Company Quick10K Filing
Noble Midstream Partners
Price1.00 EPS-239,431,000
Shares-0 P/E-0
MCap-0 P/FCF-0
Net Debt934 EBIT251
TEV934 TEV/EBIT4
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-02-12
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-03
10-K 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-01
10-K 2017-12-31 Filed 2018-02-20
10-Q 2017-09-30 Filed 2017-10-31
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-02
10-K 2016-12-31 Filed 2017-02-14
10-Q 2016-09-30 Filed 2016-11-02
8-K 2020-05-08
8-K 2020-03-13
8-K 2020-02-12
8-K 2020-01-06
8-K 2019-12-20
8-K 2019-12-16
8-K 2019-11-21
8-K 2019-11-14
8-K 2019-11-07
8-K 2019-10-24
8-K 2019-09-25
8-K 2019-08-23
8-K 2019-08-13
8-K 2019-08-09
8-K 2019-08-02
8-K 2019-06-28
8-K 2019-05-03
8-K 2019-03-21
8-K 2019-02-19
8-K 2018-11-26
8-K 2018-11-01
8-K 2018-10-18
8-K 2018-08-03
8-K 2018-07-01
8-K 2018-05-01
8-K 2018-03-09
8-K 2018-02-20
8-K 2018-01-31

NBLX 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1. Organization and Nature of Operations
Note 2. Basis of Presentation
Note 3. Transactions with Affiliates
Note 4. Property, Plant and Equipment
Note 5. Debt
Note 6. Investments
Note 7. Segment Information
Note 8. Partnership Distributions
Note 9. Net Income per Limited Partner Unit
Note 10. Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibit
EX-31.1 nblx-20200331x10qxex311.htm
EX-31.2 nblx-20200331x10qxex312.htm
EX-32.1 nblx-20200331x10qxex321.htm
EX-32.2 nblx-20200331x10qxex322.htm

Noble Midstream Partners Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2.72.21.61.10.50.02015201620182020
Assets, Equity
0.20.20.10.10.00.02015201620182020
Rev, G Profit, Net Income
0.80.50.1-0.2-0.6-0.92015201620182020
Ops, Inv, Fin

Document
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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 March 31, 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
nblxupdatedlogoa71.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 April 30, 2020, the registrant had 90,372,114 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)
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
17,656

 
$
12,676

Accounts Receivable — Affiliate
45,149

 
42,428

Accounts Receivable — Third Party
34,464

 
44,093

Other Current Assets
10,148

 
8,730

Total Current Assets
107,417

 
107,927

Property, Plant and Equipment
 
 
 
Total Property, Plant and Equipment, Gross
2,053,503

 
2,006,995

Less: Accumulated Depreciation and Amortization
(260,734
)
 
(244,038
)
Total Property, Plant and Equipment, Net
1,792,769

 
1,762,957

Investments
871,030

 
660,778

Intangible Assets, Net
269,847

 
277,900

Goodwill

 
109,734

Other Noncurrent Assets
5,911

 
6,786

Total Assets
$
3,046,974

 
$
2,926,082

LIABILITIES, MEZZANINE EQUITY AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts Payable — Affiliate
$
8,701

 
$
8,155

Accounts Payable — Trade
98,271

 
107,705

Other Current Liabilities
12,885

 
11,680

Total Current Liabilities
119,857

 
127,540

Long-Term Liabilities
 
 
 
Long-Term Debt
1,650,799

 
1,495,679

  Asset Retirement Obligations
38,357

 
37,842

Other Long-Term Liabilities
4,031

 
4,160

Total Liabilities
1,813,044

 
1,665,221

Mezzanine Equity
 
 
 
Redeemable Noncontrolling Interest, Net
109,281

 
106,005

Equity
 
 
 
Common Units (90,161 and 90,136 units outstanding, respectively)
759,145


813,999

Noncontrolling Interests
365,504

 
340,857

Total Equity
1,124,649

 
1,154,856

Total Liabilities, Mezzanine Equity and Equity
$
3,046,974

 
$
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 March 31,
 
2020

2019
Revenues





Midstream Services — Affiliate
$
113,784


$
103,803

Midstream Services — Third Party
27,898


24,029

Crude Oil Sales — Third Party
82,363

 
32,870

Total Revenues
224,045


160,702

Costs and Expenses
 
 
 
Cost of Crude Oil Sales
79,859

 
30,898

Direct Operating
26,850


30,423

Depreciation and Amortization
25,931


23,033

General and Administrative
5,486


4,361

Goodwill Impairment
109,734

 

Other Operating Expense
1,286

 

Total Operating Expenses
249,146


88,715

Operating (Loss) Income
(25,101
)

71,987

Other Expense (Income)
 
 
 
Interest Expense, Net of Amount Capitalized
6,857


5,228

Investment Loss (Income)
5,409

 
(2,341
)
Total Other Expense (Income)
12,266


2,887

(Loss) Income Before Income Taxes
(37,367
)

69,100

Income Tax Provision
149


1,309

Net (Loss) Income
(37,516
)

67,791

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

 
4,536

Net (Loss) Income Subsequent to the Drop-Down and Simplification Transaction
(37,516
)
 
63,255

Less: Net (Loss) Income Attributable to Noncontrolling Interests
(47,619
)
 
19,696

Net Income Attributable to Noble Midstream Partners LP
10,103

 
43,559

Less: Net Income Attributable to Incentive Distribution Rights

 
3,507

Net Income Attributable to Limited Partners
$
10,103

 
$
40,052

 
 
 
 
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
 
 
 
Common Units
$
0.11

 
$
1.01

Subordinated Units
$

 
$
1.01

 
 
 
 
Weighted Average Limited Partner Units Outstanding  Basic
 
 
 
Common Units
90,152

 
23,696

Subordinated Units

 
15,903

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

 
23,721

Subordinated Units

 
15,903

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)
 
Three Months Ended March 31,
 
2020
 
2019
Cash Flows From Operating Activities
 
 
 
Net (Loss) Income
$
(37,516
)
 
$
67,791

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
 
 
 
Depreciation and Amortization
25,931

 
23,033

Income Taxes

 
1,202

Goodwill Impairment
109,734

 

Loss (Income) from Equity Method Investees
6,562

 
(1,027
)
Distributions from Equity Method Investees
8,631

 
6,659

Other Adjustments for Noncash Items Included in Income
2,145

 
761

Changes in Operating Assets and Liabilities, Net of Assets Acquired and Liabilities Assumed
 
 
 
Decrease (Increase) in Accounts Receivable
6,909

 
(9,310
)
(Decrease) Increase in Accounts Payable
(3,299
)
 
2,956

Other Operating Assets and Liabilities, Net
(714
)
 
3,256

Net Cash Provided by Operating Activities
118,383

 
95,321

Cash Flows From Investing Activities
 
 
 
Additions to Property, Plant and Equipment
(53,019
)
 
(73,602
)
Additions to Investments
(225,599
)
 
(270,603
)
Other
154

 
289

Net Cash Used in Investing Activities
(278,464
)
 
(343,916
)
Cash Flows From Financing Activities
 
 
 
Distributions to Noncontrolling Interests and Parent
(5,700
)
 
(10,067
)
Contributions from Noncontrolling Interests
77,966

 
15,969

Borrowings Under Revolving Credit Facility
260,000

 
345,000

Repayment of Revolving Credit Facility
(105,000
)
 
(175,000
)
Distributions to Unitholders
(62,114
)
 
(25,667
)
Proceeds from Preferred Equity, Net of Issuance Costs

 
99,450

Other
(141
)
 
(94
)
Net Cash Provided by Financing Activities
165,011

 
249,591

Increase in Cash, Cash Equivalents, and Restricted Cash
4,930

 
996

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)
$
17,656

 
$
16,708

(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

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


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.
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 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
Noble 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.
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;

7

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


fresh water storage and delivery systems; and
investments in midstream entities that provide transportation 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 March 31, 2020 and December 31, 2019 and for the three months ended March 31, 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 months ended March 31, 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 (“VIE”). 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 Noble 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 months ended March 31, 2019. The financial statements of NBL Holdings for the 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.

8

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


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 months ended March 31, 2020 was approximately $3.3 million.
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 the quarter, 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 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 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.

9

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


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.
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 $69.9 million and $61.9 million as of March 31, 2020 and December 31, 2019, respectively. Intangible asset amortization expense totaled approximately $8.1 million for the three months ended March 31, 2020 and 2019.
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 March 31, 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 March 31, 2019 represents federal income taxes associated with the assets contributed in the Drop-Down and Simplification Transaction.
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
London Interbank Offered Rate (“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:
 
Three Months Ended March 31,
(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
$
17,656

 
$
16,658

Restricted Cash at End of Period (1)

 
50

Cash, Cash Equivalents, and Restricted Cash at End of Period
$
17,656

 
$
16,708

(1) 
Restricted cash represents the amount held as collateral for certain of our letters of credit.

10

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


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 March 31, 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 March 31, 2020, for the agreement. Our actual volumes delivered may exceed the future minimum volume commitment.
(in thousands)
Midstream Services — Affiliate
Remainder of 2020
$
27,776

2021
37,635

Total
$
65,411


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 March 31,
(in thousands)
2020
 
2019
Gathering and Processing
$
89,298

 
$
75,380

Fresh Water Delivery
23,599

 
27,587

Other
887

 
836

    Total Midstream Services — Affiliate
$
113,784

 
$
103,803


Expenses General and administrative expense consists of the following:
 
Three Months Ended March 31,
(in thousands)
2020
 
2019
General and Administrative Expense Affiliate
$
2,674

 
$
2,278

General and Administrative Expense Third Party
2,812

 
2,083

    Total General and Administrative Expense
$
5,486

 
$
4,361


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)
March 31, 2020
 
December 31, 2019
Gathering and Processing Systems
$
1,840,973

 
$
1,795,957

Fresh Water Delivery Systems
95,886

 
96,004

Construction-in-Progress (1)
116,644

 
115,034

Total Property, Plant and Equipment, at Cost
2,053,503

 
2,006,995

Accumulated Depreciation and Amortization
(260,734
)
 
(244,038
)
Property, Plant and Equipment, Net
$
1,792,769

 
$
1,762,957

(1) 
Construction-in-progress at March 31, 2020 primarily includes $99.9 million in gathering system projects and $15.3 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.

11

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


Note 5. Debt
Debt consists of the following:
 
March 31, 2020
 
December 31, 2019
(in thousands, except percentages)
Debt
 
Interest Rate
 
Debt
 
Interest Rate
Revolving Credit Facility, due March 9, 2023 (1)
$
750,000

 
2.16
%
 
$
595,000

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

 
1.94
%
 
500,000

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

 
1.82
%
 
400,000

 
2.74
%
Finance Lease Obligation
2,019

 
%
 
2,005

 
%
Total
1,652,019

 
 
 
1,497,005

 
 
Unamortized Debt Issuance Costs
(1,220
)
 
 
 
(1,326
)
 
 
Total Debt
1,650,799

 
 
 
1,495,679

 
 
Finance Lease Obligation Due Within One Year

 
 
 

 
 
Long-Term Debt
$
1,650,799

 
 
 
$
1,495,679

 
 
(1) 
Our revolving credit facility has a total borrowing capacity of $1.15 billion. As of March 31, 2020 and December 31, 2019, our revolving credit facility had $400 million and $555 million available for borrowing, respectively.
During the first quarter 2020, we borrowed a net $155 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 March 31, 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 three 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. Upon commissioning of the EPIC Crude pipeline in February 2020, EPIC began the clean out process and transition of the EPIC Y-Grade pipeline back to NGL service. During the first three 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 commissioned in February 2020 and entered full service on April 1, 2020. During the first three months of 2020, we made capital contributions of approximately $30.0 million.

12

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. During the first three months of 2020, we made capital contributions of approximately $1.5 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)
March 31, 2020
 
December 31, 2019
White Cliffs
$
10,115

 
$
10,268

Advantage
75,139

 
76,834

Delaware Crossing
85,423

 
68,707

EPIC Y-Grade
171,221

 
162,850

EPIC Crude
364,885

 
339,116

EPIC Propane
4,503

 
3,003

Saddlehorn
159,744

 

Total Investments
$
871,030

 
$
660,778


The following table presents our investment loss (income) for the periods indicated:
 
Three Months Ended March 31,
(in thousands)
2020
 
2019
White Cliffs
$
(715
)
 
$
(1,048
)
Advantage
(2,076
)
 
(2,241
)
Delaware Crossing
720

 
1,183

EPIC Y-Grade
5,618

 
30

EPIC Crude
6,901

 

EPIC Propane
25

 

Saddlehorn
(4,626
)
 

Other (1)
(438
)
 
(265
)
Total Investment Loss (Income)
$
5,409

 
$
(2,341
)
(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.

13

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 March 31, 2020
 
 
 
 
 
 
 
 
 
Midstream Services — Affiliate
$
90,185

 
$
23,599

 
$

 
$

 
$
113,784

Midstream Services — Third Party
23,724

 
4,174

 

 

 
27,898

Crude Oil Sales — Third Party
82,363

 

 

 

 
82,363

Total Revenues
196,272

 
27,773

 

 

 
224,045

Goodwill Impairment
109,734

 

 

 

 
109,734

Income (Loss) Before Income Taxes
(41,218
)
 
22,443

 
(5,409
)
 
(13,183
)
 
(37,367
)
Additions to Long-Lived Assets
47,619

 

 

 
109

 
47,728

Additions to Investments

 

 
225,599

 

 
225,599

 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
Midstream Services — Affiliate
$
76,216

 
$
27,587

 
$

 
$

 
$
103,803

Midstream Services — Third Party
20,220

 
3,809

 

 

 
24,029

Crude Oil Sales — Third Party
32,870

 

 

 

 
32,870

Total Revenues
129,306

 
31,396

 

 

 
160,702

Income (Loss) Before Income Taxes
53,660

 
23,209

 
2,341

 
(10,110
)
 
69,100

Additions to Long-Lived Assets
75,176

 
2,756

 

 
269

 
78,201

Additions to Investments

 

 
270,603

 

 
270,603

 
 
 
 
 
 
 
 
 
 
March 31, 2020
 
 
 
 
 
 
 
 
 
Total Assets
$
2,066,048

 
$
94,420

 
$
871,030

 
$
15,476

 
$
3,046,974

 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
Total Assets
$
2,160,026

 
$
91,840

 
$
660,778

 
$
13,438

 
$
2,926,082

(1) 
The Corporate segment includes all general Partnership activity not attributable to our operating subsidiaries.
Note 8. Partnership Distributions
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. The following table details the distributions paid in respect of the periods presented below:
 
 
 
 
Distributions
(in thousands)
 
 
 
 
Limited Partners
 
 
Period
Record Date
Distribution Date
Distribution per Limited Partner Unit
Common Unitholders(1)
Subordinated Unitholders (2)
Holder of IDRs (3)
Total
Q4 2018
February 4, 2019
February 11, 2019
$
0.5858

$
13,876

$
9,316

$
2,421

$
25,613

Q4 2019
February 4, 2020
February 14, 2020
$
0.6878

$
62,012

$

$

$
62,012

(1) 
Distributions to common unitholders does not include distribution equivalent rights on units that vested under the Noble Midstream Partners LP 2016 Long-Term Incentive Plan (the “LTIP’).
(2) 
On May 14, 2019, all Subordinated Units were converted into Common Units.
(3) 
In November 2019, we acquired all of Noble’s IDRs. See Note 2. Basis of Presentation
Cash Distributions On March 25, 2020, the Board of Directors of our General Partner approved a 73% reduction of the quarterly distribution to $0.1875 per unit due to the volatile commodity and market environment. The distribution will be paid on May 15, 2020, to unitholders of record as of May 8, 2020.

14

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


Note 9. Net Income Per Limited Partner Unit
Our net income is attributed to limited partners, in accordance with their respective ownership percentages, and when applicable, giving effect to incentive distributions paid to Noble. For periods prior to the conversion of Subordinated Units and simplification of IDRs, we had more than one class of participating securities and we utilized the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include Common Units, Subordinated Units and IDRs.
Basic and diluted net income per limited partner Common Unit and Subordinated Unit is computed by dividing the respective limited partners’ interest in net income for the period by the weighted-average number of Common Units and Subordinated Units outstanding for the period. Diluted net income per limited partner Common Unit and Subordinated Unit reflects the potential dilution that could occur if agreements to issue Common Units, such as awards under the LTIP, were settled or converted into Common Units. When it is determined that potential Common Units resulting from an award should be included in the diluted net income per limited partner Common and Subordinated Unit calculation, the impact is reflected by applying the treasury stock method.
Our calculation of net income per limited partner Common and Subordinated Unit is as follows:
 
Three Months Ended March 31,
(in thousands, except per unit amounts)
2020
 
2019
Net Income Attributable to Noble Midstream Partners LP
$
10,103

 
$
43,559

Less: Net Income Attributable to Incentive Distribution Rights

 
3,507

Net Income Attributable to Limited Partners
$
10,103

 
$
40,052

 
 
 
 
Net Income Attributable to Common Units
$
10,103

 
$
23,967

Net Income Attributable to Subordinated Units (1)

 
16,085

Net Income Attributable to Limited Partners
$
10,103

 
$
40,052

 
 
 
 
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
 
 
 
Common Units
$
0.11

 
$
1.01

Subordinated Units (1)
$

 
$
1.01

 
 
 
 
Weighted Average Limited Partner Units Outstanding — Basic
 
 
 
Common Units
90,152

 
23,696

Subordinated Units (1)

 
15,903

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

 
23,721

Subordinated Units (1)

 
15,903

 
 
 
 
Antidilutive Restricted Units
167

 
67

(1) 
On May 14, 2019, all Subordinated Units were converted into Common Units.
Note 10. Commitments and Contingencies
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 would expect to defend ourselves vigorously in all such matters. Based on currently available information, we believe it is unlikely that the outcome of known matters would have a material adverse impact on our combined financial condition, results of operations or cash flows.

15


Item 2. 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 our analysis of the Partnership’s financial performance and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2019. It contains forward-looking statements including, without limitation, statements relating to our 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” and similar expressions identify forward-looking statements. We do 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 our disclosures in Item 3 of this report under the heading: “Disclosure Regarding Forward-Looking Statements.”
EXECUTIVE OVERVIEW AND OPERATING OUTLOOK
The following discussion highlights the current operating environment, as well as significant operating and financial results for first quarter 2020. This discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019, which includes disclosures regarding our critical accounting policies as part of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The impacts on our business of both the recent significant decline in commodity prices due to the COVID-19 outbreak and the actions of foreign oil producers, such as Saudi Arabia and Russia, are unprecedented. We will continue to focus on our customer base and maintaining safe and reliable operations and are working with our customers to further align activity and volume expectations.
COVID-19
Market Conditions In first quarter 2020, the COVID-19 pandemic spread quickly across the globe and countries mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various responsive actions and containment measures, which included business closures, work stoppages, shuttering of public spaces and events and/or severe restrictions in global and regional travel, among others, have caused unprecedented declines in the global demand for crude oil and natural gas commodities. As a result, the global economy has experienced a slowing of economic growth, disruption of global manufacturing supply chains, stagnation of crude oil and natural gas consumption and interference with workforce continuity. This decline in global demand driven by reduced consumption has contributed to commodity prices declining precipitously beginning in mid-March 2020. The longevity and severity of COVID-19 impacts to the oil and gas industry, including the reduced demand for crude oil and natural gas commodities and its resulting impact on commodity prices, may continue until a vaccine or alternative treatment is made widely available across the globe.
Current and Future Expected Impact to the Partnership The COVID-19 outbreak, and specifically stay-at-home orders throughout the country, has suppressed the demand for energy commodities and our services, a trend we expect to continue into the second quarter, and perhaps beyond. Additionally, the risks associated with COVID-19 have impacted our workforce and the way we meet our business objectives. In response to this, we, with the support of Noble, executed the following:
Remote workforce Due to concerns over health and safety, we have asked the vast majority of our workforce to work remotely until further notice. As of March 31, 2020, working remotely has not significantly impacted our ability to maintain operations, including use of financial reporting systems, nor has it significantly impacted our internal control environment. We have not incurred, and in the future do not expect to incur, significant expenses related to business continuity as employees work from home.
Mobilized a Crisis Management Team (“CMT”) The CMT is responsible for ensuring the organization follows Center for Disease Control (“CDC”), national, state and local guidance in preparing and responding to COVID-19. The CMT implemented communication protocols should an employee become sick, and we will continue to follow CDC guidance, which is subject to change in the future.
The rapid and unprecedented decreases in energy demand have impacted certain elements of our distribution channels. We are also experiencing impacts from downstream markets, as certain pipelines have limited ability to transport production as refineries reduce activity or are declaring force majeure. Additionally, inventory surpluses have overwhelmed U.S. storage capacity, leading to a further strain on the supply chain. The constraints to the supply chain could force our customers to shut-in

16


production of certain U.S. onshore wells or entire IDPs in the future, which would result in a further decline in demand for our services.
Commodity Prices
Market Conditions Contemporaneously with the COVID-19 pandemic, Organization of Petroleum Exporting Countries (“OPEC”) and non-OPEC producers failed to agree to production cuts which were intended to stabilize and support global crude oil prices. With no agreement in place, certain large international crude oil producers, including Saudi Arabia and Russia, began to deeply discount sales of their crude oil and committed to ramping up production in an attempt to protect, or increase, their global market share. This increased production has further contributed to global production levels far exceeding current demand, a trend that exacerbates already depressed commodity prices. These extreme supply and demand dynamics have caused a significant decline in crude oil prices negatively impacting all crude oil producers. In April 2020, members of OPEC agreed to certain production cuts. While these production cuts could rebalance the market in the long-term, we do not believe they will be large enough to offset the sharp decrease in demand caused by COVID-19 in the near-term.
Additionally, the U.S. domestic natural gas market remains oversupplied and has contributed to depressed pricing.We expect that as development activity begins to decline in the U.S. leading to reduced crude oil and associated natural gas production, U.S. domestic natural gas prices will adjust as supply and demand levels equalize.
The commodity price environment may continue to remain depressed for an extended period of time based on over-supply, decreasing demand and a potential global economic recession caused by COVID-19.
Current and Future Expected Impact to the Partnership The recent decline in commodity prices adversely affected shale producers in the U.S., including our customers. In response, our customers have reduced their capital investment programs, which is expected to result in a decline in demand for our services. The commodity price environment is expected to remain depressed based on decreased demand, over-supply and a potential global economic recession. In addition, we expect downstream capacity and storage constraints to continue to have a negative impact on the ability to transport production. If constraints continue such that storage becomes unavailable to our customers or commodity prices remain depressed, they may be forced or elect to shut-in some or all of their production and delay or discontinue drilling plans, which would result in a further decline in demand for our services.
In this market environment, we are focused on prioritizing free cash flow and protecting our balance sheet. In response, we executed the following:
Reduced 2020 capital program In March 2020, we reduced the Partnership’s 2020 organic capital program by approximately 35%, or $75 million, to a range of $120 to $150 million, to reflect updated producer forecasts in the DJ and Delaware Basins. In May 2020, we further reduced our organic capital program to a range of $60 to $80 million. In total, we have lowered capital expectations by more than 65% from our original February 2020 guidance. These reductions highlight our resiliency and ability to efficiently reallocate resources to align with customer activity.
Reduced quarterly distribution The Board of Directors of our General Partner approved a 73% reduction of the quarterly distribution to $0.1875 per unit for first quarter 2020. We intend to utilize funds from the distribution reduction to reduce our debt levels. Our Board of Directors of our General Partner will continue reviewing the quarterly distribution in context of market conditions.
Potential Global Recession
Market Conditions COVID-19, coupled with the drop in commodity prices, has contributed to equity market volatility and, potentially, the risk of a global recession. We expect this global equity market volatility experienced in first quarter 2020 to continue until the COVID-19 pandemic stabilizes.
In March and April 2020, the U.S. government passed a series of stimulus packages which, collectively, provide the largest relief packages in U.S. history. These packages include various provisions intended to provide relief to individuals and businesses in the form of tax changes, loans and grants, among others. At this time, we do not believe these stimulus measures will have a material impact on the Partnership; however, we do believe it could aid the economy by providing relief to certain individuals and smaller businesses.
Current and Future Expected Impact to the Partnership We have experienced a sharp decline in our unit price over the first quarter 2020, a condition that is consistent across our sector. We do not have any debt covenants or other lending arrangements that depend upon our unit price. As of March 31, 2020, we are in compliance with the covenants contained in our revolving credit facility and term loans, which provide that our consolidated leverage ratio as of the end of each fiscal quarter may not exceed 5.00 to 1.0, and our consolidated interest coverage ratio as of the end of each fiscal quarter to be no less than 3.00 to 1.0. The consolidated leverage ratio and consolidated interest coverage ratio are defined in the respective agreements.
As cities, states and countries implement plans to loosen confinement restrictions and stimulate markets and economies, there is an increased risk for the resurgence and recurrence of COVID-19. Such an event is likely to impact global populations and

17


could result in the reinstatement of containment measures, leading to potentially an extended period of reduced demand for our services.
Potential Future Impacts
We performed impairment assessments as of March 31, 2020, including assessments of property, plant and equipment, customer-related intangible assets, goodwill and equity method investments. Based on these assessments, we fully impaired our goodwill. See Item 1. Financial Statements – Note 2. Basis of Presentation. As mentioned above, we are in compliance with the covenants contained in our revolving credit facility.
Impairment testing involves uncertainties related to key assumptions such as expectations of our customers’ development and capital spending plans, among others, and a significant number of interdependent variables are derived from these key assumptions. There is a high degree of complexity in their application in determining use and value in recovery tests and fair value determinations.
Given the inherent volatility of the current market conditions driven by the COVID-19 pandemic and the oil and gas supply dynamics, the potential for future conditions to deviate from our current assumptions exists. For instance, further erosion in consumer energy demand, lower crude oil and natural gas development and production, or lower commodity prices could trigger future impairments of our assets or non-compliance with the financial covenants in our revolving credit facility and term loans.
Workforce and Executive Salary Adjustments
As previously disclosed, the officers of our 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.
Noble implemented furlough and part-time working programs for certain employees in response to reductions in planned activity levels, representing approximately 30% of the U.S. workforce. Certain employees that support our operations were impacted by the furlough and part-time working programs. Additionally, Noble lowered executive leadership salaries by 10% to 20%. Certain officers of our General Partner were impacted by the salary reductions. The aforementioned actions by Noble have not significantly impacted our ability to maintain operations, including use of financial reporting systems, nor have they significantly impacted our internal control environment.
First Quarter 2020 Significant Results
The following discussion outlines significant results for first quarter 2020.
Significant Financial Results Include:
Net loss of $37.5 million, a decrease of 155% as compared with first quarter 2019 primarily due to the non-cash charge associated with our goodwill impairment;
Net cash provided by operating activities of $118.4 million, an increase of 24% as compared with first quarter 2019;
Adjusted EBITDA (non-GAAP financial measure) of $114.8 million, an increase of 27% as compared with first quarter 2019; and
Distributable cash flow (non-GAAP financial measure) of $93.7 million, an increase of 74% as compared with first quarter 2019.
Significant Transactional Results Include:
On February 1, 2020, Black Diamond exercised and closed an option to acquire a 20% ownership interest in Saddlehorn, which provides diversification into downstream and long-haul opportunities.
For additional information regarding our non-GAAP financial measures, please see — EBITDA (Non-GAAP Financial Measure), Distributable Cash Flow (Non-GAAP Financial Measure) and Reconciliation of Non-GAAP Financial Measures, below.

18


Organic Capital Program
As mentioned above, we have reduced our 2020 organic capital program to a range of approximately $60 to $80 million. We will continue to 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 based on current commodity prices;
operating and construction costs and our ability to achieve material supplier price reductions;
impact of new laws and regulations on our business practices, including those related to COVID-19;
indebtedness levels; and
availability of financing or other sources of funding.
We plan to fund our capital program with cash on hand, cash generated from operations, borrowings under our revolving credit facility and, if necessary, the issuance of additional equity or debt securities.
Development Project Updates
DJ Basin
In the Greeley Crescent IDP area, we continued to build out crude oil and produced water infrastructure to service future well connections. During the quarter, we connected 12 wells on the Empire crude oil gathering system and connected 42 wells to our produced water gathering system in the Greeley Crescent IDP area. We delivered fresh water to 21 wells.
In the Black Diamond dedication area, the joint venture progressed with installing new crude oil gathering infrastructure for upcoming well connections from third-party producers, as well as facility expansion and upgrade projects. During the quarter, we connected 69 third-party wells to the Black Diamond gathering system.
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. During the quarter, we connected 20 affiliate wells to the Mustang gathering system and delivered fresh water to 28 affiliate wells.
In the Wells Ranch IDP area, we commenced construction on extensions of gathering infrastructure to support future well connections. During the quarter, we connected and delivered fresh water to 9 affiliate wells.
Delaware Basin
In the Permian, we connected 22 affiliate wells and 8 third-party wells to our gathering systems. We are now connected to 173 affiliate and 23 third-party wells, and are actively preparing for additional well connections during early second quarter of 2020 before a pause in new projects.
Investment Capital Program
Our 2020 investment capital program will accommodate a net investment level of $240 to $260 million. During first quarter 2020, capital contributions to investments totaled approximately $221 million, or $148 million net to the Partnership. A substantial portion of the remaining spend will be for EPIC Y-Grade and EPIC Crude to support completion of the crude storage and marine terminal equipment as well as NGL fractionator commissioning.
Investment Project Updates
Delaware Crossing Delaware Crossing began delivering crude oil into all connection points in April 2020. Operational capacity is 135 MBbl/d with capability to expand to 200 MBbl/d. The Liberty Terminal receives barrels from the southern producers in Reeves and Pecos counties. Volumes from the Liberty Terminal flow through the 16-inch mainline to the Wink Terminal. The Wink Terminal also receives gathering volumes from producers in Ward and Winkler counties in west Texas.
EPIC Y-Grade The pipeline was commissioned in February 2020 and the clean out process and transition of the Y-Grade mainline from crude interim service to NGL service began. The pipeline commenced full service in early May 2020.
EPIC Crude Construction of the mainline and west dock of the marine terminal was completed in December 2019. The project entered full service on April 1, 2020.
EPIC Propane The EPIC Propane pipeline is currently under construction with anticipated completion in late 2020.
Saddlehorn The pipeline is currently undergoing expansion to increase crude oil capacity by 100 MBbl/d to a new total capacity of approximately 290 MBbl/d. The incremental capacity is expected to be available in late 2020.


19


RESULTS OF OPERATIONS
The impacts on our business of both the recent significant decline in commodity prices and the COVID-19 outbreak are not reflected within the results for the entire quarter. Therefore, results in first quarter 2020 may not be indicative of future results in the near term. Results of operations were as follows:
 
Three Months Ended March 31,
(thousands)
2020
 
2019
Revenues
 
 
 
Midstream Services — Affiliate
$
113,784

 
$
103,803

Midstream Services — Third Party
27,898

 
24,029

Crude Oil Sales — Third Party
82,363

 
32,870

Total Revenues
224,045

 
160,702

Costs and Expenses
 
 
 
Cost of Crude Oil Sales
79,859

 
30,898

Direct Operating
26,850

 
30,423

Depreciation and Amortization
25,931

 
23,033

General and Administrative
5,486

 
4,361

Goodwill Impairment
109,734

 

Other Operating Expense
1,286

 

Total Operating Expenses
249,146

 
88,715

Operating (Loss) Income
(25,101
)
 
71,987

Other Expense (Income)
 
 
 
Interest Expense, Net of Amount Capitalized
6,857

 
5,228