nblx-20210331

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, 2021

☐ 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

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 March 31, 2021, the registrant had 90,362,206 Common Units outstanding.

Table of Contents


Part I. Financial Information			3

Item 1. Financial Statements			3

Consolidated Balance Sheets			3

Consolidated Statements of Operations and Comprehensive Income			4

Consolidated Statements of Cash Flows			5

Consolidated Statements of Changes in Equity			6

Notes to Consolidated Financial Statements			7

Note 1. Organization and Nature of Operations			7
Note 2. Basis of Presentation			8

Note 3. Transactions with Affiliates			10
Note 4. Property, Plant and Equipment			10
Note 5. Debt			11
Note 6. Investments			11
Note 7. Segment Information			13
Note 8. Partnership Distributions			13
Note 9. Net Income per Limited Partner Unit			14
Note 10. Commitments and Contingencies			14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15

Item 3. Quantitative and Qualitative Disclosures About Market Risk			24

Item 4. Controls and Procedures			26

Part II. Other Information			26

Item 1. Legal Proceedings			26

Item 1A. Risk Factors			26

Item 6. Exhibits			27

Signatures			28

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Part I. Financial Information

Item 1. Financial Statements

Noble Midstream Partners LP

Consolidated Balance Sheets

(in thousands, unaudited)


	March 31, 2021		December 31, 2020
ASSETS
Current Assets
Cash and Cash Equivalents	$	23,180	$	16,332
Accounts Receivable — Affiliate	42,632		55,011
Accounts Receivable — Third Party	71,324		45,615
Other Current Assets	13,638		8,093
Total Current Assets	150,774		125,051
Property, Plant and Equipment
Total Property, Plant and Equipment, Gross	2,090,925		2,074,790
Less: Accumulated Depreciation and Amortization	(333,777)		(315,441)
Total Property, Plant and Equipment, Net	1,757,148		1,759,349
Investments	883,788		904,955
Intangible Assets, Net	237,545		245,510
Other Noncurrent Assets	4,409		2,331
Total Assets	$	3,033,664	$	3,037,196
LIABILITIES, MEZZANINE EQUITY AND EQUITY
Current Liabilities
Accounts Payable — Affiliate	$	6,190	$	3,713
Accounts Payable — Trade	94,884		65,723
Current Portion of Debt	501,959		501,856
Other Current Liabilities	5,909		10,323
Total Current Liabilities	608,942		581,615
Long-Term Liabilities
Long-Term Debt	1,059,705		1,109,652
Asset Retirement Obligations	42,145		41,572
Other Long-Term Liabilities	5,814		4,006
Total Liabilities	1,716,606		1,736,845
Mezzanine Equity
Redeemable Noncontrolling Interest, Net	123,310		119,658
Equity
Common Units (90,226 and 90,174 units outstanding, respectively)	834,544		823,470
Noncontrolling Interests	359,204		357,223
Total Equity	1,193,748		1,180,693
Total Liabilities, Mezzanine Equity and Equity	$	3,033,664	$	3,037,196

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

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Noble Midstream Partners LP

Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per unit amounts, unaudited)


	Three Months Ended March 31,
		2021		2020
Revenues
Midstream Services — Affiliate		$	95,169	$	113,784
Midstream Services — Third Party		22,964		27,898
Crude Oil Sales — Third Party		160,238		82,363
Total Revenues		278,371		224,045
Costs and Expenses
Cost of Crude Oil Sales		153,104		79,859
Direct Operating		25,988		26,850
Depreciation and Amortization		26,874		25,931
General and Administrative		9,027		5,486
Goodwill Impairment		—		109,734
Other Operating (Income) Expense		(15)		1,286
Total Operating Expenses		214,978		249,146
Operating Income (Loss)		63,393		(25,101)
Other Expense (Income)
Interest Expense, Net of Amount Capitalized		6,368		6,857
Investment Loss, Net		19,422		5,409

Total Other Expense, Net		25,790		12,266
Income (Loss) Before Income Taxes		37,603		(37,367)
Income Tax Expense		44		149
Net Income (Loss)		37,559		(37,516)
Less: Net Income (Loss) Attributable to Noncontrolling Interests		6,358		(47,619)
Net Income Attributable to Noble Midstream Partners LP		$	31,201	$	10,103

Net Income Attributable to Limited Partners Per Limited Partner Common Unit
Basic and Diluted		$	0.35	$	0.11


Weighted Average Limited Partner Common Units Outstanding
Basic		90,209		90,152
Diluted		90,237		90,164

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

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Noble Midstream Partners LP

Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Three Months Ended March 31,
	2021		2020
Cash Flows From Operating Activities
Net Income (Loss)	$	37,559	$	(37,516)
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Depreciation and Amortization	26,874		25,931

Goodwill Impairment	—		109,734
Loss from Equity Method Investees	19,768		6,562
Distributions from Equity Method Investees	9,614		8,631

Other Adjustments for Noncash Items Included in Income	841		2,145
Changes in Operating Assets and Liabilities, Net of Assets Acquired and Liabilities Assumed
(Increase) Decrease in Accounts Receivable	(13,331)		6,909


Increase (Decrease) in Accounts Payable	30,518		(3,299)

Other Operating Assets and Liabilities, Net	(16,142)		(714)
Net Cash Provided by Operating Activities	95,701		118,383
Cash Flows From Investing Activities
Additions to Property, Plant and Equipment	(9,323)		(53,019)

Additions to Investments	(9,098)		(225,599)


Other	883		154
Net Cash Used in Investing Activities	(17,538)		(278,464)
Cash Flows From Financing Activities





Distributions to Noncontrolling Interests and Parent	(8,299)		(5,700)
Contributions from Noncontrolling Interests	3,922		77,966
Borrowings Under Revolving Credit Facility	55,000		260,000
Repayment of Revolving Credit Facility	(105,000)		(105,000)



Distributions to Unitholders	(16,938)		(62,114)


Other	—		(141)
Net Cash (Used In) Provided by Financing Activities	(71,315)		165,011
Increase in Cash, Cash Equivalents, and Restricted Cash	6,848		4,930
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period (1)	16,332		12,726
Cash, Cash Equivalents, and Restricted Cash at End of Period (1)	$	23,180	$	17,656

(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.

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Noble Midstream Partners LP

Consolidated Statements of Changes in Equity

(in thousands, unaudited)


	Common Units		Noncontrolling Interests		Total
December 31, 2020	$	823,470	$	357,223	$	1,180,693
Net Income	31,201		6,358		37,559
Contributions from Noncontrolling Interests	—		3,922		3,922
Distributions to Noncontrolling Interests	—		(8,299)		(8,299)
Distributions to Unitholders	(16,938)		—		(16,938)
Preferred Equity Accretion	(3,652)		—		(3,652)
Other	463		—		463
March 31, 2021	$	834,544	$	359,204	$	1,193,748



December 31, 2019	$	813,999	$	340,857	$	1,154,856
Net Income (Loss)	10,103		(47,619)		(37,516)
Contributions from Noncontrolling Interests and Parent	—		77,966		77,966
Distributions to Noncontrolling Interests and Parent	—		(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

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

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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 indirect general partner and majority unitholder, 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.

Following the completion of the acquisition of Noble by Chevron Corporation (“Chevron”) on October 5, 2020, Chevron (1) indirectly, wholly owns and controls our general partner, Noble Midstream GP LLC (the “General Partner”), and (2) indirectly holds approximately 62.6% of our limited partner common units (“Common Units”).

Chevron Merger - NBLX On March 4, 2021, the Partnership and the General Partner entered into an Agreement and Plan of Merger (the “NBLX Merger Agreement”) with Chevron, Cadmium Holdings Inc., a Delaware corporation and a wholly owned subsidiary of Chevron (“Holdings”), and Cadmium Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Holdings (“Merger Sub”) pursuant to which Merger Sub will merge with and into NBLX, with NBLX surviving as an indirect, wholly owned subsidiary of Chevron (the “NBLX Merger”). Pursuant to the NBLX Merger Agreement, Chevron will acquire all Common Units that Chevron and its affiliates do not already own, and holders of such Common Units will receive 0.1393 shares of Chevron common stock for each Common Unit held. A registration statement on Form S-4 registering 4,754,327 shares of Chevron common stock to effectuate such acquisition of Common Units was filed by Chevron on March 22, 2021, as amended (Registration No. 333-254568) (the “Registration Statement”) and declared effective by the Securities and Exchange Commission (the “SEC”) on April 13, 2021. The NBLX Merger is anticipated to close in mid-May 2021. Upon completion of the NBLX Merger, the Common Units will cease to be listed on the Nasdaq Global Select Market (“Nasdaq”) and will be subsequently deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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

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

East Pony IDP (DJ Basin)

Water Services

100%

N/A

Green River DevCo LLC

Mustang IDP (DJ Basin)

Crude Oil Gathering
Natural Gas Gathering
Water Services

100%

N/A

Laramie River LLC

Greeley Crescent IDP (DJ Basin)

Crude Oil Gathering
Water Services

100%

N/A

Black Diamond Dedication Area (DJ Basin) (2)

Crude Oil Gathering
Natural Gas Gathering
Crude Oil Transmission

54.4%

45.6%

Gunnison River DevCo LP

Bronco IDP (DJ Basin) (3)

Crude Oil Gathering
Water Services

95%

Blanco River LLC

Delaware Basin

Crude Oil Gathering
Natural Gas Gathering
Produced Water Services

100%

N/A

Trinity River DevCo LLC (4)

Delaware Basin

Crude Oil Transmission
Natural Gas Compression

100%

N/A

Dos Rios DevCo LLC (5)

Delaware Basin

Crude Oil Transmission
Y-Grade Transmission
Fractionation

100%

N/A

NBL Midstream Holdings LLC

East Pony IDP (DJ Basin)

Natural Gas Gathering
Natural Gas Processing

100%

N/A

Delaware Basin

Crude Oil Gathering
Natural Gas Gathering
Produced Water Services

100%

N/A

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

(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)Our ownership interest in Saddlehorn Pipeline Company, LLC (“Saddlehorn”) is owned through a wholly-owned subsidiary of Black Diamond. See Note 6. Investments.

(3)The Bronco IDP is a future development area. We currently have no midstream infrastructure assets in the Bronco IDP.

(4)Our interest in Advantage Pipeline Holdings, L.L.C. (“Advantage”) is owned through Trinity River DevCo LLC.

(5)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;

•fresh water storage and delivery systems; and

•investments in midstream entities that provide transportation and fractionation services.

We generate revenues primarily by charging fees on a per unit basis for gathering crude oil and natural gas, delivering and storing fresh water, and collecting, cleaning and disposing of produced water. Additionally, we purchase and sell crude oil to customers at various delivery points on our gathering systems.

Note 2. Basis of Presentation

Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying consolidated financial statements at March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020 contain all normally recurring adjustments considered necessary for a fair statement of our financial position, results of operations, cash flows and equity for such periods.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. We have no items of other comprehensive income; therefore, our net income is identical to our comprehensive income.

Consolidation Our consolidated financial statements include our accounts, the accounts of subsidiaries which the Partnership wholly owns and the accounts of subsidiaries in which the Partnership has partial ownership.

Variable Interest Entities Our consolidated financial statements include the accounts of Black Diamond, which we control. We have determined that the partners with equity at risk in Black Diamond lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance. Therefore, Black Diamond is considered a variable interest entity. Through our majority representation on the Black Diamond board of directors as well as our responsibility as operator of the Black Diamond system, we have the authority to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate Black Diamond in our financial statements. Financial statement activity associated with Black Diamond is captured within the Gathering Systems and the Investments in Midstream Entities reportable segments. Assets and liabilities of Black Diamond cannot be used by the Partnership for general corporate purposes. As of March 31, 2021, current assets, property plant and equipment, net, and total liabilities were $74.9 million, $366.2 million and $51.2 million, respectively, and as of December 31, 2020 were $53.9 million, $359.4 million and $35.7 million, respectively. See Not e 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.

Impairments During first quarter 2021, no impairment indicators were identified and no impairments were recorded.

During first quarter 2020, we identified certain impairment indicators including the significant decrease in commodity prices, changes to our customers’ development outlook due to reductions in demand resulting from the COVID-19 pandemic and

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

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 in first quarter 2020, 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. Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions for operating and development costs as well as taking into account changes and uncertainties in our customers’ development outlook. Based on these assessments, we concluded that our goodwill was fully impaired and recorded a non-cash charge of $109.7 million in March 2020.

Equity Method Investments We consider our equity method investments to be essential components of our business and necessary and integral elements of our value chain in support of our operations. We considered whether any facts or circumstances suggested that our equity method investments were impaired on an other-than-temporary basis and concluded that the carrying values of our equity method investments were not impaired.

Intangible Assets Our intangible asset accumulated amortization totaled approximately $102.2 million and $94.2 million as of March 31, 2021 and December 31, 2020, respectively. Intangible asset amortization expense totaled approximately $8.0 million and $8.1 million for the three months ended March 31, 2021 and 2020, respectively.

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, 2021 and 2020.

Recently Issued Accounting Standards

LIBOR Reform In first quarter 2020, the FASB issued ASU No. 2020-04 (ASU 2020-04): Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease the transition from LIBOR to an alternative reference rate. The ASU intends to address certain concerns stakeholders raised relating to accounting for contract modifications and hedge accounting. These optional expedients and exceptions to applying GAAP, assuming certain criteria are met, are allowed through December 31, 2022. We are currently evaluating the provisions of ASU 2020-04 and have not yet determined whether we will elect the optional expedients. We do not expect the transition to an alternative rate to have a significant impact on our business, operations or liquidity.

Reconciliation of Total Cash We define total cash as cash, cash equivalents and restricted cash. Our restricted cash is included in other current assets in our consolidated balance sheets. The following table provides a reconciliation of total cash:


	Three Months Ended March 31,
(in thousands)	2021		2020
Cash and Cash Equivalents at Beginning of Period	$	16,332	$	12,676
Restricted Cash at Beginning of Period (1)	—		50
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	$	16,332	$	12,726

Cash and Cash Equivalents at End of Period	$	23,180	$	17,656
Restricted Cash at End of Period	—		—
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	23,180	$	17,656

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

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

SEC Form 10-Q filed by Noble Midstream Partners LP