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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file number: 001-37640
https://cdn.kscope.io/76ba462cbde892df26b016447b9fdcc1-nblxupdatedlogoa79.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)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes     No 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer 
Non-accelerated filer 
Smaller reporting company
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No
As of June 30, 2020, the registrant had 90,369,975 Common Units outstanding.




Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1A.  Risk Factors
 
 
Item 6.  Exhibits
 
 

2


Part I. Financial Information
Item 1. Financial Statements
Noble Midstream Partners LP
Consolidated Balance Sheets
(in thousands, unaudited)
 
June 30, 2020
 
December 31, 2019
ASSETS
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
12,729

 
$
12,676

Accounts Receivable — Affiliate
37,298

 
42,428

Accounts Receivable — Third Party
24,751

 
44,093

Other Current Assets
7,196

 
8,730

Total Current Assets
81,974

 
107,927

Property, Plant and Equipment
 
 
 
Total Property, Plant and Equipment, Gross
2,056,882

 
2,006,995

Less: Accumulated Depreciation and Amortization
(279,115
)
 
(244,038
)
Total Property, Plant and Equipment, Net
1,777,767

 
1,762,957

Investments
860,817

 
660,778

Intangible Assets, Net
261,794

 
277,900

Goodwill

 
109,734

Other Noncurrent Assets
25,995

 
6,786

Total Assets
$
3,008,347

 
$
2,926,082

LIABILITIES, MEZZANINE EQUITY AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts Payable — Affiliate
$
6,557

 
$
8,155

Accounts Payable — Trade
46,138

 
107,705

Other Current Liabilities
11,096

 
11,680

Total Current Liabilities
63,791

 
127,540

Long-Term Liabilities
 
 
 
Long-Term Debt
1,635,919

 
1,495,679

  Asset Retirement Obligations
40,762

 
37,842

Other Long-Term Liabilities
3,849

 
4,160

Total Liabilities
1,744,321

 
1,665,221

Mezzanine Equity
 
 
 
Redeemable Noncontrolling Interest, Net
112,646

 
106,005

Equity
 
 
 
Common Units (90,164 and 90,136 units outstanding, respectively)
787,584


813,999

Noncontrolling Interests
363,796

 
340,857

Total Equity
1,151,380

 
1,154,856

Total Liabilities, Mezzanine Equity and Equity
$
3,008,347

 
$
2,926,082

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

3


Noble Midstream Partners LP
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per unit amounts, unaudited)
 
Three Months Ended June 30,

Six Months Ended June 30,
 
2020

2019

2020

2019
Revenues











Midstream Services — Affiliate
$
93,739


$
97,269


$
207,523


$
201,072

Midstream Services — Third Party
22,997


21,609


50,895


45,638

Crude Oil Sales — Third Party
29,214

 
51,782

 
111,577

 
84,652

Total Revenues
145,950


170,660


369,995


331,362

Costs and Expenses
 
 
 
 
 
 
 
Cost of Crude Oil Sales
29,104

 
48,079

 
108,963

 
78,977

Direct Operating
20,039


32,866


46,889


63,289

Depreciation and Amortization
26,354


23,980


52,285


47,013

General and Administrative
6,446


5,171


11,932


9,532

Goodwill Impairment

 

 
109,734

 

Other Operating Expense
2,576

 

 
3,862

 

Total Operating Expenses
84,519


110,096


333,665


198,811

Operating Income
61,431


60,564


36,330


132,551

Other Expense (Income)
 
 
 
 
 
 
 
Interest Expense, Net of Amount Capitalized
6,633


2,322


13,490


7,550

Investment Loss (Income)
2,730

 
1,748

 
8,139

 
(593
)
Other Non-Operating Expense
1,336

 

 
1,336

 

Total Other Expense (Income)
10,699


4,070


22,965


6,957

Income Before Income Taxes
50,732


56,494


13,365


125,594

Income Tax (Benefit) Expense
(128
)

731


21


2,040

Net Income
50,860


55,763


13,344


123,554

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

 
2,565

 

 
7,101

Net Income Subsequent to the Drop-Down and Simplification Transaction
50,860

 
53,198

 
13,344

 
116,453

Less: Net Income (Loss) Attributable to Noncontrolling Interests
2,624

 
16,789

 
(44,995
)
 
36,485

Net Income Attributable to Noble Midstream Partners LP
48,236

 
36,409

 
58,339

 
79,968

Less: Net Income Attributable to Incentive Distribution Rights

 
4,640

 

 
8,147

Net Income Attributable to Limited Partners
$
48,236

 
$
31,769

 
$
58,339

 
$
71,821

 
 
 
 
 
 
 
 
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
 
 
 
 
 
 
 
Common Units
$
0.53

 
$
0.79

 
$
0.65

 
$
1.77

Subordinated Units
$

 
$
0.84

 
$

 
$
1.91

 
 
 
 
 
 
 
 
Weighted Average Limited Partner Units Outstanding  Basic
 
 
 
 
 
 
 
Common Units
90,163

 
32,090

 
90,158

 
27,916

Subordinated Units

 
7,514

 

 
11,685

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

 
32,121

 
90,163

 
27,944

Subordinated Units

 
7,514

 

 
11,685

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

4


Noble Midstream Partners LP
Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
Six Months Ended June 30,
 
2020
 
2019
Cash Flows From Operating Activities
 
 
 
Net Income
$
13,344

 
$
123,554

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
 
 
 
Depreciation and Amortization
52,285

 
47,013

Income Taxes

 
1,842

Goodwill Impairment
109,734

 

Loss from Equity Method Investees
10,276

 
2,083

Distributions from Equity Method Investees
18,820

 
6,944

Other Adjustments for Noncash Items Included in Income
6,354

 
1,647

Changes in Operating Assets and Liabilities, Net of Assets Acquired and Liabilities Assumed
 
 
 
Decrease (Increase) in Accounts Receivable
24,472

 
(12,284
)
(Decrease) Increase in Accounts Payable
(16,630
)
 
22,739

Other Operating Assets and Liabilities, Net
796

 
(4,593
)
Net Cash Provided by Operating Activities
219,451

 
188,945

Cash Flows From Investing Activities
 
 
 
Additions to Property, Plant and Equipment
(96,777
)
 
(141,716
)
Additions to Investments
(228,226
)
 
(414,587
)
Loan to Equity Method Investee
(22,500
)
 

Other
2,224

 
588

Net Cash Used in Investing Activities
(345,279
)
 
(555,715
)
Cash Flows From Financing Activities
 
 
 
Distributions to Noncontrolling Interests and Parent
(13,224
)
 
(26,476
)
Contributions from Noncontrolling Interests
81,158

 
34,110

Borrowings Under Revolving Credit Facility
350,000

 
560,000

Repayment of Revolving Credit Facility
(210,000
)
 
(250,000
)
Distributions to Unitholders
(79,020
)
 
(53,459
)
Proceeds from Preferred Equity, Net of Issuance Costs

 
99,450

Other
(3,083
)
 
(980
)
Net Cash Provided by Financing Activities
125,831

 
362,645

Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash
3

 
(4,125
)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period (1)
12,726

 
15,712

Cash, Cash Equivalents, and Restricted Cash at End of Period (1)
$
12,729

 
$
11,587

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

5


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

$
813,999

$

$

$
340,857

$
1,154,856

Net Income (Loss)

10,103



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




77,966

77,966

Distributions to Noncontrolling Interests




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

(62,114
)



(62,114
)
Preferred Equity Accretion

(3,276
)



(3,276
)
Other

433




433

March 31, 2020

759,145



365,504

1,124,649

Net Income

48,236



2,624

50,860

Contributions from Noncontrolling Interests




3,192

3,192

Distributions to Noncontrolling Interests




(7,524
)
(7,524
)
Distributions to Unitholders

(16,906
)



(16,906
)
Preferred Equity Accretion

(3,366
)



(3,366
)
Other

475




475

June 30, 2020
$

$
787,584

$

$

$
363,796

$
1,151,380

December 31, 2018
$
170,322

$
699,866

$
(130,207
)
$
2,421

$
744,153

$
1,486,555

Net Income
4,536

23,967

16,085

3,507

19,696

67,791

Contributions from Noncontrolling Interests and Parent




15,969

15,969

Distributions to Noncontrolling Interests and Parent
(6,495
)



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

(13,930
)
(9,316
)
(2,421
)

(25,667
)
Black Diamond Equity Ownership Promote Vesting

4,092

2,746


(6,838
)

Other

470




470

March 31, 2019
168,363

714,465

(120,692
)
3,507

768,311

1,533,954

Net Income
2,565

25,487

6,282

4,640

16,789

55,763

Contributions from Noncontrolling Interests




18,141

18,141

Distributions to Noncontrolling Interests and Parent
(9,905
)



(7,316
)
(17,221
)
Distributions to Unitholders

(14,534
)
(9,751
)
(3,507
)

(27,792
)
Black Diamond Equity Ownership Promote Vesting

8,196



(8,196
)

Conversion of Subordinated Units to Common Units

(124,161
)
124,161




Preferred Equity Accretion

(3,151
)



(3,151
)
Other

273




273

June 30, 2019
$
161,023

$
606,575

$

$
4,640

$
787,729

$
1,559,967


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



6

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


Note 1. Organization and Nature of Operations
Organization Noble Midstream Partners LP (the “Partnership”, “NBLX”, “we”, “us” or “our”) is a growth-oriented Delaware master limited partnership formed in December 2014 by our sponsor, Noble Energy, Inc. (“Noble” or “Parent”), to own, operate, develop and acquire a wide range of domestic midstream infrastructure assets. Our current focus areas are the Denver-Julesburg Basin (“DJ Basin”) in Colorado and the Southern Delaware Basin position of the Permian Basin (“Delaware Basin”) in Texas.
Chevron Merger On July 20, 2020, Noble, our sponsor and majority unitholder, entered into a definitive merger agreement (the “Chevron Merger Agreement”) with Chevron Corporation (NYSE: CVX) pursuant to which, and subject to the conditions of the agreement, all outstanding shares of Noble will be acquired by Chevron in an all-stock transaction (the “Chevron Merger”). The transaction was approved by the Boards of Directors of both Noble and Chevron and is anticipated to close in fourth quarter 2020. The transaction is subject to Noble stockholder approval, regulatory approvals, and other customary closing conditions. See Item 1A. Risk Factors for a discussion of risks related to the Chevron Merger.
Partnership Assets Our assets consist of ownership interests in certain companies which serve specific areas and integrated development plan (“IDP”) areas and consist of the following:
DevCo
Areas Served
NBLX Dedicated Service
NBLX Ownership
Noncontrolling Interest (1)
Colorado River LLC (2)

Wells Ranch IDP (DJ Basin)


East Pony IDP (DJ Basin)

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

Crude Oil Gathering

Crude Oil Treating
100%
N/A
San Juan River LLC (2)
East Pony IDP (DJ Basin)
Water Services
100%
N/A
Green River DevCo LLC (2)
Mustang IDP (DJ Basin)
Crude Oil Gathering
Natural Gas Gathering
Water Services
100%
N/A
Laramie River LLC (2)
Greeley Crescent IDP (DJ Basin)
Crude Oil Gathering
Water Services
100%
N/A
Black Diamond Dedication Area (DJ Basin) (3)
Crude Oil Gathering
Natural Gas Gathering
Crude Oil Transmission
54.4%
45.6%
Gunnison River DevCo LP
Bronco IDP (DJ Basin) (4)
Crude Oil Gathering
Water Services
5%
95%
Blanco River LLC (2)
Delaware Basin
Crude Oil Gathering
Natural Gas Gathering
Produced Water Services
100%
N/A
Trinity River DevCo LLC (5)
Delaware Basin
Crude Oil Transmission
Natural Gas Compression
100%
N/A
Dos Rios DevCo LLC (6)
Delaware Basin
Crude Oil Transmission
Y-Grade Transmission
100%
N/A
NBL Midstream Holdings LLC
East Pony IDP (DJ Basin)
Natural Gas Gathering
Natural Gas Processing
100%
N/A
Delaware Basin
Crude Oil Gathering
Natural Gas Gathering
Produced Water Services
100%
N/A
(1) 
The noncontrolling interest represents Noble’s retained ownership interest in the Gunnison River DevCo LP. The noncontrolling interest in Black Diamond Gathering LLC (“Black Diamond”) represents Greenfield Midstream, LLC's (the “Greenfield Member”) interest in Black Diamond.
(2) 
On December 31, 2019, the general partner and limited partnership of each of the companies were merged into limited liability companies.
(3) 
Our ownership interest in Saddlehorn Pipeline Company, LLC (“Saddlehorn”) is owned through a wholly-owned subsidiary of Black Diamond. See Note 6. Investments.
(4) 
The Bronco IDP is a future development area. We currently have no midstream infrastructure assets in the Bronco IDP.
(5) 
Our interest in Advantage Pipeline Holdings, L.L.C. (“Advantage”) is owned through Trinity River DevCo LLC.
(6) 
Our ownership interests in Delaware Crossing LLC (“Delaware Crossing”), EPIC Y-Grade, LP (“EPIC Y-Grade”), EPIC Crude Holdings, LP (“EPIC Crude”) and EPIC Propane Pipeline Holdings, LP (“EPIC Propane”) are owned through wholly-owned subsidiaries of Dos Rios DevCo LLC. See Note 6. Investments.

7

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


Nature of Operations We operate and own interests in the following assets:
crude oil gathering systems;
natural gas gathering and processing systems and compression units;
crude oil treating facilities;
produced water collection, gathering, and cleaning systems;
fresh water storage and delivery systems; and
investments in midstream entities that provide transportation and fractionation services.
We generate revenues primarily by charging fees on a per unit basis for gathering crude oil and natural gas, delivering and storing fresh water, and collecting, cleaning and disposing of produced water. Additionally, we purchase and sell crude oil to customers at various delivery points on our gathering systems.
Note 2. Basis of Presentation
Presentation   The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying consolidated financial statements at June 30, 2020 and December 31, 2019 and for the three and six months ended June 30, 2020 and 2019 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and equity for such periods.
Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. We have no items of other comprehensive income; therefore, our net income is identical to our comprehensive income.
Consolidation Our consolidated financial statements include our accounts, the accounts of subsidiaries which the Partnership wholly owns and the accounts of subsidiaries in which the Partnership has partial ownership.
Variable Interest Entities Our consolidated financial statements include the accounts of Black Diamond, which we control. We have determined that the partners with equity at risk in Black Diamond lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance. Therefore, Black Diamond is considered a variable interest entity. Through our majority representation on the Black Diamond board of directors as well as our responsibility as operator of the Black Diamond system, we have the authority to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate Black Diamond in our financial statements. Financial statement activity associated with Black Diamond is captured within the Gathering Systems and the Investments in Midstream Entities reportable segments. See Note 7. Segment Information.
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 Midstream Holdings LLC (“NBL Holdings”). Additionally, all of the Incentive Distribution Rights (“IDRs”) were converted into common units representing limited partner interests in the Partnership (“Common Units”). The acquisition of the interests and conversion of the IDRs are collectively referred to as the “Drop-Down and Simplification Transaction.” The total consideration paid by the Partnership for the Drop-Down and Simplification Transaction was $1.6 billion, which consisted of $670 million in cash and 38,455,018 Common Units issued to Noble.
The Drop-Down and Simplification Transaction represented a transaction between entities under common control. Prior to the acquisition of the remaining limited partner interests in Blanco River DevCo LP, Green River DevCo LP and San Juan River DevCo LP, the interests were reflected as noncontrolling interests in the Partnership’s consolidated financial statements. As we acquired additional interests in already-consolidated entities, the acquisition of these interests did not result in a change in reporting entity, as defined under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 805, Business Combinations. Therefore, results of operations related to these entities are accounted for on a prospective basis.
Conversely, the acquisition of all of the issued and outstanding limited liability company interests of NBL Holdings is characterized as a change in reporting entity, as defined under FASB Accounting Standards Codification Topic 805, Business Combinations, as this entity previously had not been consolidated by us. Therefore, results of operations related to NBL Holdings have been accounted for on a retrospective basis. Our financial information has been recast to include the historical results of NBL Holdings for the three and six months ended June 30, 2019. The financial statements of NBL Holdings for the

8

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


period prior to the Drop-Down and Simplification Transaction have been prepared from the separate records maintained by Noble and may not necessarily be indicative of the results of operations had these entities operated on a consolidated basis during those periods. Because a direct ownership relationship did not exist among the Partnership and NBL Holdings prior to the Drop-Down and Simplification Transaction, the net investment in NBL Holdings is shown as Parent Net Investment, in lieu of partners’ equity, in the accompanying Consolidated Statement of Changes in Equity for periods prior to the Drop-Down and Simplification Transaction.
Equity Method of Accounting We use the equity method of accounting for investments in entities that we do not control but over which we exert significant influence. For certain entities, we serve as the operator and exert significant influence over the day-to-day operations. For other entities, we do not serve as the operator; however, our voting position on management committees or the board of directors allows us to exert significant influence over decisions regarding capital investments, budgets, turnarounds, maintenance, monetization decisions and other project matters. Under the equity method of accounting, initially we record the investment at our cost. Differences in the cost, or basis, of the investment and the net asset value of the investee will be amortized into earnings over the remaining useful life of the underlying assets. See Note 6. Investments.
Cost Method of Accounting We use the cost method of accounting for our 3.33% interest in White Cliffs Pipeline L.L.C. (“White Cliffs”) as we have virtually no influence over its operations and financial policies. Under the cost method of accounting, we recognize cash distributions from White Cliffs as investment income in our consolidated statements of operations to the extent there is net income and record cash distributions in excess of our ratable share of earnings as return of investment. See Note 6. Investments.
Redeemable Noncontrolling Interest Our redeemable noncontrolling interest is related to the preferred equity issuance by one of our subsidiaries. We can redeem the preferred equity in whole or in part at any time for cash at a predetermined redemption price. The predetermined redemption price is the greater of (i) an amount necessary to achieve a 12% internal rate of return or (ii) an amount necessary to achieve a 1.375x multiple on invested capital. GIP CAPS Dos Rios Holding Partnership, L.P. (“GIP”) can request redemption of the preferred equity on or after March 25, 2025. As GIP’s redemption right is outside of our control, the preferred equity is not considered to be a component of equity on the consolidated balance sheet, and is reported as mezzanine equity on the consolidated balance sheet. In addition, because the preferred equity was issued by a subsidiary of the Partnership and is held by a third party, it is considered a redeemable noncontrolling interest.
The preferred equity was recorded initially at fair value on the issuance date. Subsequent to issuance, we accrete changes in the redemption value of the preferred equity from the date of issuance to GIP’s earliest redemption date. The preferred equity is perpetual and has a 6.5% annual dividend rate, payable quarterly in cash, with the ability to accrue unpaid dividends during the first two years following the closing. During any quarter in which a dividend is accrued, the accreted value of the preferred equity will be increased by the accrued but unpaid dividend (i.e., a paid-in-kind dividend). Accretion during the three and six months ended June 30, 2020 was approximately $3.4 million and $6.6 million, respectively.
Noncontrolling Interests We present our consolidated financial statements with a noncontrolling interest section representing Greenfield Member’s ownership of Black Diamond and Noble’s retained ownership in the Gunnison River DevCo LP.
Segment Information Accounting policies for reportable segments are the same as those described in this footnote. Transfers between segments are accounted for at market value. We do not consider interest income and expense or income tax benefit or expense in our evaluation of the performance of reportable segments. See Note 7. Segment Information.
Use of Estimates   The preparation of consolidated financial statements in conformity with GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. The current commodity price, supply and demand environment coupled with the novel coronavirus (“COVID-19”) pandemic contributed to an unusually high degree of uncertainty in our estimates this quarter and have increased the likelihood that actual results could differ significantly from those estimates.
Impairments During second quarter 2020, we performed qualitative impairment assessments over property, plant and equipment, investments, and intangible assets. No impairment indicators were identified and no impairments were recorded.
During first quarter 2020, we identified certain impairment indicators including the significant decrease in commodity prices, changes to our customers’ development outlook due to reductions in demand resulting from the novel coronavirus (“COVID-19”) pandemic and excess crude oil and natural gas inventories, and a decrease in our market capitalization. Due to these impairment indicators, we conducted impairment testing of certain of our assets, as follows:
Property, Plant and Equipment and Intangible Assets Due to publicly announced changes to our customers’ development outlook within the Delaware Basin and the Black Diamond dedication area, we concluded impairment indicators existed and

9

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


conducted an undiscounted cash flow test. We developed estimates of future undiscounted cash flows expected in connection with providing midstream services within the dedication areas and compared the estimates to the carrying amount of the assets utilized to provide midstream services. Assumptions used in the estimates include expectations of throughput volumes, future development and capital spending plans. Based upon the results of the undiscounted cash flow test, we concluded that the carrying amount of the assets were recoverable and no impairment was recorded.
Goodwill All of our goodwill was assigned to the Black Diamond reporting unit within the Gathering Systems reportable segment. We performed a qualitative assessment and concluded it was more likely than not that the fair value of the Black Diamond reporting unit was less than its carrying value. We then performed a fair value assessment using the income approach. Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions for operating and development costs as well as taking into account changes and uncertainties in our customers’ development outlook. Based on these assessments, we concluded that our goodwill was fully impaired and recorded a non-cash charge of $109.7 million in March 2020.
Equity Method Investments We consider our equity method investments to be essential components of our business and necessary and integral elements of our value chain in support of our operations. We considered whether any facts or circumstances suggested that our equity method investments were impaired on an other-than-temporary basis and concluded that the carrying values of our equity method investments were not impaired.
Intangible Assets Our intangible asset accumulated amortization totaled approximately $78.0 million and $61.9 million as of June 30, 2020 and December 31, 2019, respectively. Intangible asset amortization expense totaled approximately $8.1 million for the three months ended June 30, 2020 and 2019 and $16.1 million and $16.0 million for the six months ended June 30, 2020 and 2019, respectively.
Loan to Equity Method Investee On April 2, 2020, we entered into a loan agreement with EPIC Y-Grade. In accordance with the loan agreement, we loaned $22.5 million to EPIC Y-Grade, to be used for construction and working capital purposes. The maturity date of the loan is December 15, 2023. As the loan does not represent an in-substance capital contribution, it is recorded within other noncurrent assets in our consolidated balance sheets.
The loan bears interest at a rate equal to applicable margins plus the London Interbank Offered Rate (“LIBOR”), or alternate base rate. EPIC Y-Grade has the option to defer payment of interest (“PIK Interest”) for a 12-month period commencing on April 2, 2020. All PIK Interest is added to the outstanding principal amount of the loan and shall be paid on the maturity date. The loan plus accrued PIK Interest totaled $23.1 million at June 30, 2020. We recorded an allowance for expected credit losses of $1.3 million that is recorded within other non-operating expense in our consolidated statement of operations.
The carrying amount of the loan, net of the allowance for expected credit losses, approximates fair value as a portion of the interest rate is variable and reflective of market rates.  
Tax Provision We are not a taxable entity for United States federal income tax purposes or for the majority of states that impose an income tax. Taxes are generally borne by our partners through the allocation of taxable income and we do not record deferred taxes related to the aggregate difference in the basis of our assets for financial and tax reporting purposes. We are subject to a Texas margin tax due to our operations in the Delaware Basin and we recorded a de minimis state tax provision for the three months ended June 30, 2020 and 2019.
For periods prior to the Drop-Down and Simplification Transaction, our consolidated financial statements include a provision for tax expense on income related to the assets contributed to the Partnership. Deferred federal and state income taxes were provided on temporary differences between the financial statement carrying amounts of recognized assets and liabilities and their respective tax bases as if the Partnership filed tax returns as a stand-alone entity. Substantially all of our tax provision for the three months ended June 30, 2019 represents federal income taxes associated with the assets contributed in the Drop-Down and Simplification Transaction.

10

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


Recently Adopted Accounting Standards
Clarifying Certain Accounting Standards Codification (“ASC”) Topics In first quarter 2020, the FASB issued ASU No. 2020-01: Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), to clarify the interactions between these Topics. The update provides clarifications for entities investing in equity securities accounted for under the ASC 321 measurement alternative and companies that hold certain non-derivative forward contracts and purchased options to acquire equity securities. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We early adopted this ASU in first quarter 2020. This adoption did not have a material impact on our financial statements.
Recently Issued Accounting Standards
LIBOR Reform In first quarter 2020, the FASB issued ASU No. 2020-04 (ASU 2020-04): Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease the transition from LIBOR to an alternative reference rate. The ASU intends to address certain concerns stakeholders raised relating to accounting for contract modifications and hedge accounting. These optional expedients and exceptions to applying GAAP, assuming certain criteria are met, are allowed through December 31, 2022. We are currently evaluating the provisions of ASU 2020-04 and have not yet determined whether we will elect the optional expedients. We do not expect the transition to an alternative rate to have a significant impact on our business, operations or liquidity.
Reconciliation of Total Cash We define total cash as cash, cash equivalents and restricted cash. Our restricted cash is included in other current assets in our consolidated balance sheets. The following table provides a reconciliation of total cash:
 
Six Months Ended June 30,
(in thousands)
2020
 
2019
Cash and Cash Equivalents at Beginning of Period
$
12,676

 
$
14,761

Restricted Cash at Beginning of Period (1)
50

 
951

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period
$
12,726

 
$
15,712

 
 
 
 
Cash and Cash Equivalents at End of Period
$
12,729

 
$
11,537

Restricted Cash at End of Period (1)

 
50

Cash, Cash Equivalents, and Restricted Cash at End of Period
$
12,729

 
$
11,587

(1) 
Restricted cash represents the amount held as collateral for certain of our letters of credit.
Revenue Recognition We recognize revenue at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer, using a five-step process, in accordance with ASC 606 Revenue from Contracts with Customers (ASC 606).
Under ASC 606, remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied as of June 30, 2020. A certain fresh water delivery affiliate revenue agreement contains a minimum volume commitment for the delivery of fresh water for a fixed fee per barrel with annual percentage escalations. The following table includes estimated revenues, as of June 30, 2020, for the agreement. Our actual volumes delivered may exceed the future minimum volume commitment.
(in thousands)
Midstream Services — Affiliate
Remainder of 2020
$
18,736

2021
37,635

Total
$
56,371



11

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


Note 3. Transactions with Affiliates
Revenues We derive a substantial portion of our revenues from commercial agreements with Noble. Revenues generated from commercial agreements with Noble and its affiliates consist of the following:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2020
 
2019
 
2020
 
2019
Gathering and Processing
$
82,671

 
$
78,136

 
$
171,969

 
$
153,516

Fresh Water Delivery
10,300

 
18,367

 
33,899

 
45,954

Other
768

 
766

 
1,655

 
1,602

    Total Midstream Services — Affiliate
$
93,739

 
$
97,269

 
$
207,523

 
$
201,072


Expenses General and administrative expense consists of the following:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2020
 
2019
 
2020
 
2019
General and Administrative Expense Affiliate
$
4,107

 
$
2,178

 
$
6,782

 
$
4,456

General and Administrative Expense Third Party
2,339

 
2,993

 
5,150

 
5,076

    Total General and Administrative Expense
$
6,446

 
$
5,171

 
$
11,932

 
$
9,532


Omnibus Agreement Our omnibus agreement with Noble contractually requires us to pay a fixed annual fee to Noble for certain administrative and operational support services being provided to us. The omnibus agreement generally remains in full force and effect so long as Noble controls our general partner, Noble Midstream GP LLC (“General Partner”). The cap on the initial rate of $6.9 million expired in September 2019 and we completed the annual fee redetermination process during February 2020. The redetermined rate is $15.7 million and became effective March 1, 2020.
Note 4. Property, Plant and Equipment
Property, plant and equipment, at cost, is as follows:
(in thousands)
June 30, 2020
 
December 31, 2019
Gathering and Processing Systems
$
1,898,488

 
$
1,795,957

Fresh Water Delivery Systems
95,802

 
96,004

Construction-in-Progress (1)
62,592

 
115,034

Total Property, Plant and Equipment, at Cost
2,056,882

 
2,006,995

Accumulated Depreciation and Amortization
(279,115
)
 
(244,038
)
Property, Plant and Equipment, Net
$
1,777,767

 
$
1,762,957

(1) 
Construction-in-progress at June 30, 2020 primarily includes $49.0 million in gathering system projects and $11.6 million in equipment for use in future projects. Construction-in-progress at December 31, 2019 primarily includes $98.4 million in gathering system projects and $15.4 million in equipment for use in future projects.

12

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


Note 5. Debt
Debt consists of the following:
 
June 30, 2020
 
December 31, 2019
(in thousands, except percentages)
Debt
 
Interest Rate
 
Debt
 
Interest Rate
Revolving Credit Facility, due March 9, 2023 (1)
$
735,000

 
1.61
%
 
$
595,000

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

 
1.36
%
 
500,000

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

 
1.24
%
 
400,000

 
2.74
%
Finance Lease Obligation
2,033

 
%
 
2,005

 
%
Total
1,637,033

 
 
 
1,497,005

 
 
Unamortized Debt Issuance Costs
(1,114
)
 
 
 
(1,326
)
 
 
Total Debt
1,635,919

 
 
 
1,495,679

 
 
Finance Lease Obligation Due Within One Year

 
 
 

 
 
Long-Term Debt
$
1,635,919

 
 
 
$
1,495,679

 
 
(1) 
Our revolving credit facility has a total borrowing capacity of $1.15 billion. As of June 30, 2020 and December 31, 2019, our revolving credit facility had $415 million and $555 million available for borrowing, respectively.
During the first six months of 2020, we borrowed a net $140 million under our revolving credit facility. Proceeds from our revolving credit facility were utilized to fund portions of our capital contributions to investments, capital program and for working capital purposes.
Compliance with Covenants The revolving credit facility and term loan credit facilities require us to comply with certain financial covenants as of the end of each fiscal quarter. We were in compliance with such covenants as of June 30, 2020.
Fair Value of Long-Term Debt Our revolving credit facility and term loan credit facilities are variable-rate, non-public debt. The fair value of our revolving credit facility and term loan credit facilities approximates the carrying amount. The fair value is estimated based on observable inputs. As such, we consider the fair value of these facilities to be a Level 2 measurement on the fair value hierarchy.
Note 6. Investments
We have ownership interests in the following entities:
3.33% interest in White Cliffs;
50% interest in Advantage;
50% interest in Delaware Crossing;
15% interest in EPIC Y-Grade;
30% interest in EPIC Crude;
15% interest in EPIC Propane; and
20% interest in Saddlehorn.
Delaware Crossing On February 7, 2019, we executed definitive agreements with Salt Creek Midstream LLC and completed the formation of Delaware Crossing, a crude oil pipeline system in the Delaware Basin which began delivering crude oil into all connection points in April 2020. During the first six months of 2020, we made capital contributions of approximately $16.9 million.
EPIC Y-Grade On January 31, 2019, we exercised and closed an option with EPIC Midstream Holdings, LP (“EPIC”) to acquire an interest in EPIC Y-Grade, which owns the EPIC Y-Grade pipeline from the Delaware Basin to Corpus Christi, Texas. Interim crude service on the EPIC Y-Grade mainline ended in March 2020. EPIC Y-Grade began the transition to NGL service in May 2020 and completed construction of its first new build fractionator in June 2020. During the first six months of 2020, we made capital contributions of approximately $12.8 million.
EPIC Crude On January 31, 2019, we exercised an option with EPIC to acquire an interest in EPIC Crude, and on March 8, 2019, we closed the option to acquire the interest. EPIC Crude has been engaged in the construction of the EPIC crude oil pipeline from the Delaware Basin to Corpus Christi, Texas. Construction of the EPIC Crude pipeline was completed, and the pipeline was commissioned in February 2020 and entered full service on April 1, 2020. During the first six months of 2020, we made capital contributions of approximately $30.0 million.

13

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


EPIC Propane On December 19, 2019, we exercised and closed an option with EPIC to acquire an interest in EPIC Propane, which is constructing a propane pipeline that will run from the EPIC Y-Grade Logistics, LP fractionator complex in Robstown, Texas to the Phillips 66 petrochemical facility in Sweeney, Texas, with additional connectivity to the Markham underground storage caverns. EPIC Propane completed construction of its first new build fractionator in June 2020. During the first six months of 2020, we made capital contributions of approximately $4.0 million.
Saddlehorn Pipeline On February 1, 2020, Black Diamond exercised and closed an option to acquire a 20% ownership interest in Saddlehorn for $160 million, or $87.0 million net to the Partnership. Greenfield Member contributed $73.0 million for its portion of the purchase price. Black Diamond purchased a 10% interest from each of Magellan Midstream Partners, L.P. (“Magellan”) and Plains All American Pipeline, L.P. (“Plains”). After the transaction, Magellan and Plains each own a 30% membership interest and Black Diamond and Western Midstream each own a 20% membership interest in Saddlehorn. Magellan continues to serve as operator of the Saddlehorn pipeline.
The following table presents our investments at the dates indicated:
(in thousands)
June 30, 2020
 
December 31, 2019
White Cliffs
$
10,363

 
$
10,268

Advantage
72,651

 
76,834

Delaware Crossing
84,671

 
68,707

EPIC Y-Grade
163,244

 
162,850

EPIC Crude
362,912

 
339,116

EPIC Propane
7,028

 
3,003

Saddlehorn
159,948

 

Total Investments
$
860,817

 
$
660,778


The following table presents our investment loss (income) for the periods indicated:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2020
 
2019
 
2020
 
2019
White Cliffs
$
(549
)
 
$
(841
)
 
$
(1,264
)
 
$
(1,889
)
Advantage
(1,311
)
 
(1,513
)
 
(3,387
)
 
(3,754
)
Delaware Crossing
752

 
355

 
1,472

 
1,538

EPIC Y-Grade
7,977

 
1,024

 
13,595

 
1,054

EPIC Crude
1,972

 
3,245

 
8,873

 
3,245

EPIC Propane
36

 

 
61

 

Saddlehorn
(5,712
)
 

 
(10,338
)
 

Other (1)
(435
)
 
(522
)
 
(873
)
 
(787
)
Total Investment Loss (Income)
$
2,730

 
$
1,748

 
$
8,139

 
$
(593
)
(1) 
Represents income associated with our fee for serving as the operator of Advantage and Delaware Crossing.
Note 7. Segment Information
We manage our operations by the nature of the services we offer. Our reportable segments comprise the structure used to make key operating decisions and assess performance. 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 the services of our Gathering Systems and Fresh Water Delivery reportable segments collectively as our midstream services.

14

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


Summarized financial information concerning our reportable segments is as follows:
(in thousands)
Gathering Systems
 
Fresh Water Delivery
 
Investments in Midstream Entities
 
Corporate (1)
 
Consolidated
Three Months Ended June 30, 2020
 
 
 
 
 
 
 
 
 
Midstream Services — Affiliate
$
83,439

 
$
10,300

 
$

 
$

 
$
93,739

Midstream Services — Third Party
21,186

 
1,811

 

 

 
22,997

Crude Oil Sales — Third Party
29,214

 

 

 

 
29,214

Total Revenues
133,839

 
12,111

 

 

 
145,950

Income (Loss) Before Income Taxes
58,392

 
10,336

 
(2,730
)
 
(15,266
)
 
50,732

Additions to Long-Lived Assets
4,849

 

 

 
148

 
4,997

Additions to Investments

 

 
2,627

 

 
2,627

 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
Midstream Services — Affiliate
$
78,902

 
$
18,367

 
$

 
$

 
$
97,269

Midstream Services — Third Party
19,155

 
2,454

 

 

 
21,609

Crude Oil Sales — Third Party
51,782

 

 

 

 
51,782

Total Revenues
149,839

 
20,821

 

 

 
170,660

Income (Loss) Before Income Taxes
52,668

 
13,621

 
(1,748
)
 
(8,047
)
 
56,494

Additions to Long-Lived Assets
56,739

 
1,113

 

 
240

 
58,092

Additions to Investments

 

 
143,984

 

 
143,984

 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2020
 
 
 
 
 
 
 
 
 
Midstream Services — Affiliate
$
173,624

 
$
33,899

 
$

 
$

 
$
207,523

Midstream Services — Third Party
44,910

 
5,985

 

 

 
50,895

Crude Oil Sales — Third Party
111,577

 

 

 

 
111,577

Total Revenues
330,111

 
39,884

 

 

 
369,995

Goodwill Impairment
109,734

 

 

 

 
109,734

Income (Loss) Before Income Taxes