Noble Midstream Partners Reports First Quarter 2019 Results

HOUSTON–(BUSINESS WIRE)–Noble Midstream Partners LP (NYSE: NBLX) (Noble Midstream or the
Partnership) today reported first quarter 2019 financial and operational
results. The Partnership’s results are consolidated to include the
non-controlling interests in the Partnership’s development companies
(DevCos) retained by Noble Energy, Inc. (Noble Energy) as well as
Greenfield Midstream, LLC’s (Greenfield Midstream) 45.6% ownership of
Black Diamond Gathering, LLC (Black Diamond Gathering); however, certain
results are shown as “attributable to the Partnership,” which exclude
the aforementioned non-controlling interests retained by Noble Energy
and Greenfield Midstream. Noble Midstream believes the results
“attributable to the Partnership” provide the best representation of the
ongoing operations from which the Partnership’s unitholders will benefit.

First Quarter Highlights include:

  • Net Income of $63 million, or $44 million attributable to the
    Partnership
  • Adjusted EBITDA¹ attributable to the Partnership of $63 million, a 14%
    increase over the first quarter of 2018
  • Organic capital expenditures attributable to the Partnership of $36
    million, a 72% reduction compared to the first quarter of 2018
  • Declared a 20% annual increase in distribution per unit to $0.6132,
    with a distribution coverage ratio¹ of 1.9x
  • Record oil and gas gathering and sales volumes of 287 thousand barrels
    of oil equivalent per day (MBoe/d), up 73% versus first quarter of 2018
  • Reported fresh water delivery volumes of 220 thousand barrels of water
    per day (MBw/d), up 31% from the first quarter of 2018
  • Closed transformative Permian equity investments in the EPIC Crude
    Pipeline (30% interest), EPIC Y-Grade Pipeline (15% interest), and
    Delaware Crossing joint venture (50% interest)
  • Secured a $200 million preferred equity commitment for the EPIC Crude
    Pipeline, with an initial $100 million funded during the first quarter
    of 2019

“We continued strong execution and captured meaningful capital
efficiencies during the first quarter of 2019, delivering quarterly
throughput and EBITDA according to plan on capital that was below
expectations. This, combined with closing of our transformative Permian
joint ventures, provides a leading growth platform with meaningful
geographic, service and customer diversification. We’ve accomplished a
lot in a short period to build a business with a strong multi-year cash
flow growth profile,” Terry R. Gerhart, Chief Executive Officer of Noble
Midstream stated.

First Quarter 2019 Results

Gathering throughput was consistent with expectations while fresh water
delivery volumes were above the guided range for the first quarter.

In the gathering business, oil and gas gathering and sales volumes of
287 MBoe/d were up slightly from the fourth quarter of 2018 as an
increase in DJ Basin throughput was offset by planned lower volumes in
the Delaware Basin. As expected, produced water gathering throughput was
down 4% compared to the fourth quarter of 2018 based on the fewer well
connections.

Average fresh water delivered in the first quarter was 5% above of the
high end of guidance at 220 MBw/d and up 22% compared to the fourth
quarter of 2018. The Partnership delivered water to approximately four
completion crews on dedicated acreage in the DJ Basin during the
quarter, compared to approximately three in the fourth quarter of 2018.

First quarter investment income of $2.3 million was primarily comprised
of approximately $3.4 million from the Partnership’s minority ownership
in White Cliffs Pipeline LLC and from the Partnership’s 50% ownership in
the Advantage Pipeline, L.L.C.; this was offset by a loss from the
Delaware Crossing Joint Venture of $1.1 million driven by one-time
transaction expenses.

Net income of $63 million was in line with guidance during the quarter.
Adjusted EBITDA¹ was $91 million in the first quarter, or 11% above the
fourth quarter 2018, while Adjusted EBITDA¹ attributable to the
Partnership was up 7% from the fourth quarter of 2018 at $63 million.

In the first quarter of 2019, cash interest expense attributable to the
Partnership was $6.6 million and maintenance capital expenditures
attributable to the Partnership totaled $6 million, resulting in
distributable cash flow¹ attributable to the Partnership of $54 million
and a distribution coverage ratio¹ of 1.9x.

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

Green River DevCo

Green River results during the first quarter of 2019 reflect record oil,
gas and produced water throughput for Noble Energy’s Mustang development
in the DJ Basin. The Partnership turned online 21 wells during the first
quarter of 2019, driving average oil and gas gathering throughput to
approximately 35 MBoe/d, up 36% from the prior quarter. Average produced
water volumes of 10 MBw/d were relatively consistent with the fourth
quarter of 2018. Fresh water deliveries at Mustang during the first
quarter of 2019 totaled 120 MBw/d, up from 89 MBw/d in the fourth
quarter of 2018.

Laramie River DevCo

Oil and gas gathering and sales volumes during the first quarter of 2019
were up 2% compared to the fourth quarter of 2018. First quarter Black
Diamond Gathering throughput averaged 92 MBbl/d, representing a 3%
decline over the fourth quarter 2018 and a 67% increase since the Black
Diamond Gathering acquisition close in January 2018. The Partnership
connected a combined 88 wells during the quarter on Black Diamond
Gathering’s system and the Partnership’s wholly-owned third party
gathering system for oil gathering.

Colorado River DevCo

Colorado River oil and gas gathering volumes were down 3% in the first
quarter of 2019 compared to the fourth quarter of 2018, totaling 86
MBoe/d, with an increase in Wells Ranch offset by a decline in East
Pony; no new wells were connected during the quarter.

Blanco River DevCo

As planned, oil and gas gathering volumes at the Blanco River DevCo of
51 MBoe/d for the first quarter of 2019 were down 12% compared to the
fourth quarter of 2018 while produced water gathering volumes were down
4% on a sequential basis. The decline in gathering throughput reflects
fewer wells coming online during the quarter, with the Partnership
connecting 9 wells for Noble Energy. Average central gathering facility
(CGF) availability was 99%. Throughput growth is anticipated to resume
in the second quarter of 2019.

Trinity River DevCo

Quarterly volumes on the Advantage Pipeline system totaled 95 thousand
barrels of oil per day (MBbl/d), compared to 130 MBbl/d during the
fourth quarter of 2018 and 88 MBbl/d during the first quarter of 2018.
The sequential decline was primarily driven by a key volume commitment
shipper temporarily utilizing volume credits earned in 2018.

Capital Expenditures

Capital expenditures in the first quarter primarily reflected spending
for customer well connections in the DJ Basin and Delaware Basin.
Capital expenditures in the first quarter of $75 million were 35% below
the low end of guidance and $36 million attributable to the partnership
were 40% below the low end of guidance due primarily to sustainable
savings from efficiencies, cost focus and supplier negotiations as well
as the timing of customer activity. In addition, the Partnership had
additions to investments totaling $271 million during the first quarter
of 2019, prior to the preferred financing for the EPIC Crude Pipeline.
This included $265 million related to the EPIC Crude ($104 million),
EPIC Y-Grade ($123 million) and Delaware Crossing ($38 million) joint
ventures.

           

1Q 2019 Capital Expenditures
(in millions)

DevCo     Basin     NBLX Ownership     Gross     Net
Laramie River * DJ 100% $ 23     $ 16
Blanco River Delaware 40% $ 27 $ 11
Trinity River Delaware 100% $ 2 $ 2
Colorado River DJ 100% $ 1 $ 1
San Juan River DJ 25% $ $

Green River     DJ     25%     $ 22       $ 6
Total Capital Expenditures $ 75 $ 36
Additions to Investments     $ 271       $ 271
Capital Expenditures and Investments $ 346 $ 307

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

Liquidity and Balance Sheet

As of March 31, 2019, the Partnership had $580 million of liquidity with
$10 million in cash on hand and $570 million available under its $800
million unsecured revolving credit facility. During the quarter, Noble
Midstream secured a $200 million preferred equity commitment for the
EPIC Crude pipeline, with an initial $100 million funded during the
first quarter and the remaining $100 million available for a one-year
period subject to certain conditions precedent. Initial proceeds were
used to repay a portion of outstanding borrowings under our revolving
credit facility. The preferred equity is perpetual with a 6.5% dividend
rate, payable quarterly in cash, with the ability to accrue unpaid
dividends during the first two years. 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. The preferred equity is
reported net of offering costs as mezzanine equity on the Partnership’s
balance sheet.

Quarterly Distribution and Update on Subordinated Units

On April 25, 2019, the board of directors of Noble Midstream’s general
partner, Noble Midstream GP LLC, declared a first quarter cash
distribution of $0.6132 per unit, a 20% increase from the first quarter
2018 and 64% above the minimum quarterly cash distribution. The first
quarter distribution is payable on May 13, 2019, to unitholders of
record as of May 6, 2019. Upon payment of the first quarter 2019
distribution to unitholders on May 13, 2019, the requirements for the
conversion of all subordinated units will be satisfied under our
Partnership agreement. As a result, the Partnership expects that the
subordinated units will convert to common units in accordance with the
First Amended and Restated Limited Partnership Agreement of Noble
Midstream and participate on terms equal with all other common units in
distributions of available cash. The conversion will not impact the
amount of the cash distributions paid by the Partnership or the total
units outstanding.

Second Quarter 2019 and Full Year Guidance

As planned, and consistent with 2018, the second quarter of 2019 is
anticipated to be the lowest quarter for both volumes and financial
guidance items. At the midpoint of guidance, gross oil and gas gathering
and sales volumes are anticipated to be up slightly; volumes are
anticipated to grow sequentially in the Blanco River DevCo and in the
Green River DevCo. This is expected to be offset by lower throughput in
the Colorado River DevCo, with no new well connections in Wells Ranch
until the middle of the second quarter of 2019. At the midpoint of
guidance, produced water throughput is anticipated to be up 16% in the
second quarter 2019 compared to the first quarter of 2019. Gross fresh
water volumes are anticipated to be down quarter over quarter, totaling
between 140 and 160 MBw/d, with delivery approximately two crews
compared to nearly four during the first quarter of 2019.

Full-year 2019 combined gross oil and gas gathering volumes remain
unchanged at 299-325 MBoe/d, which at the midpoint of guidance,
represents more than a 40% increase in throughput compared to 2018. The
Partnership expects volume growth acceleration in the second half of the
year, with the highest number of well connections during the third
quarter. This is supported by third-party processing additions in the DJ
Basin and with the startup of additional crude oil takeaway capacity in
the Delaware Basin.

Full-year 2019 gross produced water gathering volumes are still expected
to range between 160 and 190 MBw/d, which at the midpoint of guidance,
represents over 70% annual growth compared to 2018.

Fresh water delivery volumes are anticipated to run at lower levels
compared to the first quarter 2019 for the remainder of the year, with
delivery to between two and three completion crews. Fresh water delivery
volumes are anticipated to average between 140 and 170 MBw/d.

For the full-year, the Partnership is incorporating contributions from
its equity investments in the EPIC Crude and EPIC Y-Grade pipelines.
Including this, full year 2019 net income is anticipated to be between
$233 million and $257 million. The Partnership is narrowing full-year
2019 Adjusted EBITDA guidance to between $355 million and $380 million.
Adjusted EBITDA attributable to the Partnership is still anticipated to
range between $245 million and $270 million.

Based on strong performance relative to guidance in the first quarter of
2019, Noble Midstream is currently tracking towards the low-end to below
its 2019 organic capital budget of $335 million – $375 million, or $180
million – $210 million attributable to the Partnership. This provides
the Partnership flexibility for any capital associated with additional
commercial success or changes in customer activity levels in the balance
of 2019. In addition, our equity investments in the Delaware Crossing,
EPIC Crude Oil Pipeline, and EPIC Y-Grade Pipeline are still anticipated
to total between $570 million and $615 million in 2019, prior to the
preferred investment in the EPIC Crude Pipeline.

       
  Guidance
1Q19 2Q19     2019

Gross Volumes

   
Oil Gathered (MBbl/d)¹ 228 217 – 227 235 – 255
Gas Gathered (MMcf/d) 353 395 – 410 385 – 420
Oil and Gas Gathered (MBoe/d)¹ 287 283 – 295 299 – 325
Produced Water Gathered (MBw/d) 142 160 – 170 160 – 190
Fresh Water Delivered (MBw/d) 220 140 – 160 140 – 170
 

Financials ($MM)

Net Income $63 $45 – $52 $233 – $257
Gross Adjusted EBITDA2 $91 $76 – $83 $355 – $380
Net Adjusted EBITDA2 $63 $55 – $61 $245 – $270
Distributable Cash Flow2 $54 $39 – $46 $190 – $205
Distribution Coverage Ratio2,3 1.9x 1.3x – 1.5x 1.5x – 1.6x
 
Gross Capital, Excluding Investments $75 $80 – $90 $335 – $375
Net Capital, Excluding Investments $36 $40 – $50 $180 – $210
 

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

1 Includes crude oil sales volume

2 Results “attributable to the
Partnership” exclude the non-controlling interests in the DevCos
retained by Noble Energy. Adjusted EBITDA, DCF, and Distribution
Coverage Ratio are not financial measures calculated in accordance with
Generally Accepted Accounting Principles (“GAAP”). For definitions of
these non-GAAP measures, see “Non-GAAP Financial Measures” below.

3 Assumes 20% annualized distribution
growth

Conference Call

Noble Midstream will host a webcast and conference call today at 10:00
a.m. Central Time to discuss first quarter 2019 financial and
operational results. Conference call numbers for participation are
877-883-0383, or 412-902-6506 for international calls. The passcode
number is 1549247. The live audio webcast and related presentation
material is accessible on the ‘Investors’ page of the Partnership’s
website at www.nblmidstream.com.
A replay of the conference call will be available at the same web
location following the event.

About Noble Midstream

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

Forward Looking Statements

This news release contains certain “forward-looking statements” within
the meaning of federal securities law.

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

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

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

 

Schedule 1

Noble Midstream Partners LP

Revenue and Throughput Volume Statistics

(unaudited)

 
    Three Months Ended March 31,
2019   2018
Colorado River DevCo LP  
Crude Oil Gathering Volumes (Bbl/d) 52,668 66,537
Natural Gas Gathering Volumes (MMBtu/d) 263,298 207,848
Produced Water Gathering Volumes (Bbl/d) 13,380 16,220
Fresh Water Delivery Volumes (Bbl/d) 14,147 101,877
Gathering and Fresh Water Delivery Revenues Affiliate (in
thousands)
$ 43,701

 

$ 52,274
 
San Juan River DevCo LP
Fresh Water Delivery Volumes (Bbl/d) 40,236
Gathering and Fresh Water Delivery Revenues Affiliate (in
thousands)
$ 7,271 $ 447
 
Green River DevCo LP
Crude Oil Gathering Volumes (Bbl/d) 23,123
Natural Gas Gathering Volumes (MMBtu/d) 90,933
Produced Water Gathering Volumes (Bbl/d) 10,486
Fresh Water Delivery Volumes (Bbl/d) 120,451 21,995
Gathering and Fresh Water Delivery Revenues Affiliate (in
thousands)
$ 21,614 $ 3,444
 
Blanco River DevCo LP
Crude Oil Gathering Volumes (Bbl/d) 38,479 14,409
Natural Gas Gathering Volumes (MMBtu/d) 98,651 39,703
Produced Water Gathering Volumes (Bbl/d) 104,246 25,985
Gathering Revenues Affiliate and Third Party (in thousands) $ 17,329 $ 6,887
 
Laramie River DevCo LP
Crude Oil Gathering and Sales Volumes (Bbl/d) (1) 113,450 53,293
Natural Gas Gathering Volumes (MMBtu/d) 5,773
Produced Water Gathering Volumes (Bbl/d) 14,178 4,773
Fresh Water Delivery Volumes (Bbl/d) 44,880 43,871
Gathering and Fresh Water Delivery Revenues Third Party (in
thousands)
$ 54,096 $ 32,454
 
Total Gathering Systems
Crude Oil Gathering and Sales Volumes (Bbl/d) 227,720 134,239
Natural Gas Gathering Volumes (MMBtu/d) 458,655 247,551
Barrels of Oil Equivalent (Boe/d) 286,522 165,976
Produced Water Gathering Volumes (Bbl/d) 142,290 46,978
Gathering Revenues (in thousands) $ 114,739 $ 71,704
 
Total Fresh Water Delivery
Fresh Water Delivery Volumes (Bbl/d) 219,714 167,743
Fresh Water Delivery Revenues (in thousands) $ 31,396     $ 24,186
 
(1)   Includes crude oil gathering volumes as well as crude oil that
is sold to customers and transported on our gathering systems.
 
 

Schedule 2

Noble Midstream Partners LP

Consolidated Statement of Operations

(in thousands, except per unit amounts, unaudited)

 
    Three Months Ended March 31,
2019   2018
Revenues  
Crude Oil, Natural Gas and Produced Water Gathering Affiliate $ 63,573 $ 43,024
Crude Oil, Natural Gas and Produced Water Gathering — Third Party 18,296 6,570
Fresh Water Delivery Affiliate 27,587 20,284
Fresh Water Delivery — Third Party 3,809 3,902
Crude Oil Sales — Third Party 32,870 22,110
Other — Affiliate 836 955
Other — Third Party 989     888  
Total Revenues 147,960     97,733  
Costs and Expenses
Cost of Crude Oil Sales 30,898 21,439
Direct Operating 27,437 17,148
Depreciation and Amortization 19,351 11,329
General and Administrative 4,023     10,442  
Total Operating Expenses 81,709     60,358  
Operating Income 66,251 37,375
Other Expense (Income)
Interest Expense, Net of Amount Capitalized 5,230 1,033
Investment Income (2,341 )   (2,868 )
Total Other Expense (Income) 2,889     (1,835 )
Income Before Income Taxes 63,362 39,210
State Income Tax Provision 107     74  
Net Income 63,255 39,136
Less: Net Income (Loss) Attributable to Noncontrolling Interests 19,696     (225 )
Net Income Attributable to Noble Midstream Partners LP 43,559 39,361
Less: Net Income Attributable to Incentive Distribution Rights 3,507     819  
Net Income Attributable to Limited Partners $ 40,052     $ 38,542  
 
Net Income Attributable to Limited Partners Per Limited Partner
Common and Subordinated Unit
Basic $ 1.01 $ 0.97
Diluted $ 1.01 $ 0.97
 
Weighted Average Limited Partner Units Outstanding Basic
Common Units 23,696 23,683
Subordinated Units 15,903     15,903  
Total Limited Partner Units 39,599 39,586
 
Weighted Average Limited Partner Units Outstanding
Diluted
Common Units 23,721 23,698
Subordinated Units 15,903     15,903  
Total Limited Partner Units 39,624 39,601
 
 

Schedule 3

Noble Midstream Partners LP

Consolidated Balance Sheet

(in thousands, unaudited)

 
    March 31,
2019
  December 31,
2018
ASSETS  
Current Assets
Cash and Cash Equivalents $ 9,506 $ 10,740
Accounts Receivable — Affiliate 43,784 31,613
Accounts Receivable — Third Party 21,632 23,091
Other Current Assets 4,616     5,875  
Total Current Assets 79,538 71,319
Property, Plant and Equipment
Total Property, Plant and Equipment, Gross 1,571,105 1,500,609
Less: Accumulated Depreciation and Amortization (90,469 )   (79,357 )
Total Property, Plant and Equipment, Net 1,480,636 1,421,252
Intangible Assets, Net 302,237 310,202
Goodwill 109,734 109,734
Investments 346,998 82,317
Other Noncurrent Assets 3,319     3,093  
Total Assets $ 2,322,462     $ 1,997,917  
LIABILITIES, MEZZANINE EQUITY AND EQUITY
Current Liabilities
Accounts Payable — Affiliate $ 924 $ 2,778
Accounts Payable — Trade 101,169 92,756
Other Current Liabilities 10,514     9,217  
Total Current Liabilities 112,607 104,751
Long-Term Liabilities
Long-Term Debt 729,320 559,021
Asset Retirement Obligations 17,553 17,330
Other Long-Term Liabilities 641     582  
Total Liabilities 860,121     681,684  
Mezzanine Equity
Redeemable Noncontrolling Interest, Net 96,750
Equity
Limited Partner
Common Units (23,882 and 23,759 units outstanding, respectively) 714,465 699,866
Subordinated Units (15,903 units outstanding) (120,692 ) (130,207 )
General Partner 3,507     2,421  
Total Partners’ Equity 597,280 572,080
Noncontrolling Interests 768,311     744,153  
Total Equity 1,365,591     1,316,233  
Total Liabilities, Mezzanine Equity and Equity $ 2,322,462     $ 1,997,917  
 

Contacts

Megan Repine
Investor Relations
(832) 639-7380
megan.repine@nblmidstream.com

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