materials or operational flaws, natural disasters, acts of terrorism or acts of third parties;
mechanical or structural failures at our or Noble’s facilities or at third-party facilities on which our customers’ or our operations are dependent, including electrical shortages, power disruptions and power grid failures;
leaks of crude oil, natural gas, NGLs or produced water or losses of crude oil, natural gas, NGLs or produced water as a result of the malfunction of, or other disruptions associated with, equipment or facilities;
unexpected business interruptions;
curtailments of operations due to severe seasonal weather;
riots, strikes, lockouts or other industrial disturbances;
fires, ruptures and explosions; and
other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.
Any of these risks could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims for:
injury or loss of life;
damage to and destruction of property, natural resources and equipment;
pollution and other environmental damage;
regulatory investigations and penalties;
suspension of our operations; and
repair and remediation costs.
We may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash distributions.
Our asset inspection, maintenance or repair costs may increase in the future. In addition, there could be service interruptions due to unforeseen events or conditions or increased downtime associated with our pipelines that could have a material adverse effect on our business and results of operations.
Gathering systems, pipelines and facilities are generally long-lived assets, and construction and coating techniques have varied over time. Depending on the condition and results of inspections, some assets will require additional maintenance, which could

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result in increased expenditures in the future. Any significant increase in these expenditures could adversely affect our results of operations, financial position or cash flows, as well as our ability to make cash distributions to our unitholders. 
It is difficult to predict future maintenance capital expenditures related to inspections and repairs. Additionally, there could be service interruptions associated with these maintenance capital expenditures or other unforeseen events. Similarly, laws and regulations may change which could also lead to increased maintenance capital expenditures. Any increase in these expenditures could adversely affect our results of operations, financial position, or cash flows which in turn could impact our ability to make cash distributions to our unitholders.
We do not own in fee some of the land on which our pipelines and facilities are located, which could result in disruptions to our operations.
Our only interests in these properties are rights granted under surface use agreements, rights-of-way, surface leases or other easement rights, which may limit or restrict our rights or access to or use of the surface estates. Accommodating these competing rights of the surface owners may adversely affect our operations. In addition, we are subject to the possibility of more onerous terms or increased costs to retain necessary land use if we do not have valid rights-of-way, surface leases or other easement rights or if such usage rights lapse or terminate. We may obtain the rights to construct and operate our pipelines on land owned by third parties and governmental agencies for a specific period of time. Our loss of these rights, through our inability to renew rights-of-way, surface leases or other easement rights or otherwise, could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash distributions.
A shortage of equipment and skilled labor could reduce equipment availability and labor productivity and increase labor and equipment costs, which could have a material adverse effect on our business and results of operations.
Our gathering and other midstream services require special equipment and laborers who are skilled in multiple disciplines, such as equipment operators, mechanics and engineers, among others. If we experience shortages of necessary equipment or skilled labor in the future, our labor and equipment costs and overall productivity could be materially and adversely affected. If our equipment or labor prices increase or if we experience materially increased health and benefit costs for employees, our business and results of operations could be materially and adversely affected.
The loss of key personnel could adversely affect our ability to operate.
We depend on the services of a relatively small group of our General Partner’s senior management. We do not maintain, nor do we plan to obtain, any insurance against the loss of any of these individuals. The loss of the services of our General Partner’s senior management, including Brent J. Smolik, our Chief Executive Officer, Thomas W. Christensen, our Chief Financial Officer, Robin H. Fielder, our Chief Operating Officer, Phillip S. Welborn, our Chief Accounting Officer, and Aaron G. Carlson, our General Counsel and Secretary could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash distributions.
We do not have any officers or employees and rely on officers of our General Partner and employees of Noble.
We are managed and operated by the board of directors and executive officers of our General Partner. Our General Partner has no employees and relies on the employees of Noble to conduct our business and activities.
Noble conducts businesses and activities of its own in which we have no economic interest. As a result, there could be material competition for the time and effort of the officers and employees who provide services to both our General Partner and Noble. If our General Partner and the officers and employees of Noble do not devote sufficient attention to the management and operation of our business and activities, our business, financial condition, results of operations, cash flows and ability to make cash distributions could be materially adversely affected.
Debt we incur in the future may limit our flexibility to obtain financing and to pursue other business opportunities.
Our future level of debt could have important consequences to us, including the following:
our ability to obtain additional financing, if necessary, for working capital, capital expenditures (including building additional gathering pipelines needed for required connections and building additional centralized gathering facilities pursuant to our gathering agreements) or other purposes may be impaired or such financing may not be available on favorable terms;
our funds available for operations, future business opportunities and distributions to unitholders will be reduced by that portion of our cash flow required to make interest payments on our debt;
we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and
our flexibility in responding to changing business and economic conditions may be limited.
Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are

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beyond our control. If our operating results are not sufficient to service any future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, investments or capital expenditures, selling assets or issuing equity. We may not be able to effect any of these actions on satisfactory terms or at all.
Increases in interest rates could adversely affect our business.
We have exposure to increases in interest rates. As of December 31, 2019, $595 million and $900 million were outstanding under our revolving credit facility and term loan credit facility, respectively. A 1.0% increase in our interest rates would have resulted in an estimated $9.5 million increase in interest expense for the year ended December 31, 2019. 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.
Terrorist attacks or cyber-attacks could have a material adverse effect on our business, financial condition or results of operations.
Terrorist attacks or cyber-attacks may significantly affect the energy industry, including our operations and those of Noble and our other potential customers, as well as general economic conditions, consumer confidence and spending and market liquidity. Strategic targets, such as energy-related assets, may be at greater risk of future attacks than other targets in the United States. Our insurance may not protect us against such occurrences. Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition and results of operations.
A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss.
The oil and gas industry has become increasingly dependent on digital technologies to conduct day-to-day operations including certain midstream activities. For example, software programs are used to manage gathering and transportation systems and for compliance reporting. The use of mobile communication devices has increased rapidly. Industrial control systems such as SCADA (supervisory control and data acquisition) now control large scale processes that can include multiple sites and long distances, such as oil and gas pipelines.
We depend on digital technology, including information systems and related infrastructure as well as cloud applications and services, to process and record financial and operating data and to communicate with our employees and business partners. Our business partners, including vendors, service providers, and financial institutions, are also dependent on digital technology. The technologies needed to conduct midstream activities make certain information the target of theft or misappropriation.
As dependence on digital technologies has increased, cyber incidents, including deliberate attacks or unintentional events, also has increased. A cyber attack could include gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption, or result in denial-of-service on websites. SCADA-based systems are potentially vulnerable to targeted cyber attacks due to their critical role in operations.
Our technologies, systems, networks, and those of our business partners may become the target of cyber attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of our business operations. In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period.
A cyber incident involving our information systems and related infrastructure, or that of our business partners, could disrupt our business plans and negatively impact our operations in the following ways, among others:
a cyber attack on a vendor or service provider could result in supply chain disruptions which could delay or halt development of additional infrastructure, effectively delaying the start of cash flows from the project;
a cyber attack on downstream pipelines could prevent us from delivering product at the tailgate of our facilities, resulting in a loss of revenues;
a cyber attack on a communications network or power grid could cause operational disruption resulting in loss of revenues;
a deliberate corruption of our financial or operational data could result in events of non-compliance which could lead to regulatory fines or penalties; and
business interruptions could result in expensive remediation efforts, distraction of management, damage to our reputation, or a negative impact on the price of our units.
Our implementation of various controls and processes, including globally incorporating a risk-based cyber security framework, to monitor and mitigate security threats and to increase security for our information, facilities and infrastructure is costly and labor intensive. Moreover, there can be no assurance that such measures will be sufficient to prevent security breaches from occurring. As cyber threats continue to evolve, we may be required to expend significant additional resources

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to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
Risks Inherent in an Investment in Us
Our General Partner and its affiliates, including Noble, have conflicts of interest with us and our partnership agreement eliminates their default fiduciary duties to us and our unitholders and replaces them with contractual standards that may allow our General Partner and its affiliates to favor their own interests to our detriment and that of our unitholders. Additionally, we have no control over the business decisions and operations of Noble, and Noble is under no obligation to adopt a business strategy that favors us.
Noble directly owns an aggregate 62.6% limited partner interest in us. In addition, Noble owns and controls our General Partner. Although our General Partner has a duty to manage us in a manner that is not adverse to the interests of our partnership, the directors and officers of our General Partner also have a duty to manage our General Partner in a manner that is in the best interests of its owner, Noble. Conflicts of interest may arise between Noble and its affiliates, including our General Partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts, the General Partner may favor its own interests and the interests of its affiliates, including Noble, over the interests of our common unitholders. These conflicts include, among others, the following situations:
neither our partnership agreement nor any other agreement requires Noble to pursue a business strategy that favors us or utilizes our assets, which could involve decisions by Noble to increase or decrease crude oil or natural gas production on our dedicated acreage, pursue and grow particular markets or undertake acquisition opportunities for itself. Noble’s directors and officers have a fiduciary duty to make these decisions in the best interests of the stockholders of Noble;
Noble may be constrained by the terms of its debt instruments from taking actions, or refraining from taking actions, that may be in our best interests;
our partnership agreement replaces the fiduciary duties that would otherwise be owed by our General Partner with contractual standards governing its duties and limits our General Partner’s liabilities and the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty under applicable Delaware law;
except in limited circumstances, our General Partner has the power and authority to conduct our business without unitholder approval;
our General Partner will determine the amount and timing of, among other things, cash expenditures, borrowings and repayments of indebtedness, the issuance of additional partnership interests, the creation, increase or reduction in cash reserves in any quarter and asset purchases and sales, each of which can affect the amount of cash that is available for distribution to unitholders;
our General Partner will determine which costs incurred by it are reimbursable by us;
our General Partner may cause us to borrow funds in order to permit the payment of cash distributions;
our partnership agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf;
our General Partner intends to limit its liability regarding our contractual and other obligations;
our General Partner may exercise its right to call and purchase all of the Common Units not owned by it and its affiliates if it and its affiliates own more than 80% of the Common Units;
our General Partner controls the enforcement of obligations owed to us by our General Partner and its affiliates, including our gathering agreements with Noble, the ROFR and ROFO; and
our General Partner decides whether to retain separate counsel, accountants or others to perform services for us.
Neither our partnership agreement nor our omnibus agreement will prohibit Noble or any other affiliates of our General Partner from owning assets or engaging in businesses that compete directly or indirectly with us. Under the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, will not apply to our General Partner or any of its affiliates, including Noble and executive officers and directors of our General Partner. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. Consequently, Noble and other affiliates of our General Partner may acquire, construct or

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dispose of additional midstream assets in the future without any obligation to offer us the opportunity to purchase any of those assets (except to the extent the ROFR or ROFO pertain to such assets). As a result, competition from Noble and other affiliates of our General Partner could materially and adversely impact our results of operations and distributable cash flow. This may create actual and potential conflicts of interest between us and affiliates of our General Partner and result in less than favorable treatment of us and our unitholders.
We expect to distribute a substantial portion of our cash available for distribution, which could limit our ability to grow and make acquisitions.
We expect to distribute most of our available cash for distribution. As a result, we expect to rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. Therefore, to the extent we are unable to finance our growth externally, our cash distribution policy will significantly impair our ability to grow. In addition, our growth may not be as fast as that of businesses that reinvest their cash to expand ongoing operations. To the extent we issue additional partnership interests in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional partnership interests may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement on our ability to issue additional partnership interests, including partnership interests ranking senior to our Common Units as to distributions or in liquidation or that have special voting rights and other rights, and our common unitholders will have no preemptive or other rights (solely as a result of their status as common unitholders) to purchase any such additional partnership interests. The incurrence of additional commercial bank borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may reduce the amount of cash that we have available to distribute to our unitholders.
Our partnership agreement replaces our General Partner’s fiduciary duties to holders of our Common Units with contractual standards governing its duties.
Delaware law provides that a Delaware limited partnership may, in its partnership agreement, expand, restrict or eliminate the fiduciary duties otherwise owed by the general partner to limited partners and the partnership. As permitted by Delaware law, our partnership agreement contains provisions that eliminate the fiduciary standards to which our General Partner would otherwise be held by state fiduciary duty law and replaces those duties with several different contractual standards. For example, our partnership agreement permits our General Partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our General Partner, free of any duties to us and our unitholders. This entitles our General Partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. By purchasing a common unit, a unitholder agrees to be bound by our partnership agreement and approves the elimination and replacement of fiduciary duties disclosed above.
Our partnership agreement restricts the remedies available to holders of our units and for actions taken by our General Partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement contains provisions that restrict the remedies available to unitholders for actions taken by our General Partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our partnership agreement provides that:
whenever our General Partner makes a determination or takes, or declines to take, any other action in its capacity as our General Partner, our General Partner is required to make such determination, or take or decline to take such other action, in good faith, meaning that it subjectively believed that the determination or the decision to take or decline to take such action was not adverse to the interests of our partnership, and will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity;
our General Partner will not have any liability to us or our unitholders for decisions made in its capacity as a General Partner so long as it acted in good faith;
our General Partner and its officers and directors will not be liable for monetary damages or otherwise to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our General Partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and
our General Partner will not be in breach of its obligations under our partnership agreement or its fiduciary duties to us or our limited partners if a transaction with an affiliate or the resolution of a conflict of interest is approved in accordance with, or otherwise meets the standards set forth in, our partnership agreement.
In connection with a situation involving a transaction with an affiliate or a conflict of interest, other than one where our General Partner is permitted to act in its sole discretion, our partnership agreement provides that any determination by our

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General Partner must be made in good faith. If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the conflicts committee, then it will be presumed that, in making its decision, taking any action or failing to act, the board of directors of our General Partner acted in good faith and in any proceeding brought by or on behalf of any limited partner or the Partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
Cost reimbursements and fees due to our General Partner and its affiliates for services provided will be substantial and will reduce the amount of cash we have available for distribution to unitholders.
Under our partnership agreement, we are required to reimburse our General Partner and its affiliates for all costs and expenses that they incur on our behalf for managing and controlling our business and operations. Except to the extent specified under our omnibus agreement and operational services and secondment agreement, our General Partner determines the amount of these expenses. Under the terms of the omnibus agreement, we will be required to reimburse Noble for the provision of certain administrative support services to us. Under our operational services and secondment agreement, we will be required to reimburse Noble for the provision of certain operation services and related management services in support of our operations. Our General Partner and its affiliates also may provide us other services for which we will be charged fees as determined by our General Partner. The costs and expenses for which we will reimburse our General Partner and its affiliates may include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our General Partner by its affiliates. The costs and expenses for which we are required to reimburse our General Partner and its affiliates are not subject to any caps or other limits. Payments to our General Partner and its affiliates will be substantial and will reduce the amount of cash we have available to distribute to unitholders.
Unitholders have very limited voting rights and, even if they are dissatisfied, they cannot remove our General Partner.
Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. For example, unlike holders of stock in a public corporation, unitholders will not have “say-on-pay” advisory voting rights. Unitholders did not elect our General Partner or the board of directors of our General Partner and will have no right to elect our General Partner or the board of directors of our General Partner on an annual or other continuing basis. The board of directors of our General Partner is chosen by its sole member, which is owned by Noble. Furthermore, if the unitholders are dissatisfied with the performance of our General Partner, they will have little ability to remove our General Partner. As a result of these limitations, the price at which our Common Units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.
Our General Partner may not be removed unless such removal is both (i) for cause and (ii) approved by a vote of the holders of at least 66 23% of the outstanding units, including any units owned by our General Partner and its affiliates, voting together as a single class. “Cause” is narrowly defined under our partnership agreement to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding our General Partner liable to us or any limited partner for actual fraud or willful misconduct in its capacity as our General Partner. Noble currently owns 62.6% of our total outstanding Common Units. As a result, our public unitholders do not have limited ability to remove our General Partner.
Furthermore, unitholders’ voting rights are further restricted by the partnership agreement provision providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our General Partner, its affiliates, their transferees, and persons who acquired such units with the prior approval of the board of directors of our General Partner, cannot vote on any matter.
Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management.
Our partnership agreement restricts the voting rights of certain unitholders owning 20% or more of our Common Units.
Unitholders’ voting rights are restricted by a provision of our partnership agreement providing that any person or group that owns 20% or more of any class of units then outstanding, other than our General Partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our General Partner, cannot vote on any matter.
Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent.
Our General Partner may transfer its General Partner interest in us to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. Furthermore, there is no restriction in our partnership agreement on the ability of Noble to transfer its membership interest in our General Partner to a third party. The new owner of

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our General Partner would then be in a position to replace the board of directors and officers of our General Partner with its own choices.
We may issue an unlimited number of additional partnership interests without unitholder approval, which would dilute unitholder interests.
At any time, we may issue an unlimited number of General Partner interests or limited partner interests of any type without the approval of our unitholders and our unitholders will have no preemptive or other rights (solely as a result of their status as unitholders) to purchase any such General Partner interests or limited partner interests. Further, there are no limitations in our partnership agreement on our ability to issue equity securities that rank equal or senior to our common units as to distributions or in liquidation or that have special voting rights and other rights. The issuance by us of additional Common Units or other equity securities of equal or senior rank will have the following effects:
our unitholders’ proportionate ownership interest in us will decrease;
the amount of cash we have available to distribute on each unit may decrease;
the ratio of taxable income to distributions may increase;
the relative voting strength of each previously outstanding unit may be diminished; and
the market price of our Common Units may decline.
The issuance by us of additional General Partner interests may have the following effects, among others, if such General Partner interests are issued to a person who is not an affiliate of Noble:
management of our business may no longer reside solely with our current General Partner; and
affiliates of the newly admitted General Partner may compete with us, and neither that General Partner nor such affiliates will have any obligation to present business opportunities to us except with respect to rights of first refusal contained in our omnibus agreement.
Noble may sell units in the public or private markets, and such sales could have an adverse impact on the trading price of the Common Units.
Noble currently holds 56,447,616 Common Units. Additionally, we have agreed to provide Noble with registration rights. The sale of these units in the public or private markets could have an adverse impact on the price of the Common Units or on any trading market that may develop.
Our General Partner’s discretion in establishing cash reserves may reduce the amount of cash we have available to distribute to unitholders.
Our partnership agreement permits the General Partner to reduce available cash by establishing cash reserves for the proper conduct of our business, (including reserves for future capital expenditures and for our anticipated future credit needs) to comply with applicable law or agreements to which we are a party, or to provide funds for future distributions to partners. These cash reserves will affect the amount of cash we have available to distribute to unitholders.
Affiliates of our General Partner, including Noble, may compete with us, and neither our General Partner nor its affiliates have any obligation to present business opportunities to us except with respect to dedications contained in our commercial agreements and rights of first refusal and rights of first offer contained in our omnibus agreement.
None of our partnership agreement, our omnibus agreement, our commercial agreements or any other agreement in effect will prohibit Noble or any other affiliates of our General Partner from owning assets or engaging in businesses that compete directly or indirectly with us. Under the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, will not apply to our General Partner or any of its affiliates, including Noble and executive officers and directors of our General Partner. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us except with respect to dedications contained in our commercial agreements and rights of first refusal and rights of first offer contained in our omnibus agreement. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. Consequently, Noble and other affiliates of our General Partner may acquire, construct or dispose of additional midstream assets in the future without any obligation to offer us the opportunity to purchase any of those assets. As a result, competition from Noble and other affiliates of our General Partner could materially and adversely impact our results of operations and distributable cash flow.


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Our General Partner has a call right that may require our unitholders to sell their Common Units at an undesirable time or price.
If at any time our General Partner and its affiliates own more than 80% of our then-outstanding common units, our General Partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the Common Units held by unaffiliated persons at a price not less than their then current market price. As a result, our unitholders may be required to sell their Common Units at an undesirable time or price and may not receive any return on their investment. Our unitholders may also incur a tax liability upon a sale of their units. Our General Partner and its affiliates currently own approximately 62.6% of our Common Units (excluding any Common Units owned by the directors and executive officers of our General Partner and certain other individuals as selected by our General Partner under our directed unit program).
Unitholders may have to repay distributions that were wrongfully distributed to them.
Under certain circumstances, unitholders may have to repay amounts wrongfully distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, or the Delaware Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Liabilities to partners on account of their partnership interest and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
Units held by persons who our General Partner determines are not “eligible holders” at the time of any requested certification in the future may be subject to redemption.
As a result of certain laws and regulations to which we are or may in the future become subject, we may require owners of our Common Units to certify that they are both U.S. citizens and subject to U.S. federal income taxation on our income. Units held by persons who our General Partner determines are not “eligible holders” at the time of any requested certification in the future may be subject to redemption. “Eligible holders” are limited partners whose (or whose owners’) (i) U.S. federal income tax status or lack of proof of U.S. federal income tax status does not have and is not reasonably likely to have, as determined by our General Partner, a material adverse effect on the rates that can be charged to customers by us or our subsidiaries with respect to assets that are subject to regulation by the FERC or similar regulatory body and (ii) nationality, citizenship or other related status does not create and is not reasonably likely to create, as determined by our General Partner, a substantial risk of cancellation or forfeiture of any property in which we have an interest. The aggregate redemption price for redeemable interests will be an amount equal to the current market price (the date of determination of which will be the date fixed for redemption) of limited partner interests of the class to be so redeemed multiplied by the number of limited partner interests of each such class included among the redeemable interests. For these purposes, the “current market price” means, as of any date for any class of limited partner interests, the average of the daily closing prices per limited partner interest of such class for the 20 consecutive trading days immediately prior to such date. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our General Partner. The units held by any person the General Partner determines is not an eligible holder will not be entitled to voting rights.
Our partnership agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our unitholders, which would limit our unitholders’ ability to choose the judicial forum for disputes with us or our general partner’s directors, officers or other employees. Our partnership agreement also provides that any unitholder bringing an unsuccessful action will be obligated to reimburse us for any costs we have incurred in connection with such unsuccessful action.
Our partnership agreement provides that, with certain limited exceptions, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction) shall be the exclusive forum for any claims, suits, actions or proceedings (i) arising out of or relating in any way to our partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the duties, obligations or liabilities among our partners, or obligations or liabilities of our partners to us, or the rights or powers of, or restrictions on, our partners or us), (ii) brought in a derivative manner on our behalf, (iii) asserting a claim of breach of a duty owed by any of our, or our general partner’s, directors, officers, or other employees, or owed by our general partner, to us or our partners, (iv) asserting a claim against us arising pursuant to any provision of the Delaware Act or (v) asserting a claim against us governed by the internal affairs doctrine.
The exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore,

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Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation or similar governing documents has been challenged in legal proceedings, and it is possible that a court could find the choice of forum provisions contained in our partnership agreement to be inapplicable or unenforceable, including with respect to claims arising under the U.S. federal securities laws. This exclusive forum provision may limit the ability of a limited partner to commence litigation in a forum that the limited partner prefers, or may require a limited partner to incur additional costs in order to commence litigation in Delaware, each of which may discourage such lawsuits against us or our general partner’s directors or officers. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our business, results of operations and financial condition.
If any person brings any of the aforementioned claims, suits, actions or proceedings (including any claims, suits, actions or proceedings arising out of this offering) and such person does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought, then such person shall be obligated to reimburse us and our affiliates for all fees, costs and expenses of every kind and description, including but not limited to all reasonable attorneys’ fees and other litigation expenses, that the parties may incur in connection with such claim, suit, action or proceeding. In addition, our partnership agreement provides that each limited partner irrevocably waives the right to trial by jury in any such claim, suit, action or proceeding. However, such waiver of the right to trial by jury does not impact the ability of a limited partner to make a claim under either federal or state law. By purchasing a common unit, a limited partner is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or such other court) in connection with any such claims, suits, actions or proceedings. These provisions may have the effect of discouraging lawsuits against us and our general partner’s directors and officers.
Our partnership agreement provides that unitholders irrevocably waive the right to trial by jury in any claim, suit, action or proceeding under either state or federal laws, including any claim under U.S. federal securities laws, which could result in less favorable outcomes to unitholders in any such action.
Our partnership agreement provides that unitholders irrevocably waive the right to trial by jury for any claims, suits, actions or proceedings under either state or federal laws, including any claim under U.S. federal securities laws. Regardless, such waiver of the right to trial by jury does not impact the ability of a unitholder to make a claim under either federal or state law. The waiver of the right to a jury trial is not intended to be deemed a waiver by a unitholder with respect to the Partnership’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. If the Partnership or one of its unitholders opposed a jury trial demand based on the waiver, the applicable court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with applicable state and federal laws. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the U.S. federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Delaware, which govern our partnership agreement.
If a unitholder brings a claim in connection with matters arising under our partnership agreement, including claims under U.S. federal securities laws, such unitholder may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits. If a lawsuit is brought by a unitholder under our partnership agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in a different outcome than a trial by jury, including results that could be less favorable to the unitholder(s) bringing such lawsuit.
Nasdaq does not require a publicly traded limited partnership like us to comply with certain of its corporate governance requirements.
Our Common Units are listed on Nasdaq. Because we are a publicly traded limited partnership, Nasdaq does not require us to have a majority of independent directors on our General Partner’s board of directors or to establish a compensation committee or a nominating and corporate governance committee. Additionally, any future issuance of additional Common Units or other securities, including to affiliates, will not be subject to Nasdaq’s shareholder approval rules that apply to a corporation. Accordingly, unitholders will not have the same protections afforded to certain corporations that are subject to all of Nasdaq’s corporate governance requirements.

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If we are deemed an “investment company” under the Investment Company Act of 1940, it would adversely affect the price of our Common Units and could have a material adverse effect on our business.
If a sufficient amount of our assets, such as our ownership interests in other midstream ventures, now owned or in the future acquired, are deemed to be “investment securities” within the meaning of the Investment Company Act of 1940, or the Investment Company Act, we would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC or modify our organizational structure or our contract rights to fall outside the definition of an investment company. In that event, it is possible that our ownership of these interests, combined with our assets acquired in the future, could result in our being required to register under the Investment Company Act if we were not successful in obtaining exemptive relief or otherwise modifying our organizational structure or applicable contract rights. Treatment of us as an investment company would prevent our qualification as a partnership for federal income tax purposes in which case we would be treated as a corporation for federal income tax purposes. As a result, we would pay federal income tax on our taxable income at the corporate tax rate, distributions to our unitholders would generally be taxed again as corporate distributions and none of our income, gains, losses or deductions would flow through to our unitholders. Because a tax would be imposed upon us as a corporation, our cash available for distribution to unitholders would be substantially reduced. Therefore, treatment of us as an investment company would result in a material reduction in the anticipated cash flow and after-tax return to the unitholders, likely causing a substantial reduction in the value of our Common Units.
Moreover, registering as an investment company could, among other things, materially limit our ability to engage in transactions with affiliates, including the purchase of additional interests in our midstream systems from Noble, restrict our ability to borrow funds or engage in other transactions involving leverage and require us to add additional directors who are independent of us or our affiliates. The occurrence of some or all of these events would adversely affect the price of our Common Units and could have a material adverse effect on our business.
Tax Risks
Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes. If the Internal Revenue Service (IRS) were to treat us as a corporation for U.S. federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of entity-level taxation, then our distributable cash flow to our unitholders would be substantially reduced.
The anticipated after-tax economic benefit of an investment in the Common Units depends largely on our being treated as a partnership for U.S. federal income tax purposes.
Despite the fact that we are organized as a limited partnership under Delaware law, we would be treated as a corporation for U.S. federal income tax purposes unless we satisfy a “qualifying income” requirement. Based upon our current operations and current Treasury Regulations, we believe that we satisfy the qualifying income requirement. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal income tax on our taxable income at the corporate tax rate and we would also likely pay additional state and local income taxes at varying rates. Distributions to our unitholders would generally be taxed again as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions, or credits would flow through to our unitholders. Because a tax would be imposed upon us as a corporation, our distributable cash flow would be substantially reduced.
At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. Imposition of a material amount of any of these taxes in the jurisdictions in which we own assets or conduct business could substantially reduce the cash available for distribution to our unitholders.
If we were treated as a corporation for U.S. federal income tax purposes or otherwise subjected to a material amount of entity-level taxation, there would be a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our Common Units.
The tax treatment of publicly traded partnerships or an investment in our Common Units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our Common Units may be modified by administrative, legislative or judicial interpretation at any time. From time to time, members of Congress have proposed and considered substantive changes to the existing U.S. federal income tax laws that would affect publicly traded partnerships, including elimination of partnership tax treatment for certain publicly traded partnerships.
In addition, the Treasury Department has issued, and in the future may issue, regulations interpreting those laws that affect publicly traded partnerships. Any modification to the U.S. federal income tax laws and interpretations thereof may or may not

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be retroactively applied and could make it more difficult or impossible for us to meet the exception for certain publicly traded partnerships to be treated as partnerships for U.S. federal income tax purposes. We are unable to predict whether any changes or other proposals will ultimately be enacted. Any future legislative changes could negatively impact the value of an investment in our Common Units.
You are urged to consult with your own tax advisor with respect to the status of regulatory or administrative developments and proposals and their potential effect on your investment in our Common Units.
If the IRS contests the U.S. federal income tax positions we take, the market for our Common Units may be adversely impacted and our cash available to our unitholders might be substantially reduced.
The IRS may adopt positions that differ from the conclusions of our counsel expressed in this Annual Report or from the positions we take, and the IRS’s positions may ultimately be sustained. It may be necessary to resort to administrative or court proceedings to sustain some or all of our counsel’s conclusions or the positions we take and such positions may not ultimately be sustained. A court may not agree with some or all of our counsel’s conclusions or the positions we take. Any contest with the IRS, and the outcome of any IRS contest, may materially and adversely impact on the market for our Common Units and the price at which they trade. In addition, our costs of any contest between us and the IRS will be borne indirectly by our unitholders because the costs will reduce our distributable cash flow.
If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.
Legislation applicable to partnership tax years beginning after 2017 alters the procedures for auditing large partnerships and for assessing and collecting taxes due (including penalties and interest) as a result of a partnership-level federal income tax audit. If the IRS makes an audit adjustment to our partnership tax return, to the extent possible under the new rules our General Partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS in the year in which the audit is completed or, if we are eligible, issue a revised information statement to each unitholder and former unitholder with respect to an audited and adjusted partnership tax return. Although our General Partner may elect to have our unitholders and former unitholders take such audit adjustment into account and pay any resulting taxes (including applicable penalties or interest) in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible or effective in all circumstances. If, as a result of any such adjustment, we make payments of taxes and any penalties and interest directly to the IRS in the year in which the audit is completed, cash available for distribution to our unitholders might be substantially reduced, in which case our current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if the current unitholders did not own Common Units in us during the tax year under audit.
Our unitholders’ share of our income is taxable to them for U.S. federal income tax purposes even if they do not receive any cash distributions from us.
Each unitholder is treated as a partner to whom we will allocate taxable income even if the unitholder does not receive any cash distributions from us. Unitholders are required to pay federal income taxes and, in some cases, state and local income taxes, on their share of our taxable income, whether or not they receive cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due from them with respect to that income.
Tax gain or loss on the disposition of our Common Units could be more or less than expected.
If our unitholders sell Common Units, they will recognize a gain or loss for U.S. federal income tax purposes equal to the difference between the amount realized and their tax basis in those Common Units. Because distributions in excess of their allocable share of our net taxable income decrease their tax basis in their Common Units, the amount, if any, of such prior excess distributions with respect to the Common Units a unitholder sells will, in effect, become taxable income to the unitholder if it sells such Common Units at a price greater than its tax basis in those Common Units, even if the price received is less than its original cost. In addition, because the amount realized includes a unitholder’s share of our nonrecourse liabilities, if a unitholder sells its units, a unitholder may incur a tax liability in excess of the amount of cash received from the sale.
Furthermore, a substantial portion of the amount realized on any sale of Common Units, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture. Thus, a unitholder may recognize both ordinary income and capital loss from the sale of Common Units if the amount realized on a sale of the Common Units is less than the unitholder’s adjusted basis in Common Units. In addition, because the amount realized includes a unitholder’s share of our non-recourse liabilities, a unitholder that sells Common Units may incur a tax liability in excess of the amount of cash received from the sale.

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Unitholders may be subject to limitations on their ability to deduct interest expense we incur.
In general, we are entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or
business during our taxable year. However, under the Tax Cuts and Jobs Act, for taxable years beginning after December 31, 2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable for depreciation, amortization, or depletion to the extent such depreciation, amortization, or depletion is not capitalized into cost of goods sold with respect to inventory. If our “business interest” is subject to limitation under these rules, our unitholders will be limited in their ability to deduct their share of any interest expense that has been allocated to them. As a result, unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
Tax-exempt entities face unique tax issues from owning our Common Units that may result in adverse tax consequences to them.
Investment in Common Units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (“IRAs”), raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. With respect to taxable years beginning after December 31, 2017, subject to the proposed aggregation rules for certain similarly situated businesses or activities issued by the Treasury Department, a tax-exempt entity with more than one unrelated trade or business cannot aggregate losses from one unrelated trade or business to offset income from another to reduce total unrelated business taxable income. As a result, for the years beginning after December 31, 2017, it may not be possible for tax-exempt entities to utilize losses from an investment in us to offset unrelated business taxable income from another unrelated trade or business and vice versa. Tax exempt entities should consult a tax advisor before investing in our Common Units.
Non-U.S. unitholders will be subject to U.S. federal income taxes and withholding with respect to income and gain from owning our Common Units.
Non-U.S. unitholders are generally taxed and subject to U.S. federal income tax filing requirements on income effectively connected with a U.S. trade or business. Income allocated to our unitholders and, under recently enacted legislation, any gain from the sale of our Common Units will generally be considered to be “effectively connected” with a U.S. trade or business. As a result, distributions to a non-U.S. unitholder will be subject to withholding at the highest applicable effective tax rate, and a non-U.S. unitholder who sells or otherwise disposes of a common unit will also be subject to U.S. federal income on the gain realized from the sale or disposition of that Common Unit.
Moreover, the transferee of an interest in a partnership that is engaged in a U.S. trade or business is generally required to withhold 10% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person, and we are required to deduct and withhold from the transferee amounts that should have been withheld by the transferees but were not withheld. Because the “amount realized” includes a partner’s share of the partnership’s liabilities, 10% of the amount realized could exceed the total cash purchase price for the units. However, pending the issuance of final regulations, the IRS has suspended the application of this withholding rule to transfers of publicly traded interests in publicly traded partnerships. If recently promulgated regulations are finalized as proposed, such regulations would provide, with respect to transfers of publicly traded interests in publicly traded partnerships effected through a broker, that the obligation to withhold is imposed on the transferor’s broker and that a partner’s “amount realized” does not include a partner’s share of a publicly traded partnership’s liabilities for purposes of determining the amount subject to withholding. However, it is not clear when such regulations will be finalized and if they will be finalized in their current form.
We treat each purchaser of Common Units as having the same tax benefits without regard to the actual Common Units purchased. The IRS may challenge this treatment, which could adversely affect the value of the Common Units.
Because we cannot match transferors and transferees of Common Units and because of other reasons, our depreciation and amortization positions may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to unitholders. It also could affect the timing of these tax benefits or the amount of gain from a unitholder’s sale of Common Units and could have a negative impact on the value of our Common Units or result in tax return audit adjustments.
We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes between transferors and transferees of our Common Units each month based upon the ownership of our Common Units on the first day of each month, instead of on the basis of the date a particular Common Unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.
We generally prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes between transferors and transferees of our Common Units each month based upon the ownership of our Common Units on the first day of each

43


month, instead of on the basis of the date a particular unit is transferred. Although Treasury Regulations allow publicly traded partnerships to use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, these Treasury Regulations do not specifically authorize all aspects of our proration method. If the IRS were to successfully challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.
A unitholder whose Common Units are loaned to a “short seller” to effect a short sale of Common Units may be considered as having disposed of those Common Units. If so, the unitholder would no longer be treated for U.S. federal income tax purposes as a partner with respect to those Common Units during the period of the loan and may recognize gain or loss from the disposition.
Because there are no specific rules governing the U.S. federal income tax consequence of loaning a partnership interest, a unitholder whose Common Units are loaned to a “short seller” to effect a short sale of Common Units may be considered as having disposed of the loaned Common Units, the unitholder may no longer be treated for U.S. federal income tax purposes as a partner with respect to those Common Units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those Common Units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those Common Units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from loaning their Common Units.
As a result of investing in our Common Units, our unitholders may become subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire properties.
In addition to U.S. federal income taxes, our unitholders will likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or control property now or in the future, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. As we make acquisitions or expand our business, we may control assets or conduct business in additional states that impose a personal income tax. It is our unitholders’ responsibility to file all federal, state and local tax returns and pay any taxes due in these jurisdictions. Unitholders should consult with their own tax advisors regarding the filing of such tax returns, the payment of such taxes, and the deductibility of any taxes paid.
Item 1B.  Unresolved Staff Comments
None.
Item 3.  Legal Proceedings
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 will defend ourselves vigorously in all such matters.
Information regarding legal proceedings is set forth in Item 8. Financial Statements and Supplementary Data – Note 15. Commitments and Contingencies of this Form 10-K, which is incorporated by reference into this Part I, Item 3.
Information regarding environmental proceedings is set forth in Items 1. and 2. Business and Properties – Regulations – Environmental Matters – Water – Colorado Water Quality Control Act of this Form 10-K, which is incorporated by reference into this Part I, Item 3.
Item 4.  Mine Safety Disclosures
Not Applicable.

44


PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
On December 16, 2019, acting pursuant to authorization from the Board of our General Partner, we provided notice to the New York Stock Exchange (“NYSE”) of our intent to voluntarily withdraw the principal listing of our Common Units representing limited partner interests, from the NYSE and transfer the listing to Nasdaq. Our Common Units were voluntarily delisted effective as of the close of trading on December 27, 2019, and trading commenced on Nasdaq at market open on December 30, 2019. Our Common Units continue to trade under the symbol “NBLX”.
As of December 31, 2019, our units were held by 19 holders of record. The number of holders does not include the holders for whom units are held in a “nominee” or “street” name. In addition, as of December 31, 2019, Noble owned 56,447,616 of our Common Units, which represent a 62.6% limited partner interest in us.
Securities Authorized for Issuance Under Equity Compensation Plans 
In 2016, the board of directors of our General Partner adopted the Noble Midstream Partners LP 2016 Long-Term Incentive Plan (the “LTIP”), which permits the issuance of up to 1,860,000 Common Units. See Item 8. Financial Statements and Supplementary Data – Note 11. Unit-Based Compensation for information regarding our equity compensation plan as of December 31, 2019.
The following table summarizes information regarding the number of Common Units that are available for issuance under our LTIP as of December 31, 2019.
Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
(a)
(b)
(c)
Equity Compensation Plans Approved by Security Holders


1,630,638

Equity Compensation Plans Not Approved by Security Holders



Total


1,630,638

Distributions of Available Cash
General
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. On January 23, 2020, the Board of our General Partner declared a quarterly cash distribution of $0.6878 per limited partner unit. The distribution will be paid on February 14, 2020, to unitholders of record on February 4, 2020.
Definition of Available Cash
Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter:
less, the amount of cash reserves established by our General Partner to:
provide for the proper conduct of our business (including reserves for our future capital expenditures, future acquisitions and for anticipated future credit needs);
comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which we or any of our subsidiaries is a party or by which we or such subsidiary is bound or we or such subsidiary’s assets are subject; or
provide funds for distributions to our unitholders and to our General Partner for any one or more of the next four quarters (provided that our General Partner may not establish cash reserves for distributions pursuant to this bullet point if the effect of such reserves will prevent us from distributing $0.375);
plus, if our General Partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.

45


The purpose and effect of the last bullet point above is to allow our General Partner, if it so decides, to use cash from working capital borrowings made after the end of the quarter but on or before the date of determination of available cash for that quarter to pay distributions to unitholders. Under our partnership agreement, working capital borrowings are generally borrowings incurred under a credit facility, commercial paper facility or similar financing arrangement that are used solely for working capital purposes or to pay distributions to our partners and with the intent of the borrower to repay such borrowings within twelve months with funds other than from additional working capital borrowings.
General Partner Interest
Our General Partner owns a non-economic General Partner interest in us, which does not entitle it to receive cash distributions. However, our General Partner may in the future own Common Units or other equity securities in us that will entitle it to receive distributions.
Simplification of Incentive Distribution Rights
On November 14, 2019, all of the IDRs were converted into Common Units as part of the Drop-Down and Simplification Transaction.
Conversion of Subordinated Units
On April 25, 2019, the Board of our General Partner declared a quarterly cash distribution of $0.6132 per unit for the quarter ended March 31, 2019. The distribution was paid on May 13, 2019 to unitholders of record as of the close of business on May 6, 2019. Upon payment of such 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 Noble, converted into Common Units on a one-for-one basis and thereafter have or will continue to participate on terms equal with all other Common Units in distributions from available cash.


46


Item 6. Selected Financial Data
Selected Financial Data for periods prior to September 20, 2016 represent the Contributed Businesses of certain of Noble’s midstream assets as the accounting Predecessor to the Partnership, presented on a carve-out basis of Noble’s historical ownership of the Predecessor. The Predecessor financial data has been prepared from the separate records maintained by Noble and may not necessarily be indicative of the actual results of operations that might have occurred if the Predecessor had been operated separately during the periods reported. Our consolidated financial statements have been retrospectively recast for all periods presented to include the historical results of NBL Holdings, as the acquisition of NBL Holdings by the Partnership in the Drop-Down and Simplification Transaction represented a transaction between entities under common control. The selected financial data covering the periods prior to the aforementioned transactions may not necessarily be indicative of the actual results of operations had these entities been operated together during those periods.
The information presented below should be read in conjunction with the information in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and related notes appearing in Item 8. Financial Statements and Supplementary Data.
 
Year Ended December 31,
(in thousands, except as noted)
2019
 
2018
 
2017
 
2016
 
2015
Statements of Operations
 
 
 
 
 
 
 
 
 
Total Revenues
$
703,801

 
$
558,735

 
$
289,622

 
$
193,453

 
$
117,878

Net Income
245,467

 
216,719

 
160,767

 
96,290

 
(88,344
)
Net Income Attributable to Noble Midstream Partners LP
159,996

 
162,734

 
140,572

 
28,458

 
N/A

 
 
 
 
 
 
 
 
 
 
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic
 
 
 
 
 
 
 
 
 
Common Units
$
3.09

 
$
3.96

 
$
4.10

 
$
0.89

 
N/A

Subordinated Units
3.86

 
3.96

 
4.10

 
0.89

 
N/A

Cash Distributions Declared per Limited Partner Unit
2.6144

 
2.1913

 
1.8113

 
0.4333

 
N/A

 
 
 
 
 
 
 
 
 
 
Balance Sheet
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
12,676

 
$
14,761

 
$
20,090

 
$
57,443

 
$
30,299

Total Property, Plant and Equipment, Net
1,762,957

 
1,570,923

 
821,962

 
380,310

 
352,764

Investments
660,778

 
82,317

 
80,461

 
11,151

 
12,279

Intangible Assets, Net
277,900

 
310,202

 

 

 

Goodwill
109,734

 
109,734

 

 

 

Total Assets
2,926,082

 
2,192,178

 
1,038,465

 
537,430

 
481,853

Long-Term Debt
1,495,679

 
559,021

 
85,000

 

 

Total Liabilities
1,665,221

 
705,623

 
251,806

 
50,368

 
61,674

Mezzanine Equity
106,005

 

 

 

 

Total Equity
1,154,856

 
1,486,555

 
786,659

 
487,062

 
420,179

 
 
 
 
 
 
 
 
 
 
Throughput and Crude Oil Sales Volumes
 
 
 
 
 
 
 
 
 
Crude Oil Sales Volumes (Bbl/d)
9,354

 
6,129

 

 

 

Crude Oil Gathering Volumes (Bbl/d)
231,963

 
177,127

 
69,249

 
45,236

 
33,977

Natural Gas Gathering Volumes (MMBtu/d)
631,760

 
387,804

 
244,940

 
180,262

 
100,298

Total Barrels of Oil Equivalent (Boe/d)
322,312

 
232,974

 
100,652

 
68,347

 
46,836

Natural Gas Processing Volumes (MMBtu/d)
50,039

 
61,766

 
49,531

 
42,269

 
11,735

Produced Water Gathering Volumes (Bbl/d)
188,515

 
121,215

 
37,365

 
10,592

 
5,198

Fresh Water Services Volumes (Bbl/d)
164,524

 
175,754

 
155,990

 
94,227

 
51,980


47


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a narrative about our business from the perspective of our management. Our MD&A is presented in the following major sections:
MD&A is the Partnership’s analysis of its financial performance and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. It contains forward-looking statements including, without limitation, statements relating to the Partnership’s 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,” “on schedule,” “strategy,” and similar expressions identify forward-looking statements. The Partnership does 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 the Partnership’s disclosures under “Disclosure Regarding Forward-Looking Statements” in this Form 10-K.
EXECUTIVE OVERVIEW
Overview
We are a growth-oriented Delaware master limited partnership formed in December 2014 by our Parent, Noble, to own, operate, develop and acquire a wide range of domestic midstream infrastructure assets. Our current areas of focus are in the DJ Basin in Colorado and the Delaware Basin in Texas. We currently provide crude oil, natural gas, and water-related midstream services through long-term, fixed-fee contracts, as well as purchase crude oil from producers and sell crude oil to customers at various delivery points. Our business activities are conducted through four reportable segments: Gathering Systems (primarily includes crude oil gathering, natural gas gathering and processing, produced water gathering and crude oil sales), Fresh Water Delivery, Investments in Midstream Entities and Corporate. We often refer to the services of our Gathering Systems and Fresh Water Delivery reportable segments collectively as our midstream services.
We are Noble’s primary vehicle for its midstream operations in the onshore United States. We believe that our diverse midstream infrastructure assets and our relationship with Noble position us as a leading midstream service provider.
2019 Initiatives and Results
During 2019, our activities were focused on positioning the Partnership for sustainable, long-term cash flows through the following initiatives:
Developing Strategic Relationships Our strategic relationships, including with Saddlehorn, in the DJ Basin, and with EPIC Y-Grade, EPIC Crude Holdings, and Delaware Crossing in the Delaware Basin, resulted in expansion of our long-haul business downstream of our gathering systems and an increase in dedications.
Improving Cost Structure Despite record throughput, capital expenditures trended below our expectations for the year, due to consistent cost focus, utilization of existing infrastructure, and to a lesser extent, the timing of customer activity. Cost savings initiatives included project scope and design optimization and more efficient construction processes as well as an enhanced contracting strategy.
Expanding our Third-party Business We significantly increased midstream services revenues, particularly in the DJ Basin, through additional well connections to existing customers and adding new customers to our systems.
Managing Liquidity We utilized a new term loan facility, preferred equity commitment and common unit offerings to provide liquidity while executing our growth opportunities, including the entry into multiple new partnerships.
Returning Value to Unit Holders While executing our growth opportunities, we were able to provide consistent quarterly distribution increases to our unitholders.
Increasing Alignment and Operational Synergies with Noble Through the Drop-Down and Simplification Transaction, we simplified our relationship with Noble through the elimination of IDRs and the acquisition of the remaining ownership interest in our DevCos as well as gained additional midstream assets.
Specifically, we accomplished the following significant transactional and financial results for the year ended December 31, 2019.

48


Significant Transactional Highlights Include:
completed the Drop-Down and Simplification Transaction;
completed the formation of Delaware Crossing;
closed options to acquire interests in EPIC Y-Grade and EPIC Crude;
secured equity commitment and issued preferred equity to GIP CAPS Dos Rios Holding Partnership, L.P. (“GIP”);
entered into an additional term loan credit facility that permitted aggregate borrowing up to $400 million; and
extended the borrowing capacity of our revolving credit facility to $1.15 billion.
Significant Financial Highlights Include:
net income of $245.5 million, an increase of 13% as compared with 2018;
net cash provided by operating activities of $385.1 million, an increase of 41% as compared with 2018;
Adjusted EBITDA (non-GAAP financial measure) of $385.9 million, an increase of 18% as compared with 2018;
Adjusted EBITDA (non-GAAP financial measure) attributable to the partnership of $254.6 million, an increase of 14% as compared with 2018; and
distributable cash flow (non-GAAP financial measure) of $213.4 million, an increase of 17% as compared with 2018.
For additional information regarding our non-GAAP financial measures, see Adjusted EBITDA (Non-GAAP Financial Measure), Distributable Cash Flow (Non-GAAP Financial Measure) and Reconciliation of Non-GAAP Financial Measures, below.
OPERATING OUTLOOK
2019 Development Project Updates
DJ Basin
In the Greeley Crescent IDP area, we commenced construction on the trunkline extensions supporting future produced water gathering and fresh water delivery services. During the year, we connected 72 wells in Greeley Crescent IDP for two stream gathering services and delivered fresh water to 70 wells.
In the Black Diamond dedication area, we progressed the Milton Phase I Terminal expansion project that increased outlet pumping capacity and we installed new oil gathering infrastructure for upcoming well connections from third-party producers. During the year, we connected 260 third-party wells to the Black Diamond gathering system. Black Diamond added a long-term oil gathering dedication from a third-party customer. The dedication increased Black Diamond dedicated acres by approximately 85,000 acres, or 54%.
In the Mustang IDP area, we extended infrastructure for crude oil, natural gas and produced water gathering systems to facilitate further development and support future well connections. We also completed additional natural gas offload capacity to facilitate future growth from the area. During the year, we connected 56 wells to the Mustang gathering system.
In the Wells Ranch IDP area, we commenced construction on extensions of gathering infrastructure to support future well connections. During the year, we connected and delivered fresh water to 42 wells.
In the East Pony IDP area, we connected and delivered fresh water to 22 wells during the year.
Delaware Basin
In the Permian, we connected 13 sponsored wells and six third-party wells to our gathering systems. We are now connected to 151 sponsor and 15 third-party wells. We also plan to add further compression capacity to our CGFs during 2020.
Saddlehorn Transportation Commitment and Investment Option
During 2019, Black Diamond entered into a strategic relationship with Saddlehorn. Saddlehorn is jointly owned by affiliates of Magellan, Plains and Western Midstream. 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 with Saddlehorn. See Item 8. Financial Statements and Supplementary Data – Note 15. Commitments and Contingencies. Black Diamond received an option to acquire an ownership interest of up to 20% in Saddlehorn. Black Diamond’s investment option was scheduled to expire in April 2020. In February 2020, Black Diamond exercised its option, effective February 1, 2020, and acquired the 20% ownership interest for $155 million, or $84 million net to the Partnership. After Black Diamond’s purchase, with Magellan and Plains each selling a 10% interest, Magellan and Plains each own a 30% membership interest and Black

49


Diamond and Western Midstream each own a 20% membership interest in Saddlehorn. Magellan continues to serve as operator of the Saddlehorn pipeline. The Partnership funded its share of the transaction price with available cash and a draw under its revolving credit facility.
2020 Capital Program
Organic Capital Program
Our 2020 organic capital program will accommodate a net investment level of approximately $190 to $230 million. The Partnership has lowered previously-issued 2020 organic net capital expectations by 25% due to continued progress on sustainable costs savings, including a reduction in pipeline installation costs and improved planning and construction solutions for projects as well as better line of sight to customer activity. We will 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;
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 securities.
Investment Capital Program
Our 2020 investment capital program will accommodate a net investment level, inclusive of the $84 million to acquire the 20% interest in Saddlehorn, of approximately $220 to $260 million. The partnership has increased previously-issued 2020 investment capital guidance due to scope changes and phasing of investments from 2019 to 2020 as well as factoring higher cost assumptions to complete the projects.

50


How We Evaluate Our Operations
Our management uses a variety of financial and operating metrics, each as described in more detail below, to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include:
throughput volumes (Gathering Systems and Fresh Water Delivery reportable segments);
operating costs and expenses;
Adjusted EBITDA (non-GAAP financial measure);
distributable cash flow (non-GAAP financial measure); and
capital expenditures.
RESULTS OF OPERATIONS
Results of operations were as follows:
 
Year Ended December 31,
(in thousands)
2019
 
2018
 
2017
Revenues
 
 
 
 
 
Midstream Services — Affiliate
$
417,835

 
$
338,747

 
$
271,269

Midstream Services — Third Party
96,194

 
78,498

 
18,353

Crude Oil Sales — Third Party
189,772

 
141,490

 

Total Revenues
703,801

 
558,735

 
289,622

Costs and Expenses
 
 
 
 
 
Cost of Crude Oil Sales
181,390

 
136,368

 

Direct Operating
116,675

 
95,852

 
67,832

Depreciation and Amortization
96,981

 
79,568

 
22,990

General and Administrative
25,777

 
25,910

 
14,792

Other Operating (Income) Expense
(488
)
 
2,159

 

Total Operating Expenses
420,335

 
339,857

 
105,614

Operating Income
283,466

 
218,878

 
184,008

Other Expense (Income)
 
 
 
 
 
Interest Expense, Net of Amount Capitalized
16,236

 
10,447

 
1,603

Investment Loss (Income)
17,748

 
(16,289
)
 
(6,334
)
Total Other Expense (Income)
33,984

 
(5,842
)
 
(4,731
)
Income Before Income Taxes
249,482

 
224,720

 
188,739

Tax Provision
4,015

 
8,001

 
27,972

Net Income
245,467

 
216,719

 
160,767

Less: Net Income Prior to the Drop-Down and Simplification Transaction
12,929

 
27,843

 
(2,869
)
Net Income Subsequent to the Drop-Down and Simplification Transaction
232,538

 
188,876

 
163,636

Less: Net Income Attributable to Noncontrolling Interests
72,542

 
26,142

 
23,064

Net Income Attributable to Noble Midstream Partners LP
$
159,996

 
$
162,734

 
$
140,572

 
 
 
 
 
 
Adjusted EBITDA(1) Attributable to Noble Midstream Partners LP
$
254,586

 
$
223,144

 
$
156,526

 
 
 
 
 
 
Distributable Cash Flow(1) of Noble Midstream Partners LP
$
213,442

 
$
182,024

 
$
136,156

(1) 
Adjusted EBITDA and Distributable Cash Flow are not defined in 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, see — Adjusted EBITDA (Non-GAAP Financial Measure), Distributable Cash Flow (Non-GAAP Financial Measure) and Reconciliation of Non-GAAP Financial Measures, below.

51


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. These volumes are affected primarily by the level of drilling and completion activity by our customers in our areas of operations, and by changes in the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets.
Our customers willingness to engage in drilling and completion activity is determined by a number of factors, the most important of which are the prevailing and projected prices of crude oil and natural gas, the cost to drill and operate a well, expected well performance, the availability and cost of capital, and environmental and government regulations. We generally expect the level of drilling to positively correlate with long-term trends in commodity prices. Similarly, production levels nationally and regionally generally tend to positively correlate with drilling activity.
Our customers have dedicated acreage to us based on the services we provide. Our commercial agreements with Noble provide that, in addition to our existing dedicated acreage, any future acreage that is acquired by Noble in the IDP areas, and that is not subject to a pre-existing third-party commitment, will be included in the dedication to us for midstream services.
Throughput and crude oil sales volumes related to our Gathering Systems reportable segment and throughput volumes related to our Fresh Water Delivery reportable segment were as follows:
 
Year Ended December 31,
 
2019
 
2018
 
2017
DJ Basin
 
 
 
 
 
Crude Oil Sales Volumes (Bbl/d)
9,354

 
6,129

 

Crude Oil Gathering Volumes (Bbl/d)
182,121

 
143,095

 
61,864

Natural Gas Gathering Volumes (MMBtu/d)
476,605

 
308,929

 
228,768

Natural Gas Processing Volumes (MMBtu/d)
50,039

 
61,766

 
49,531

Produced Water Gathering Volumes (Bbl/d)
39,629

 
29,903

 
16,435

Fresh Water Delivery Volumes (Bbl/d)
164,524

 
175,754

 
155,990

 
 
 
 
 
 
Delaware Basin
 
 
 
 
 
Crude Oil Gathering Volumes (Bbl/d)
49,842

 
34,032

 
7,385

Natural Gas Gathering Volumes (MMBtu/d)
155,155

 
78,875

 
16,172

Produced Water Gathering Volumes (Bbl/d)
148,886

 
91,312

 
20,930

 
 
 
 
 
 
Total Gathering Systems
 
 
 
 
 
Crude Oil Sales Volumes (Bbl/d)
9,354

 
6,129

 

Crude Oil Gathering Volumes (Bbl/d)
231,963

 
177,127

 
69,249

Natural Gas Gathering Volumes (MMBtu/d)
631,760

 
387,804

 
244,940

Total Barrels of Oil Equivalent (Boe/d)
322,312

 
232,974

 
100,652

Natural Gas Processing Volumes (MMBtu/d)
50,039

 
61,766

 
49,531

Produced Water Gathering Volumes (Bbl/d)
188,515

 
121,215

 
37,365

 
 
 
 
 
 
Total Fresh Water Delivery
 
 
 
 
 
Fresh Water Services Volumes (Bbl/d)
164,524

 
175,754

 
155,990



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Revenues
Revenues from our Gathering System and Fresh Water Delivery reportable segments were as follows:
 
 
 
Increase (Decrease)
from Prior Year
 
 
 
Increase (Decrease)
from Prior Year
 
 
(in thousands, except percentages)
2019
 
 
2018
 
 
2017
Year Ended December 31,
 
 
 
 
 
 
 
 
 
Gathering and Processing — Affiliate
$
337,086

 
27
 %
 
$
265,505

 
40
 %
 
$
189,732

Gathering and Processing — Third Party
76,645

 
42
 %
 
54,017

 
626
 %
 
7,444

Fresh Water Delivery Affiliate
77,566

 
12
 %
 
69,266

 
(9
)%
 
75,860

Fresh Water Delivery — Third Party
12,591

 
(35
)%
 
19,345

 
77
 %
 
10,909

Crude Oil Sales — Third Party
189,772

 
34
 %
 
141,490

 
N/M

 

Other — Affiliate
3,183

 
(20
)%
 
3,976

 
(30
)%
 
5,677

Other — Third Party
6,958

 
35
 %
 
5,136

 
N/M

 

Total Midstream Services Revenues
$
703,801

 
26
 %
 
$
558,735

 
93
 %
 
$
289,622

N/M amount is not meaningful.
Revenues Trend Analysis
Revenues increased during 2019 as compared with 2018 and increased during 2018 as compared with 2017. The increases in revenues by reportable segment were as follows:
Gathering Systems Gathering Systems revenues increased by $143.5 million during 2019 as compared with 2018 due to the following:
an increase of $48.3 million in crude oil sales and $17.4 million in crude oil gathering services driven by an increase in throughput volumes resulting from an increase in the number of wells connected to the Black Diamond system;
an increase of $54.8 million in crude oil, produced water and natural gas gathering services revenues driven by an increase in throughput volumes resulting from an increase in wells connected to our gathering systems in the Wells Ranch IDP, Greeley Crescent IDP, and Mustang IDP.
an increase of $43.6 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes resulting from an increase in wells connected to our gathering systems in the Delaware Basin;
partially offset by:
a decrease of $10.1 million in natural gas gathering and processing revenues driven by a decrease in natural gas throughput volumes in the East Pony IDP; and
a decrease of $7.2 million in crude oil gathering driven by a decrease in crude oil throughput volumes in the East Pony IDP.
Gathering Systems revenues increased by $267.3 million during 2018 as compared with 2017 due to the following:
an increase of $141.5 million in crude oil sales due to the commencement of services upon closing of Black Diamond’s and Greenfield Midstream, LLC’s (the “Greenfield Member”) acquisition of all of the issued and outstanding limited liability company interests (the “Black Diamond Acquisition”) in Saddle Butte Rockies Midstream, LLC and certain affiliates (collectively, “Saddle Butte”) from Saddle Butte Pipeline II, LLC;
an increase of $43.1 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 a full year of gathering services revenues and the commencement of services with a third-party customer during 2018;
an increase of $34.1 million in crude oil and natural gas gathering services revenues due to the commencement of services upon closing of the Black Diamond Acquisition;
an increase of $19.9 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes in the Wells Ranch IDP and East Pony IDP;
an increase of $10.3 million in crude oil, natural gas and produced water gathering services revenues due to the commencement of services in the Mustang IDP during 2018;
an increase of $8.2 million in crude oil and produced water gathering services due to providing a full year of services in the Greeley Crescent IDP to an unaffiliated third party; and

53


an increase of $3.5 million in crude oil, natural gas and produced water gathering services revenue driven by rate escalations in the Wells Ranch IDP and East Pony IDP;
partially offset by:
a decrease of $15.0 million in produced water hauling, recycling and disposal services driven by decreased use of third-party services in the Wells Ranch IDP and East Pony IDP.
Fresh Water Delivery Fresh Water Delivery revenues increased by $1.5 million during 2019 as compared with 2018 due to the following:
an increase of $19.8 million in fresh water delivery revenues due to the recommencement of services in the East Pony IDP area during 2019;
substantially offset by:
a decrease of $18.3 million in fresh water delivery revenues in the Mustang IDP, Greeley Crescent IDP and Wells Ranch IDP driven by decreased fresh water volumes resulting from reduced well completion activity by Noble.
Fresh Water Delivery revenues increased by $1.8 million during 2018 as compared with 2017 due to the following:
an increase of $36.7 million in fresh water delivery revenues due to the recommencement of services in the Mustang IDP during 2018; and
an increase of $8.4 million in fresh water delivery revenues driven by increased fresh water volumes delivered to a third-party customer in the Greeley Crescent IDP;
substantially offset by:
a decrease of $43.3 million in fresh water delivery revenues due to a decrease in fresh water deliveries in the Wells Ranch IDP and East Pony IDP resulting from reduced well completion activity by Noble.
Costs and Expenses
Direct Operating Expense
We seek to maximize the profitability of our operations in part by minimizing, to the extent appropriate, expenses directly associated with operating our assets. Direct labor costs, ad valorem taxes, repair and maintenance costs, integrity management costs, utilities and contract services comprise the most significant portion of our operations and maintenance expense. Many of these expenses remain relatively stable across broad ranges of throughput volumes, but a portion of these expenses can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses. We also seek to manage operating expenditures on our midstream systems by scheduling maintenance over time to avoid significant variability in our maintenance expenditures and minimize their impact on our cash flow.
General and Administrative Expense
Noble charges us for general and administrative services. Direct charges include a fixed fee under our omnibus agreement and compensation of our executives under our secondment agreement based on the percentage of time spent working on us.
We incur incremental general and administrative expenses attributable to being a publicly traded partnership, including expenses associated with: annual, quarterly and current reporting with the SEC; tax return and Schedule K-1 preparation and distribution; Sarbanes-Oxley Act of 2002 compliance; Nasdaq listing; independent auditor fees; legal fees; investor relations expenses; transfer agent and registrar fees; incremental salary and benefits costs of seconded employees; outside director fees; director and officer insurance coverage expenses; and compensation expense associated with the LTIP.

54


Costs and Expenses Trend Analysis
Costs and expenses were as follows:
 
 
 
Increase (Decrease)
from Prior Year
 
 
 
Increase
from Prior Year
 
 
(in thousands, except percentages)
2019
 
 
2018
 
 
2017
Year Ended December 31,
 
 
 
 
 
 
 
 
 
Cost of Crude Oil Sales
$
181,390

 
33
 %
 
$
136,368

 
N/M

 
$

Direct Operating
116,675

 
22
 %
 
95,852

 
41
%
 
67,832