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Noble Midstream Partners Reports Second Quarter 2018 Results

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Noble Midstream Partners LP (NYSE:NBLX) (Noble Midstream or the
Partnership) today reported second quarter 2018 results. The
Partnership's results are consolidated to include the non-controlling
interests in the Partnership's development companies (DevCos) retained
by Noble Energy, Inc. (Noble Energy) as well as Greenfield Midstream,
LLC's (Greenfield Midstream) 45.6% ownership of Black Diamond Gathering,
LLC (Black Diamond Gathering); however, certain results are shown as
"attributable to the Partnership," which excludes the aforementioned
non-controlling interests retained by Noble Energy and Greenfield
Midstream. Noble Midstream believes the results "attributable to the
Partnership" provide the best representation of the ongoing operations
from which the Partnership's unitholders will benefit.

Second Quarter Highlights Include:

  • Net Income of $44 million, or $37 million attributable to the
    Partnership
  • Adjusted EBITDA1 of $64 million, a 10% increase over the
    first quarter of 2018
  • Adjusted EBITDA1 attributable to the Partnership of $49
    million was in the upper half of guidance but down 9% on sequential
    basis due to the previously indicated fresh water activity shift from
    the Colorado River DevCo (100% owned by Partnership) to the Green
    River DevCo (25% owned by the Partnership)
  • Declared a 20% annual increase in distribution per unit to $0.5348,
    with a distribution coverage ratio1 of 1.8x
  • Combined gathering and sales volumes for oil, gas and produced water
    were up 30% versus the first quarter of 2018
  • Increased total gathering dedicated acres in the DJ and Delaware
    basins by 5% to ~ 580,000 acres

"We achieved significant milestones during the quarter, including the
continued build-out of our customer base and the completion of four
major projects. All five Delaware Basin CGFs and the DJ Basin gathering
system at Mustang are online for Noble Energy, while the Advantage
Pipeline expansion is complete. This provides significant capital
efficiency and a long future growth runway," Terry R. Gerhart, Chief
Executive Officer of Noble Midstream stated.

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

Other Recent Highlights:

  • Noble Midstream entered into a $500 million three-year unsecured term
    loan facility. Funds were used to repay borrowings on the revolving
    credit facility

Recent Commercial Agreements with Noble Energy

Noble Midstream today announced the following agreements with Noble
Energy:

  • Establishment of full-field midstream service commercial terms with
    Noble Energy for the Green River DevCo, 25% owned by Noble Midstream,
    servicing the Mustang development area. Commercial terms include
    revised fees to reflect the change to a spec gathering system from a
    central gathering facility (CGF) as well as the use of enhanced
    completions for fresh water delivery
  • Establishment of a minimum fresh water delivery volume threshold in
    Wells Ranch (Colorado River DevCo, 100% owned by NBLX). The three-year
    volume commitment commences in 2019 at 50 thousand barrels of water
    per day (MBw/d) and increases to 60 MBw/d beginning in 2020
  • Noble Energy provided Noble Midstream an incremental dedication for
    oil transportation from the Wells Ranch CGF to Platteville following
    expiration of an existing third-party contract at year-end 2020. The
    contract term will extend 10 years following expiration of the
    existing arrangement
  • Noble Energy has assigned Noble Midstream its option to acquire up to
    15% ownership in the EPIC NGL pipeline, which will transport NGLs from
    the Delaware Basin to the Gulf Coast. The option expires in early
    February 2019

Second Quarter 2018 Results

Combined oil and gas gathering and sales, produced water gathering, and
fresh water delivery volumes were consistent with or above guidance
ranges for the second quarter.

In the gathering business, oil and gas gathering volumes of 192 thousand
barrels of oil equivalent per day (MBoe/d) were up 15% compared to first
quarter 2018 volumes and reflect a full quarter of contribution from
Black Diamond. The Partnership realized sequential growth in oil and gas
gathering throughput growth at the Blanco River and Laramie River
DevCos. Produced water gathering throughput was up 84% from the first
quarter of 2018 due to the increase in wells coming online in the
Delaware Basin over the past several quarters.

Average fresh water delivered in the second quarter was 23% above the
high end of guidance at 160 MBw/d but down 5% versus the first quarter
of 2018. The Partnership delivered water to three completion crews on
dedicated acreage in the DJ Basin, a similar level compared to the first
quarter of 2018.

Second quarter investment income of $4.1 million is primarily comprised
of approximately $1 million from the Partnership's minority ownership in
White Cliffs Pipeline LLC and approximately $3.1 million from the
Partnership's 50% ownership in the Advantage Pipeline, L.L.C.

Net income of $44 million in the quarter exceeded guidance. Depreciation
and amortization increased compared to the first quarter due to the
amortization of intangible assets related to customer contracts that
were acquired during the Partnership's acquisition of all of the
outstanding limited liability company interests in Saddle Butte Rockies
Midstream, LLC and certain affiliates (collectively, Saddle Butte);
however, depreciation and amortization came in below guidance.

Adjusted EBITDA1 was $64 million in the second quarter, or
10% above the prior quarter, while Adjusted EBITDA1 attributable
to the Partnership was down 9% from the first quarter to $49 million due
to the previously announced customer activity mix shift to the Green
River DevCo (25% owned by the Partnership) from the Colorado River DevCo
(100% owned by the Partnership). Quarterly adjustments to earnings
include approximately $1.3 million in transaction expenses associated
with the Saddle Butte acquisition.

In the second quarter, cash interest expense attributable to the
Partnership was $4 million and maintenance capital expenditures
attributable to the Partnership totaled $4.8 million, resulting in DCF1
attributable to the Partnership of $40 million and a distribution
coverage ratio1 of 1.8x.

Blanco River DevCo

Oil and gas gathering volumes at Blanco River DevCo were up 47% compared
to the first quarter of 2018. The Partnership connected 26 wells during
the quarter. Combined oil and gas gathering capacity in the Delaware
Basin now totals 115 MBoe/d from five CGFs, including 90 thousand
barrels of oil per day (MBbl/d) and 150 million cubic feet of gas per
day. The Billy Miner II CGF began operations in April 2018, and the
Collier CGF was completed in mid-May 2018. Planning is currently
underway for oil, gas, and produced water gathering services for a
third-party in Reeves County. Services for approximately 13,000 acres
dedicated to Noble Midstream Services will be provided through the
Blanco River DevCo, with the first well anticipated in the third quarter
of 2018.

Trinity River DevCo

Strong customer demand continued at the Advantage Pipeline system in the
second quarter, with quarterly volumes of 105 MBbl/d up 19% from the
first quarter of 2018 and up more than three times compared to levels at
the time of the acquisition close in April 2017. Expansion of the
Advantage Pipeline nameplate capacity to 200 MBbl/d from 150 MBbl/d was
completed in July. For the compression segment, new build installed
horsepower totaled 18,000 at mid-year.

Green River DevCo

Noble Midstream completed the oil, gas and produced water spec gathering
system for Noble Energy's Mustang development in the DJ basin in June
and connected five wells to the system at the end of the quarter. Noble
Midstream delivered fresh water to two completion crews in Mustang
during the quarter.

Laramie River DevCo

Oil gathering and sales volumes, were up 31% compared to the first
quarter of 2018. Black Diamond Gathering reported its first full quarter
of throughput contribution in the second quarter of 2018 of 58 MBbl/d,
representing a 5% increase since the end of January 2018. The
Partnership connected a combined 103 wells during the quarter on Black
Diamond's gathering system and the Partnership's wholly-owned third
party gathering system. Noble Midstream delivered fresh water to one
completion crew in the Laramie River DevCo during the quarter.

Colorado River DevCo

Colorado River oil and gas gathering volumes were flat compared to the
first quarter of 2018 at 93 MBoe/d despite a 65% sequential decline in
well connections due to strong sustained well performance. Fresh water
delivery volumes declined to almost zero as Noble Energy focused
completion activity at Mustang in the Green River DevCo.

Capital Expenditures

Organic capital expenditures in the second quarter totaled $155 million
and came in at the midpoint of guidance. Capital attributable to the
Partnership of $71 million was within 1% of the high end of guidance.
Gross and net capital by DevCo is as follows:

     

2Q 2018 Capital Expenditures
(in millions)

DevCo   Basin  

NBLX
Ownership

  Gross   Net
Laramie River * DJ 100% $ 30   $ 23
Blanco River Delaware 40% $ 92 $ 37
Trinity River Delaware 100% $ 3 $ 3
Colorado River DJ 100% $

 

$

San Juan River DJ 25% $ 1 $
Green River   DJ   25%   $ 29   $ 7
Total Organic Capital Expenditures $ 155 $ 71
Acquisition Capital Expenditures   $   $
Total Capital Expenditures $ 155 $ 71

* Includes capital expenditures for Black Diamond, which is 54.4% owned
by Noble Midstream.

Quarterly Distribution

On July 26, 2018, the Board of Directors of Noble Midstream's general
partner, Noble Midstream GP LLC, declared a second quarter cash
distribution of $0.5348 per unit, a 20% increase from the second quarter
2017 and 43% above the minimum quarterly cash distribution. The second
quarter distribution is payable on August 13, 2018, to unitholders of
record as of August 6, 2018.

Second Half and Full Year 2018 Guidance

2018 guidance, including third and fourth quarter details, for capital,
volumes and key financial metrics can be found in the table below.

We anticipate continued gathering volume growth throughout this year as
new projects as well as customer activity increases in the DJ begin
contributing to results. Oil and gas gathering and sales volume is
anticipated to grow 21% in the second half of 2018 above the first half
average. Produced water gathering volumes are also expected to continue
to set records as the average volume in the second half is expected to
nearly double compared to the first half average. Second half 2018 fresh
water delivery volumes are expected to be 31% above the first half
average, with the Partnership delivering fresh water to five completion
crews on dedicated acreage compared to three in the first half of the
year.

Full year 2018 gross oil and gas gathering and sales volume is
anticipated to be 194 to 204 MBoe/d down from 200 to 235 MBoe/d,
primarily reflecting year to-date actuals as well as our Sponsor's
expected Delaware Basin activity changes later this year. Based on
strong year to-date performance, we are raising full year 2018 fresh
water delivery volume guidance to between 180 MBw/d and 200 MBw/d from
130 MBw/d to 190 MBw/d. We are adjusting produced water gathering
throughput guidance to between 91 MBw/d and 99 MBw/d from 80 MBw/d to
110 MBw/d.

Full year 2018 EBITDA attributable to the Partnership is anticipated to
be $215 million to $225 million, compared to prior guidance of $215
million to $235 million, with EBITDA attributable to the partnership
increasing 13% in the second half of 2018 compared to the first half of
the year. The second half of 2018 financial guidance is highlighted by
DCF coverage of 1.9x to 2.1x in both the third and the fourth quarter.
Full year 2018 coverage has been adjusted to 2.0x to 2.1x from 1.9x to
2.1x.

The Partnership has revised its gross capital guidance to approximately
$530 million to $550 million from $500 million to $535 million, while
capital attributable to the Partnership remains $270 million to $285
million. Over 70% of 2018 capital attributable to the Partnership was
spent in the first half of the year completing major projects for our
customers. The revised capital guidance reflects new customer additions
in the DJ and Delaware Basins as well as higher spending on
infrastructure for Noble Energy at Blanco River DevCo and Green River
Devco, partially offset by lower capital expenditures at Laramie River
DevCo.

     

 

 

Guidance

   
1Q18   2Q18 3Q18 4Q18   FY 2018

Gross Volumes

             

Oil Gathered (MBbl/d)1

135 158

165 - 180

180 - 195

160 - 167

Gas Gathered (MMcf/d) 191 206

210 - 230

225 - 245

208 - 218

Oil and Gas Gathered (MBoe/d)1

167

192

200 - 218

218 - 236

194 - 204

Produced Water Gathered (MBw/d) 47 86

100 - 115

130 - 145

91 - 99

Fresh Water Delivered (MBw/d) 168 160

190 - 230

200 - 240

180 - 200

 

Financials ($MM)

Net Income $39 $44

$43 - $47

$54 - $59

$181 - $191

Gross Adjusted EBITDA2

$58 $64

$65 - $70

$77 - $83

$265 - $275

Net Adjusted EBITDA2 $54 $49

$55 - $59

$57 - $62

$215 - $225

Distributable Cash Flow2 $47 $40

$46 - $50

$48 - $53

$181 - $191

Distribution Coverage Ratio2,3

2.3x 1.8x

1.9x - 2.1x

1.9x - 2.1x

2.0x - 2.1x

 
Gross Capital, Excluding Acquisitions $249 $155

$71 - $80

$55 - $66

$530 - $550

Net Capital, Excluding Acquisitions $128 $71

$40 - $50

$31 - $36

$270 - $285

 

Further details with respect to the second quarter results and guidance
can be found in the supplemental presentation on the Partnership's
website, www.nblmidstream.com.

1 Includes crude oil sales volume

2 Results "attributable to the
Partnership" exclude the non-controlling interests in the DevCos
retained by Noble Energy. Adjusted EBITDA, Distributable Cash Flow and
Distribution Coverage Ratio are not financial measures calculated in
accordance with Generally Accepted Accounting Principles (GAAP). For
definitions of these non-GAAP measures, see Schedule 4 of the financial
tables which follow.

3 Assumes 20% annualized distribution
growth

Conference Call

Noble Midstream will host a webcast and conference call today at 10:00
a.m. Central Time to discuss second quarter 2018 financial and
operational results and updated 2018 guidance. The live audio webcast
and related presentation material is accessible on the ‘Investors' page
of the Partnership's website at www.nblmidstream.com.
Conference call numbers for participation are 877-883-0383, or
412-902-6506 for international calls. The passcode number is 1915404. A
replay of the conference call will be available at the same web location
following the event.

About Noble Midstream Partners

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

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

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

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

   

Schedule 1

Noble Midstream Partners LP

Revenue and Throughput Volume Statistics

(unaudited)

Three Months Ended
June 30,

 

Six Months Ended
June 30,

2018   2017   2018   2017
Colorado River DevCo LP    
Crude Oil Gathering Volumes (Bbl/d) 65,289 53,763 65,910 49,025
Natural Gas Gathering Volumes (MMBtu/d) 217,202 158,216 212,551 152,355
Produced Water Gathering Volumes (Bbl/d) 20,829 12,609 18,537 10,841
Fresh Water Delivery Volumes (Bbl/d) 1,116 113,824 51,219 93,935
Gathering and Fresh Water Delivery Revenues Affiliate (in
thousands)
$ 39,236 $ 44,730 $ 91,510 $ 80,941
 
San Juan River DevCo LP
Fresh Water Delivery Volumes (Bbl/d) 20,067 37,759
Gathering and Fresh Water Delivery Revenues Affiliate (in
thousands)
$ (779 ) $ 7,946 $ (332 ) $ 20,463
 
Green River DevCo LP
Crude Oil Gathering Volumes (Bbl/d) 108 54
Natural Gas Gathering Volumes (MMBtu/d) 172 87
Produced Water Gathering Volumes (Bbl/d) 236 119
Fresh Water Delivery Volumes (Bbl/d) 112,379 67,437
Gathering and Fresh Water Delivery Revenues Affiliate (in
thousands)
$ 17,888 $ $ 21,332 $
 
Blanco River DevCo LP
Crude Oil Gathering Volumes (Bbl/d) 21,506 17,978
Natural Gas Gathering Volumes (MMBtu/d) 48,743 44,248
Produced Water Gathering Volumes (Bbl/d) 59,682 42,927
Gathering Revenues Affiliate (in thousands) $ 9,018 $ $ 15,776

 

$
 
Laramie River DevCo LP

Crude Oil Gathering and Sales Volumes (Bbl/d) (1)

70,761 61,787
Natural Gas Gathering Volumes (MMBtu/d) 1,970 1,489
Produced Water Gathering Volumes (Bbl/d) 5,665 5,222
Fresh Water Delivery Volumes (Bbl/d) 46,379 50,326 45,132 25,302
Gathering and Fresh Water Delivery Revenues Third Party (in
thousands)
$ 54,446 $ 3,666 $ 87,028 $ 3,666
 
Trinity River DevCo LLC (Delaware Basin)
Natural Gas Compression Volumes (MMBtu/d) 30,468 25,632
Gathering Revenues Affiliate (in thousands) $ 582 $ $ 967 $
 
Total Gathering Systems
Crude Oil Gathering and Sales Volumes (Bbl/d) 157,664 53,763 145,729 49,025
Natural Gas Gathering Volumes (MMBtu/d) 268,087 158,216 258,375 152,355
Barrels of Oil Equivalent (Boe/d) 192,034 74,047 178,854 68,558
Produced Water Gathering Volumes (Bbl/d) 86,412 12,609 66,805 10,841
Natural Gas Compression Volumes (MMBtu/d) 30,468 25,632
Gathering Revenues (in thousands) $ 98,216 $ 32,328 $ 169,920 $ 60,737
 
Total Fresh Water Delivery
Fresh Water Delivery Volumes (Bbl/d) 159,874 184,217 163,788 156,996
Fresh Water Delivery Revenues (in thousands) $ 22,175     $ 24,014     $ 46,361     $ 44,333

(1)

  Includes crude oil gathering volumes as well as crude oil that is
sold to customers and transported on our gathering systems.
 
   

Schedule 2

Noble Midstream Partners LP

Consolidated Statement of Operations

(in thousands, except per unit amounts, unaudited)

Three Months Ended June 30,   Six Months Ended June 30,
2018   2017   2018   2017
Midstream Services Revenues    
Crude Oil, Natural Gas and Produced Water Gathering Affiliate $ 46,871 $ 32,328 $ 89,895 $ 60,737
Crude Oil, Natural Gas and Produced Water Gathering — Third Party

$

9,767 $ 16,337
Fresh Water Delivery Affiliate 19,074 20,348 39,358 40,667
Fresh Water Delivery — Third Party 3,101 3,666 7,003 3,666
Crude Oil Treating Affiliate 979 1,169 1,934 2,436
Crude Oil Sales — Third Party 41,578 63,688
Other — Affiliate 272 591
Other — Third Party 601         1,489      
Total Revenues 121,971     54,117     219,704     104,431  
Costs and Expenses
Cost of Crude Oil Sales 40,012 61,451
Direct Operating 18,393 14,293 35,541 25,694
Depreciation and Amortization 16,371 2,472 27,700 4,921
General and Administrative 4,980     3,452     15,422     6,194  
Total Operating Expenses 79,756     20,217     140,114     36,809  
Operating Income 42,215 37,566 79,590 71,288
Other (Income) Expense
Interest Expense, Net of Amount Capitalized 1,681 100 2,714 367
Investment Income (4,091 )   (1,641 )   (6,959 )   (2,706 )
Total Other Income (2,410 )   (1,541 )   (4,245 )   (2,339 )
Income Before Income Taxes 44,625 39,107 83,835 73,627
State Income Tax Provision 183         257      
Net Income 44,442 39,107 83,578 73,627
Less: Net Income Attributable to Noncontrolling Interests 7,858     7,515     7,633     17,693  
Net Income Attributable to Noble Midstream Partners LP 36,584 31,592 75,945 55,934
Less: Net Income Attributable to Incentive Distribution Rights 1,134     92     1,953     92  
Net Income Attributable to Limited Partners $ 35,450     $ 31,500     $ 73,992     $ 55,842  
 
Net Income Attributable to Limited Partners Per Limited Partner
Unit
Basic and Diluted
Common Units $ 0.90 $ 0.98 $ 1.87 $ 1.75
Subordinated Units $ 0.90 $ 0.98 $ 1.87 $ 1.75
 
Weighted Average Limited Partner Units Outstanding Basic
Common Units 23,686 16,127 23,684 16,015
Subordinated Units 15,903     15,903     15,903     15,903  
Total Limited Partner Units 39,589 32,030 39,587 31,918
 
Weighted Average Limited Partner Units Outstanding
Diluted
Common Units 23,700 16,137 23,699 16,024
Subordinated Units 15,903     15,903     15,903     15,903  
Total Limited Partner Units 39,603 32,040 39,602 31,927
 
   

Schedule 3

Noble Midstream Partners LP

Consolidated Balance Sheet

(in thousands, unaudited)

June 30,
2018

 

December 31,
2017

ASSETS
Current Assets
Cash and Cash Equivalents $ 16,202 $ 18,026
Restricted Cash 37,505
Accounts Receivable — Affiliate 25,631 27,539
Accounts Receivable — Third Party 20,085 2,641
Crude Oil Inventory 3,314
Other Current Assets 3,896     389  
Total Current Assets 69,128 86,100
Property, Plant and Equipment
Total Property, Plant and Equipment, Gross 1,331,831 706,039
Less: Accumulated Depreciation and Amortization (58,414 )   (44,271 )
Total Property, Plant and Equipment, Net 1,273,417 661,768
Intangible Assets, Net 326,485
Goodwill 111,145
Investments 81,234 80,461
Deferred Charges 3,056     1,429  
Total Assets $ 1,864,465     $ 829,758  
LIABILITIES
Current Liabilities
Accounts Payable — Affiliate $ 2,951 $ 1,616
Accounts Payable — Trade 136,196 109,893
Other Current Liabilities 5,605     2,876  
Total Current Liabilities 144,752 114,385
Long-Term Liabilities
Long-Term Debt 530,000 85,000
Asset Retirement Obligations 15,576 10,416
Other Long-Term Liabilities 2,466     3,727  
Total Liabilities 692,794     213,528  
EQUITY
Partners' Equity
Limited Partner
Common Units (23,762 and 23,712 units outstanding, respectively) 667,830 642,616
Subordinated Units (15,903 units outstanding) (151,256 ) (168,136 )
General Partner 1,134     520  
Total Partners' Equity 517,708 475,000
Noncontrolling Interests 653,963     141,230  
Total Equity 1,171,671     616,230  
Total Liabilities and Equity $ 1,864,465     $ 829,758  
 

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

Non-GAAP Financial Measures

This news release, the financial tables and other supplemental
information include Adjusted EBITDA, Distributable Cash Flow, and
Distribution Coverage Ratio, all of which are non-GAAP measures which
may be used periodically by management when discussing our financial
results with investors and analysts.

We define Adjusted EBITDA as net income before income taxes, net
interest expense, depreciation and amortization, transaction expenses
and unit-based compensation. Adjusted EBITDA is used as a supplemental
financial measure by management and by external users of our financial
statements, such as investors, industry analysts, lenders and ratings
agencies, to assess:

  • our operating performance as compared to those of other companies in
    the midstream energy industry, without regard to financing methods,
    historical cost basis or capital structure;
  • the ability of our assets to generate sufficient cash flow to make
    distributions to our partners;
  • our ability to incur and service debt and fund capital expenditures;
  • and the viability of acquisitions and other capital expenditure
    projects and the returns on investment of various investment
    opportunities.

We define Distributable Cash Flow as Adjusted EBITDA less estimated
maintenance capital expenditures and cash interest expense.
Distributable Cash Flow is used by management to evaluate our overall
performance. Our partnership agreement requires us to distribute all
available cash on a quarterly basis, and Distributable Cash Flow is one
of the factors used by the board of directors of our general partner to
help determine the amount of available cash that is available to our
unitholders for a given period. We define Distribution Coverage Ratio as
Distributable Cash Flow divided by total distributions declared. The
Distribution Coverage Ratio is used by management to illustrate our
ability to make our distributions each quarter.

We believe that the presentation of Adjusted EBITDA, Distributable Cash
Flow, and Distribution Coverage Ratio provide information useful to
investors in assessing our financial condition and results of
operations. The GAAP measure most directly comparable to Adjusted
EBITDA, Distributable Cash Flow and Distribution Coverage Ratio is net
income. Adjusted EBITDA, Distributable Cash Flow and Distribution
Coverage Ratio should not be considered alternatives to net income or
any other measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EBITDA, Distributable Cash Flow and
Distribution Coverage Ratio exclude some, but not all, items that affect
net income, and these measures may vary from those of other companies.
As a result, Adjusted EBITDA, Distributable Cash Flow and Distribution
Coverage Ratio as presented herein may not be comparable to similarly
titled measures of other companies.

Noble Midstream does not provide guidance on the reconciling items
between forecasted Net Income, forecasted Adjusted EBITDA, forecasted
Distributable Cash Flow and forecasted Distribution Coverage Ratio due
to the uncertainty regarding timing and estimates of these items. Noble
Midstream provides a range for the forecasts of Net Income, Adjusted
EBITDA, Distributable Cash Flow and Distribution Coverage Ratio to allow
for the variability in timing and uncertainty of estimates of
reconciling items between forecasted Net Income, forecasted Adjusted
EBITDA, forecasted Distributable Cash Flow and forecasted Distribution
Coverage Ratio. Therefore, the Partnership cannot reconcile forecasted
Net Income to forecasted Adjusted EBITDA, forecasted Distributable Cash
Flow or forecasted Distribution Coverage Ratio without unreasonable
effort.

In addition to Net Income, the GAAP measure most directly comparable to
Adjusted EBITDA and Distributable Cash Flow is net cash provided by
operating activities. Adjusted EBITDA and Distributable Cash Flow should
not be considered alternatives to net income, net cash provided by
operating activities or any other measure of financial performance or
liquidity presented in accordance with GAAP. Due to the forward-looking
nature of net cash provided by operating activities, management cannot
reliably predict certain of the necessary components of the most
directly comparable forward-looking GAAP measures, such as future
impairments and future changes in working capital. Accordingly, Noble
Midstream is unable to present a quantitative reconciliation of the
aforementioned forward-looking non-GAAP financial measures to net cash
provided by operating activities. Amounts excluded from these non-GAAP
measures in future periods could be significant.

 

Schedule 4 (Continued)

Noble Midstream Partners LP

Reconciliations of GAAP Financial Measures to Non-GAAP
Financial Measures

 

Reconciliation of Net Income (GAAP) to Adjusted EBITDA and
Distributable Cash Flow (Non-GAAP)

(in thousands, unaudited)

Three Months Ended June 30,
2018   2017
Reconciliation from Net Income (GAAP)  
Net Income and Comprehensive Income (GAAP) $ 44,442 $ 39,107

Add:

Depreciation and Amortization 16,371 2,472
Interest Expense, Net of Amount Capitalized 1,681 100
State Income Tax Provision 183
Transaction and Integration Expenses 1,280
Unit-Based Compensation 393   206
Adjusted EBITDA (Non-GAAP) 64,350   41,885
Less:
Adjusted EBITDA Attributable to Noncontrolling Interests 15,691   8,005
Adjusted EBITDA Attributable to Noble Midstream Partners LP
(Non-GAAP)
48,659 33,880
Less:
Cash Interest Paid 4,030 593
Maintenance Capital Expenditures 4,772   2,951
Distributable Cash Flow of Noble Midstream Partners LP (Non-GAAP) $ 39,857   $ 30,336
Distributions (Declared) $ 22,306 $ 16,089
Distribution Coverage Ratio (Declared) 1.8x 1.9x
 
 

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

and Distributable Cash Flow (Non-GAAP)

(in thousands, unaudited)

Three Months Ended June 30,
2018   2017
Reconciliation from Net Cash Provided by Operating Activities
(GAAP)
 
Net Cash Provided by Operating Activities (GAAP) $ 59,469 $ 42,302
Add:
Interest Expense, Net of Amount Capitalized 1,681 100
Changes in Operating Assets and Liabilities 228 (826 )
Transaction and Integration Expenses 1,280
Change in Income Tax Payable 183
Other Adjustments 1,509   309  
Adjusted EBITDA (Non-GAAP) 64,350 41,885
Less:        
Adjusted EBITDA Attributable to Noncontrolling Interests 15,691   8,005  
Adjusted EBITDA Attributable to Noble Midstream Partners LP
(Non-GAAP)
48,659 33,880
Less:
Cash Interest Paid 4,030 593
Maintenance Capital Expenditures 4,772   2,951  
Distributable Cash Flow of Noble Midstream Partners LP (Non-GAAP) $ 39,857   $ 30,336  
Distributions (Declared) $ 22,306 $ 16,089
Distribution Coverage Ratio (Declared) 1.8x 1.9x
 
 

Schedule 4 (Continued)

Noble Midstream Partners LP

Reconciliations of GAAP Financial Measures to Non-GAAP
Financial Measures

 

Reconciliation of 2018 GAAP Guidance to 2018 Non-GAAP Guidance

(in millions, unaudited)

2018 Guidance
3Q18   4Q18   Full Year
Reconciliation from Net Income (GAAP) to Distributable Cash Flow
(Non-GAAP)
   
Net Income and Comprehensive Income (GAAP) $43 - $47 $54 - $59 $181 - $191
Add:
Depreciation and Amortization 18 19 65
Interest Expense, Net of Amount Capitalized 4 4 11

Unit-Based Compensation

0 0 2
Transaction Expenses

7
Income Tax Provision (Benefit) 0   0 0
Adjusted EBITDA (Non-GAAP)

$65 - $70

$77 - $83 $265 - $275
Adjusted EBITDA Attributable to Noncontrolling Interests 10   20 50
Adjusted EBITDA Attributable to the Partnership $55 - $59 $57 - $62 $215 - $225
Less:
Maintenance Capital Expenditures and Cash Interest Paid 9   9 34
Distributable Cash Flow $46 - $50 $48 - $53 $181 - $191
Distribution Coverage Ratio

1.9x - 2.1x

1.9x - 2.1x 2.0x - 2.1x

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