Noble Midstream Partners LP - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Noble Midstream Partners LP	nblx-20170930x10qxex322.htm
EX-32.1 - EXHIBIT 32.1 - Noble Midstream Partners LP	nblx-20170930x10qxex321.htm
EX-31.2 - EXHIBIT 31.2 - Noble Midstream Partners LP	nblx-20170930x10qxex312.htm
EX-31.1 - EXHIBIT 31.1 - Noble Midstream Partners LP	nblx-20170930x10qxex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

o 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)

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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes ý No o

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 o	Accelerated filer o	Non-accelerated filer ý	Smaller reporting company o	Emerging growth company ý
		(Do not check if a smaller reporting 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. ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

As of September 30, 2017, the registrant had 20,032,586 common units and 15,902,584 subordinated units outstanding.

Table of Contents



Part I. Financial Information	3

Item 1. Financial Statements	3

Consolidated Statement of Operations and Comprehensive Income	3

Consolidated Balance Sheet	4

Consolidated Statement of Cash Flows	5

Consolidated Statement 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. Investments	11
Note 6. Debt	12
Note 7. Asset Retirement Obligations	12
Note 8. Segment Information	13
Note 9. Commitments and Contingencies	13
Note 10. Unit-Based Compensation	14
Note 11. Partnership Distributions	14
Note 12. Net Income per Limited Partner Unit	15
Note 13. Income Taxes	15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures About Market Risk	29

Item 4. Controls and Procedures	30

Part II. Other Information	31

Item 1. Legal Proceedings	31

Item 1A. Risk Factors	31

Item 6. Exhibits	31

Signatures	32

Index to Exhibits	33

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Noble Midstream Partners LP

Consolidated Statement of Operations and Comprehensive Income

(in thousands, except per unit amounts, unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues
Midstream Services — Affiliate	$	56,755		$	47,167		$	161,186		$	112,259
Midstream Services — Third Party	6,356			—			10,022			—
Total Revenues	63,111			47,167			171,208			112,259
Costs and Expenses
Direct Operating	13,712			7,426			39,406			19,999
Depreciation and Amortization	3,562			2,290			8,483			6,652
General and Administrative	3,087			2,587			9,281			7,411
Total Operating Expenses	20,361			12,303			57,170			34,062
Operating Income	42,750			34,864			114,038			78,197
Other (Income) Expense
Interest Expense, Net of Amount Capitalized	594			2,462			961			3,107
Investment Income	(1,633		)	(1,070		)	(4,339		)	(3,509		)
Total Other (Income) Expense	(1,039		)	1,392			(3,378		)	(402		)
Income Before Income Taxes	43,789			33,472			117,416			78,599
Income Tax Provision	33			11,105			33			28,288
Net Income and Comprehensive Income	43,756			22,367			117,383			50,311
Less: Net Income Prior to the IPO on September 20, 2016	—			18,046			—			45,990
Net Income Subsequent to the IPO on September 20, 2016	43,756			4,321			117,383			4,321
Less: Net Income Attributable to Noncontrolling Interests	2,086			1,228			19,779			1,228
Net Income Attributable to Noble Midstream Partners LP	41,670			3,093			97,604			3,093
Less: Net Income Attributable to Incentive Distribution Rights	223			—			315			—
Net Income Attributable to Limited Partners	$	41,447		$	3,093		$	97,289		$	3,093

Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
Common Units	$	1.15		$	0.10		$	2.93		$	0.10
Subordinated Units	$	1.15		$	0.10		$	2.92		$	0.10

Weighted Average Limited Partner Units Outstanding — Basic
Common Units — Public	17,900			14,375			15,627			14,375
Common Units — Noble	2,090			1,528			1,727			1,528
Subordinated Units — Noble	15,903			15,903			15,903			15,903

Weighted Average Limited Partner Units Outstanding —Diluted
Common Units — Public	17,915			14,375			15,638			14,375
Common Units — Noble	2,090			1,528			1,727			1,528
Subordinated Units — Noble	15,903			15,903			15,903			15,903

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

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Noble Midstream Partners LP

Consolidated Balance Sheet

(in thousands, unaudited)



	September 30, 2017			December 31, 2016
ASSETS
Current Assets
Cash and Cash Equivalents	$	10,682		$	57,421
Accounts Receivable — Affiliate	22,608			19,191
Accounts Receivable — Third Party	2,552			—
Other Current Assets	490			380
Total Current Assets	36,332			76,992
Property, Plant and Equipment
Total Property, Plant and Equipment, Gross	566,377			311,045
Less: Accumulated Depreciation and Amortization	(39,891		)	(31,642		)
Total Property, Plant and Equipment, Net	526,486			279,403
Investments	79,748			11,151
Deferred Charges	1,525			1,813
Total Assets	$	644,091		$	369,359
LIABILITIES
Current Liabilities
Accounts Payable — Affiliate	$	2,386		$	1,452
Accounts Payable — Third Party	85,682			12,501
Current Portion of Capital Lease	785			4,786
Other Current Liabilities	1,700			1,617
Total Current Liabilities	90,553			20,356
Long-Term Liabilities
Long-Term Debt	200,000			—
Asset Retirement Obligations	7,215			5,415
Long-Term Portion of Capital Lease	3,043			—
Other Long-Term Liabilities	610			683
Total Liabilities	301,421			26,454
Commitments and Contingencies
EQUITY
Partners' Equity
Limited Partner
Common Units — Public (17,943 and 14,375 units outstanding, respectively)	476,426			311,872
Common Units — Noble (2,090 and 1,528 units outstanding, respectively)	(22,727		)	(3,534		)
Subordinated Units — Noble (15,903 units outstanding)	(179,207		)	(36,799		)
General Partner	223			—
Total Partner's Equity	274,715			271,539
Noncontrolling Interests	67,955			71,366
Total Equity	342,670			342,905
Total Liabilities and Equity	$	644,091		$	369,359

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

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Noble Midstream Partners LP

Consolidated Statement of Cash Flows

(in thousands, unaudited)



	Nine Months Ended September 30,
	2017			2016
Cash Flows From Operating Activities
Net Income and Comprehensive Income	$	117,383		$	50,311
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Depreciation and Amortization	8,483			6,652
Deferred Income Taxes	—			28,288
Income from Equity Method Investee	(821		)	—
Unit-Based Compensation	581			—
Other Adjustments for Noncash Items Included in Income	288			132
Changes in Operating Assets and Liabilities
Increase in Accounts Receivable	(7,273		)	(4,294		)
Increase (Decrease) in Accounts Payable	5,816			(476		)
Other Operating Assets and Liabilities, Net	(100		)	(40		)
Net Cash Provided by Operating Activities	124,357			80,573
Cash Flows From Investing Activities
Additions to Property, Plant and Equipment	(185,442		)	(23,720		)
Additions to Investments	(68,504		)	(147		)
Distributions from Cost Method Investee	728			963
Proceeds from Asset Sale — Affiliate	—			1,850
Net Cash Used in Investing Activities	(253,218		)	(21,054		)
Cash Flows From Financing Activities
Distributions to Parent	—			(42,480		)
Contributions from Parent	—			1,036
Proceeds from the IPO, Net of Offering Costs	—			301,461
Distribution to Noble Subsequent to the IPO	—			(296,820		)
Revolving Credit Facility Origination Fees and Expenses Paid	—			(1,859		)
Distributions to Noncontrolling Interests	(19,849		)	—
Cash Contributions from Noncontrolling Interests	52,806			—
Borrowings Under Revolving Credit Facility	245,000			—
Repayment of Revolving Credit Facility	(45,000		)	—
Net Proceeds from Private Placement	138,084			—
Distribution to Noble for Contributed Assets	(245,000		)	—
Distributions to Unitholders	(42,937		)	—
Repayment of Capital Lease Obligation	(982		)	—
Net Cash Provided by (Used in) Financing Activities	82,122			(38,662		)
(Decrease) Increase in Cash and Cash Equivalents	(46,739		)	20,857
Cash and Cash Equivalents at Beginning of Period	57,421			26,612
Cash and Cash Equivalents at End of Period	$	10,682		$	47,469

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

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Noble Midstream Partners LP

Consolidated Statement of Changes in Equity

(in thousands, unaudited)



	Partnership
	Common Units — Public			Common Units — Noble			Subordinated Units — Noble			General Partner			Noncontrolling Interests			Total
December 31, 2016	$	311,872		$	(3,534	)	$	(36,799	)	$	—		$	71,366		$	342,905
Net Income	46,001			5,116			46,172			315			19,779			117,383
Contributions from Noncontrolling Interests	—			—			—			—			51,503			51,503
Distributions to Noncontrolling Interests	—			—			—			—			(19,849		)	(19,849		)
Distributions to Unitholders	(20,112		)	(2,221		)	(20,512		)	(92		)	—			(42,937		)
Net Proceeds from Private Placement	138,084			—			—			—			—			138,084
Distribution to Noble for Contributed Assets ⁽¹⁾	—			(28,459		)	(216,541		)	—			—			(245,000		)
Contributed Assets Transfer from Noble	—			6,371			48,473			—			(54,844		)	—
Unit-Based Compensation	581			—			—			—			—			581
September 30, 2017	$	476,426		$	(22,727	)	$	(179,207	)	$	223		$	67,955		$	342,670


⁽¹⁾	These amounts represent the $245 million in cash consideration for the Contributed Assets. In addition to this cash consideration, we issued 562,430 common units to Noble. See Note 1. Organization and Nature of Operations.

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

Table of Contents

Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Note 1. Organization and Nature of Operations

Organization Noble Midstream Partners LP (the Partnership, we, or us) 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 (DJ) Basin in Colorado and the Southern Delaware Basin position of the Permian Basin (Delaware Basin) in Texas.

On September 20, 2016, we completed our initial public offering (the IPO) of 14,375,000 common units representing limited partner interests in the Partnership (common units), which included 1,875,000 common units issued pursuant to the underwriters’ exercise of their option to purchase additional common units, at a price to the public of $22.50 per common unit ($21.20625 per common unit, net of underwriting discounts).

In connection with the IPO, Noble contributed ownership interests in certain development companies (DevCos) and a 3.33% ownership interest in White Cliffs Pipeline L.L.C. (the White Cliffs Interest) to us. The ownership interests in the DevCos, together with the White Cliffs Interest, are referred to collectively as the Contributed Businesses.

Advantage Joint Venture On April 3, 2017, Trinity River DevCo LLC, an indirect wholly owned subsidiary of the Partnership, and Plains Pipeline, L.P. (Plains), a wholly owned subsidiary of Plains All American Pipeline, L.P., completed the acquisition of Advantage Pipeline, L.L.C. (Advantage) for $133 million through a newly formed 50/50 joint venture (the Advantage Joint Venture). Trinity River DevCo LLC contributed $66.8 million of cash in exchange for its 50% interest in the Advantage Joint Venture. The Partnership funded the acquisition with a combination of borrowings under our revolving credit facility and from cash on hand. We serve as the operator of the Advantage system, which includes a 70-mile crude oil pipeline in the Southern Delaware Basin from Reeves County, Texas to Crane County, Texas, with 150,000 barrels of daily shipping capacity and 490,000 barrels of storage capacity. See Note 5. Investments and See Note 6. Debt.

Contribution Agreement On June 20, 2017, the Partnership entered into a Contribution Agreement (the Contribution Agreement) by and among the Partnership, Noble Midstream GP LLC, our general partner, Noble Midstream Services, LLC (Midstream Services), NBL Midstream, LLC (NBL Midstream), a subsidiary of Noble, and Blanco River DevCo GP LLC (Blanco River DevCo GP). Pursuant to the terms of the Contribution Agreement, the Partnership agreed to acquire from NBL Midstream (i) the remaining 20% limited partner interest in Colorado River DevCo LP and (ii) an additional 15% limited partner interest in Blanco River DevCo LP (collectively, the Contributed Assets). In consideration for the Contributed Assets, the Partnership agreed to pay NBL Midstream $270 million, consisting of (i) $245 million in cash and (ii) 562,430 common units issued to NBL Midstream at an issue price of $44.45 per common unit, the closing price of our common units on the New York Stock Exchange on June 20, 2017 (the Transaction). The Transaction closed on June 26, 2017. The Partnership funded the cash consideration with a combination of borrowings under our revolving credit facility, proceeds from the Private Placement (as defined below), and from cash on hand. See Note 6. Debt.

Prior to the acquisition, the Contributed Assets were reflected as noncontrolling interests in the Partnership’s consolidated financial statements. As the Partnership acquired additional interests in already-consolidated entities, the acquisition did not result in a change in reporting entity, as defined under the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 805, Business Combinations, and was accounted for on a prospective basis. Therefore, beginning June 26, 2017, the Partnership’s consolidated financial statements reflect its 100% ownership interest in Colorado River DevCo LP and its 40% ownership interest in Blanco River DevCo LP.

Private Placement On June 20, 2017, the Partnership entered into a Common Unit Purchase Agreement with certain institutional investors, pursuant to which, the Partnership agreed to sell 3,525,000 common units in a private placement for gross proceeds of approximately $142.6 million (the Private Placement). Net proceeds totaled approximately $138.1 million, after deducting offering expenses of approximately $4.5 million. The closing of the Private Placement occurred on June 26, 2017.

Nature of Operations Through our ownership interests in the DevCos, we operate and own interests in the following assets:


•	crude oil and natural gas gathering systems;


•	crude oil treating facilities;


•	produced water collection, gathering, and cleaning systems; and


•	fresh water storage and delivery systems.

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.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Predecessor This quarterly report on Form 10-Q includes the assets, liabilities and results of operations of the Contributed Businesses on a carve-out basis, our Predecessor for accounting purposes, for periods prior to September 20, 2016, the date on which we completed the IPO.

References in this report to “Predecessor,” “we,” “our,” “us” or like terms, when referring to periods prior to September 20, 2016, refer to Noble’s Contributed Businesses, our Predecessor for accounting purposes. References to “the Partnership,” “we,” “our,” “us” or like terms, when referring to periods after September 20, 2016, refer to the Partnership.

Note 2. Basis of Presentation

Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. 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 U.S. GAAP for complete financial statements. The accompanying consolidated financial statements at September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and partners' equity for such periods. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. Certain prior-period amounts have been reclassified to conform to the current-period presentation.

The accompanying consolidated financial statements for periods prior to September 20, 2016 represent the Contributed Businesses of certain of Noble's midstream assets as the accounting Predecessor to the Partnership, presented on a carve-out basis of Noble’s historical ownership of the Predecessor. The Predecessor financial statements have been prepared from the separate records maintained by Noble and may not necessarily be indicative of the actual results of operations that might have occurred if the Predecessor had been operated separately during the periods reported.

The Partnership has no items of other comprehensive income; therefore, its net income is identical to its comprehensive income.

Consolidation and Variable Interest Entities Our consolidated financial statements include our accounts and the accounts of the DevCos, each of which we control as general partner. All intercompany balances and transactions have been eliminated upon consolidation. We have determined that the partners with equity at risk in each of the DevCos lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance; therefore, each DevCo is considered a variable interest entity, or VIE. Through our 100% ownership interest in Noble Midstream Services, LLC, a Delaware limited liability company which owns controlling interests in each of the DevCos, 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 each of the DevCos in our financial statements. A substantial portion of the financial statement activity associated with our DevCos is captured within the Gathering Systems and Fresh Water Delivery reportable segments. Although our investment in the Advantage Joint Venture is owned by Trinity River DevCo LLC, all financial statement activity associated with our investment is captured within the Investments and Other reportable segment. See Note 8. Segment Information.

Investments Although we serve as the operator of the Advantage system, our operating agreements empower the Advantage board, split between us and Plains, to direct the activities that most significantly affect the long-term economic performance of the entity, primarily the oversight of the commercial function and approval of expansion capital. As a result, our investment in the Advantage Joint Venture does not require consolidation under the VIE consolidation model. We use the equity method of accounting for our investment in the Advantage Joint Venture, as we do not control, but do exert significant influence over, its operations. 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 5. Investments.

We use the cost method of accounting for our White Cliffs Interest 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 Pipeline L.L.C. 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 5. Investments.

Revenue Recognition 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. We recognize revenue when services have been rendered, the prices are fixed or determinable, and collectibility is reasonably assured.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Under our commercial agreements, if dedicated volumes do not flow through our gathering facilities, we may have the right to charge a fee for the resulting unutilized capacity. Any income associated with the fee is recognized as revenue in the accompanying consolidated statements of operations.

Use of Estimates The preparation of consolidated financial statements in conformity with U.S. 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. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment.

Fair Value Measurements We measure assets and liabilities requiring fair value presentation and disclose such amounts according to the quality of valuation inputs under the fair value hierarchy. The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature and maturity of the instruments and use Level 1 inputs.

Supplemental Cash Flow Information We accrued $72.5 million and $2.7 million related to midstream capital expenditures as of September 30, 2017 and September 30, 2016, respectively.

Concentration of Credit Risk For the three and nine months ended September 30, 2017, 90% and 94%, respectively, of our revenues are from Noble and its affiliates. For all other periods presented, 100% of our revenues are from Noble and its affiliates.

Recently Issued Accounting Standards In May 2017, the FASB issued Accounting Standards Update No. 2017-09 (ASU 2017-09) Compensation - Stock Compensation (Topic 718). The purpose of this update is to provide clarity as to which modifications of awards require modification accounting under Topic 718, whereas previously issued guidance frequently resulted in varying interpretations and a diversity of practice. Under ASU 2017-09, an entity should employ modification accounting unless the following items are met: (1) the fair value of the award is the same immediately before and after the award is modified; (2) the vesting conditions are the same under both the modified award and the original award; and (3) the classification of the modified award is the same as the original award, either equity or liability. Regardless of whether modification accounting is utilized, award disclosure requirements under Topic 718 remain unchanged. ASU 2017-09 will be effective for annual or any interim periods beginning after December 15, 2017. We do not believe adoption of ASU 2017-09 will have a material impact on our financial statements. We will adopt the new standard on the effective date of January 1, 2018.

In January 2017, the FASB issued Account Standards Update No. 2017-01 (ASU 2017-01): Business Combinations - Clarifying the Definition of a Business, that assists in determining whether certain transactions should be accounted for as acquisitions or dispositions of assets or businesses. The amendment provides a screen to be applied to the fair value of an acquisition or disposal to evaluate whether the assets in question are simply assets or if they meet the definition of a business. If the screen is not met, no further evaluation is needed. If the screen is met, certain steps are subsequently taken to make the determination. This ASU is effective for annual and interim periods beginning after December 15, 2017 and is required to be applied prospectively. We will adopt the new standard on the effective date of January 1, 2018.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18): Statement of Cash Flows - Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. This ASU will be effective for annual and interim periods beginning after December 15, 2017, with earlier application permitted. We do not believe adoption of ASU 2016-18 will have a material impact on our statement of cash flows and related disclosures. We will adopt the new standard on the effective date of January 1, 2018.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15 (ASU 2016-15): Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, to clarify how eight specific cash receipt and cash payment transactions should be presented in the statement of cash flows. ASU 2016-15 will be effective for annual and interim periods beginning after December 15, 2017, with earlier application permitted. We do not believe adoption of ASU 2016-15 will have a material impact on our statement of cash flows. We will adopt the new standard on the effective date of January 1, 2018.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02): Leases. The guidance requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by leases with terms of more than 12 months. ASU 2016-02 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. The standard will be effective for annual and interim periods beginning after December 15, 2018, with earlier application permitted. In the normal course of business, we enter into capital and operating lease agreements to support our operations and may lease water-related, field-related and other assets. At this

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

time, we cannot reasonably estimate the financial impact ASU 2016-02 will have on our financial statements; however, we believe adoption and implementation of ASU 2016-02 will likely materially impact our balance sheet resulting from an increase in both assets and liabilities relating to our leasing activities. As part of our assessment to date, we have formed an implementation work team, prepared educational and training materials pertinent to ASU 2016-02 and have begun contract review and documentation.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers. In summary, revenue recognition would occur upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition.

We continue to evaluate the impact of ASU 2014-09 on our accounting policies, internal controls, and consolidated financial statements and related disclosures. We are performing a review of contracts for each of our revenue streams and developing accounting policies to address the provisions of ASU 2014-09. ASU 2014-09 also includes provisions regarding future revenues and expenses under a gross-versus-net presentation. We are evaluating the impact, if any, on the presentation of our future revenues and expenses under this gross-versus-net presentation guidance. Based upon assessments performed to date, we do not expect ASU 2014-09 to have a material effect on the timing of revenue recognition or our financial position. The standard is required to be adopted using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustment to retained earnings on the opening balance sheet. We will adopt the new standard on January 1, 2018, using the modified retrospective approach with a cumulative adjustment to retained earnings as necessary.

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 September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Crude Oil, Natural Gas and Produced Water Gathering	$	37,854	$	24,250	$	98,591	$	67,313
Fresh Water Delivery	17,589		21,280		58,256		39,968
Crude Oil Treating	1,037		1,397		3,473		4,090
Other	275		240		866		888
Total Midstream Services Revenues — Affiliate	$	56,755	$	47,167	$	161,186	$	112,259

Expenses General and administrative expense consists of the following:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
General and Administrative Expense — Affiliate	$	1,819	$	1,712	$	5,527	$	5,272
General and Administrative Expense — Third Party	1,268		875		3,754		2,139
Total General and Administrative Expense	$	3,087	$	2,587	$	9,281	$	7,411

Asset Sale — Affiliate During the first nine months of 2016, we sold certain equipment to Noble, at cost, and received proceeds of $1.9 million. No gain or loss was recognized for the transaction.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Note 4. Property, Plant and Equipment

Property, plant and equipment, at cost, is as follows:



(in thousands)	September 30, 2017			December 31, 2016
Crude Oil, Natural Gas and Produced Water Gathering Systems and Facilities	$	374,259		$	201,323
Fresh Water Delivery Systems ⁽¹⁾	71,492			56,792
Crude Oil Treating Facilities	20,099			20,099
Construction-in-Progress ⁽²⁾	100,527			32,831
Total Property, Plant and Equipment, at Cost	566,377			311,045
Accumulated Depreciation and Amortization	(39,891		)	(31,642		)
Property, Plant and Equipment, Net	$	526,486		$	279,403


⁽¹⁾	Fresh water delivery system assets at September 30, 2017 and December 31, 2016 include $5 million related to a leased pond accounted for as a capital lease.


⁽²⁾	Construction-in-progress at September 30, 2017 includes $96.7 million in gathering system projects and $3.8 million in fresh water delivery system projects. Construction-in-progress at December 31, 2016 includes $27.6 million in gathering system projects and $5.2 million in fresh water delivery system projects.

Note 5. Investments

The following table presents our investments at the dates indicated:



(in thousands)	September 30, 2017		December 31, 2016
Advantage Joint Venture ⁽¹⁾	$	69,325	$	—
White Cliffs Interest	10,423		11,151
Total Investments	$	79,748	$	11,151


⁽¹⁾	We capitalized $1.7 million in acquisition related expenses that are included in the basis of the investment. As of September 30, 2017, $1.7 million in acquisition related expenses remains unamortized.

The following table presents our investment income for the periods indicated:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Advantage Joint Venture ⁽¹⁾	$	416	$	—	$	821	$	—
White Cliffs Interest	1,042		1,070		3,226		3,509
Other ⁽²⁾	175		—		292		—
Total Investment Income	$	1,633	$	1,070	$	4,339	$	3,509


⁽¹⁾	Includes the amortization of acquisition related expenses. As we completed the Advantage acquisition on April 3, 2017, the year-to-date results are for the period beginning on April 3, 2017 and ending on September 30, 2017.


⁽²⁾	Represents income associated with our fee for serving as the operator of the Advantage Joint Venture. The fee totals approximately $0.7 million per year.

Summarized, 100% combined balance sheet financial information for the Advantage Joint Venture at the date indicated:



(in thousands)	September 30, 2017
Current Assets	$	5,874
Noncurrent Assets	130,721
Current Liabilities	1,255
Noncurrent Liabilities	$	—

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Summarized, 100% combined statement of operations information for the Advantage Joint Venture for the periods indicated:



(in thousands)	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017 ⁽¹⁾
Operating Revenues	$	3,186	$	6,274
Operating Expenses	2,314		4,556
Income Before Taxes	872		1,718
Income Tax Expense	20		20
Net Income	$	852	$	1,698


⁽¹⁾	As we completed the Advantage acquisition on April 3, 2017, the year-to-date results are for the period beginning on April 3, 2017 and ending on September 30, 2017.

Note 6. Debt

Revolving Credit Facility We maintain a $350 million revolving credit facility to fund working capital and to finance acquisitions and other capital expenditures. The revolving credit facility matures on September 20, 2021. The borrowing capacity on our revolving credit facility may be increased by up to an additional $350 million subject to certain conditions including compliance with the covenants contained in the credit agreement and requisite commitments from existing or new lenders.

There were no amounts outstanding under the revolving credit facility as of December 31, 2016. As of September 30, 2017, $200 million was outstanding under our revolving credit facility. During the nine months ended September 30, 2017, borrowings under our revolving credit facility were primarily used to fund portions of our construction activities, the Advantage acquisition, and the cash consideration for the Contributed Assets.

Borrowings under the revolving credit facility bear interest at a rate equal to an applicable margin plus, at our option, either (a) in the case of base rate borrowings, a rate equal to the highest of (1) the prime rate, (2) the greater of the federal funds rate or the overnight bank funding rate, plus 0.5% and (3) the LIBOR for an interest period of one month plus 1.00%; or (b) in the case of LIBOR borrowings, the offered rate per annum for deposits of dollars for the applicable interest period.

Interest was incurred on the revolving credit facility at a weighted average annual interest rate of 2.45% during the nine months ended September 30, 2017. The unused portion of the revolving credit facility is subject to a commitment fee. Commitment fees began to accrue beginning on the date we entered into the revolving credit facility. As of December 31, 2016 and September 30, 2017, the commitment fee rate was 0.2%. Unamortized debt issuance costs totaled $1.8 million and $1.5 million as of December 31, 2016 and September 30, 2017, respectively.

The revolving credit facility requires us to comply with certain financial covenants as of the end of each fiscal quarter. The Partnership was in compliance with such covenants as of September 30, 2017. Certain lenders that are a party to the credit agreement have in the past performed, and may in the future from time to time perform, investment banking, financial advisory, lending or commercial banking services for us for which they have received, and may in the future receive, customary compensation and reimbursement of expenses.

Subsequent Event During October 2017, we drew an additional $25 million under our revolving credit facility to fund our construction activities.

Note 7. Asset Retirement Obligations

Asset retirement obligations consist of estimated costs of dismantlement, removal, site reclamation and similar activities associated with our infrastructure assets. Changes in asset retirement obligations are as follows:



(in thousands)	Nine Months Ended September 30, 2017
Asset Retirement Obligations, Beginning Balance	$	5,415
Liabilities Incurred	1,566
Accretion Expense ⁽¹⁾	234
Asset Retirement Obligations, Ending Balance	$	7,215


⁽¹⁾	Accretion expense is included in depreciation and amortization expense in the consolidated statements of operations.

Liabilities incurred in the 2017 period were primarily related to our Billy Miner I Central Gathering Facility (CGF) in the Delaware Basin.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Note 8. Segment Information

Our operations are located in the U.S. and are organized into the following reportable segments: Gathering Systems (crude oil, natural gas and produced water gathering as well as crude oil treating), Fresh Water Delivery, and Investments and Other. Our reportable segments comprise the structure used to make key operating decisions and assess performance.

Summarized financial information concerning our reportable segments is as follows:



(in thousands)	Gathering Systems⁽¹⁾		Fresh Water Delivery⁽¹⁾		Investments and Other^{(1) (2)}			Consolidated
Three Months Ended September 30, 2017
Midstream Services — Affiliate	$	39,166	$	17,589	$	—		$	56,755
Midstream Services — Third Party	1,574		4,782		—			6,356
Total Midstream Services Revenues	40,740		22,371		—			63,111
Income (Loss) Before Income Taxes	28,307		17,823		(2,341		)	43,789

Three Months Ended September 30, 2016
Midstream Services Revenues	$	25,887	$	21,280	$	—		$	47,167
Income (Loss) before Income Taxes	19,280		18,186		(3,994		)	33,472

Nine Months Ended September 30, 2017
Midstream Services — Affiliate	$	102,930	$	58,256	$	—		$	161,186
Midstream Services — Third Party	1,574		8,448		—			10,022
Total Midstream Services Revenues	104,504		66,704		—			171,208
Income (Loss) Before Income Taxes	70,633		53,298		(6,515		)	117,416

Nine Months Ended September 30, 2016
Midstream Services Revenues	$	72,291	$	39,968	$	—		$	112,259
Income (Loss) Before Income Taxes	56,390		29,272		(7,063		)	78,599

September 30, 2017
Total Assets	$	459,647	$	66,839	$	117,605		$	644,091

December 31, 2016
Total Assets	$	224,861	$	54,542	$	89,956		$	369,359

⁽¹⁾

A substantial portion of the financial statement activity associated with our DevCos is captured within the Gathering Systems and Fresh Water Delivery reportable segments. Although our investment in the Advantage Joint Venture is owned by Trinity River DevCo LLC, all financial statement activity associated with our investment is captured within the Investments and Other reportable segment. As our DevCos represent VIEs, see the above reportable segments for our VIEs impact to the consolidated financial statements.


⁽²⁾	The Investments and Other segment includes our investments in the Advantage Joint Venture and White Cliffs Interest as well as all general Partnership activity not attributable to our DevCos.

Note 9. Commitments and Contingencies

Legal Proceedings 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.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Note 10. Unit-Based Compensation

The Noble Midstream Partners LP 2016 Long-Term Incentive Plan (the LTIP) provides for the grant, at the discretion of the board of directors of our general partner, of unit awards, restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, profits interest units and other unit-based awards. The purpose of awards under the LTIP is to provide additional incentive compensation to individuals providing services to us, and to align the economic interests of such individuals with the interests of our unitholders.

The LTIP limits the number of units that may be delivered pursuant to vested awards to 1,860,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminated without delivery of common units will be available for delivery pursuant to other awards. As of September 30, 2017, 1,817,428 common units are available for future grant under the LTIP.

Restricted unit activity for the nine months ended September 30, 2017 was as follows:



	Number of Units	Weighted Average Award Date Fair Value
Awarded and Unvested Units at December 31, 2016	7,868	$	30.50
Awarded	34,704	45.10
Awarded and Unvested Units at September 30, 2017	42,572	$	42.40

As of September 30, 2017, $1.2 million of compensation cost related to all of our unvested restricted units awarded under the LTIP remained to be recognized. The cost is expected to be recognized over a weighted-average period of 1.75 years.

Note 11. 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
					Limited Partners
Period	Record Date	Distribution Date	Distribution per Limited Partner Unit		Common Unitholders		Subordinated Unitholders		Holder of IDRs		Total
Q4 2016⁽¹⁾	February 6, 2017	February 14, 2017	$	0.4333	$	6,891	$	6,891	$	—	$	13,782
Q1 2017	May 8, 2017	May 16, 2017	$	0.4108	$	6,533	$	6,533	$	—	$	13,066
Q2 2017	August 7, 2017	August 14, 2017	$	0.4457	$	8,909	$	7,088	$	92	$	16,089


⁽¹⁾	The distribution for the fourth quarter 2016 is comprised of $0.3925 per unit for the fourth quarter 2016 and $0.0408 per unit for the 10-day period beginning on the closing of the IPO on September 20, 2016 and ending on September 30, 2016.

Incentive Distribution Rights Noble currently holds Incentive Distribution Rights (IDRs) that entitle it to receive increasing percentages, up to a maximum of 50%, of the available cash we distribute from operating surplus in excess of $0.4313 per unit per quarter. The maximum distribution of 50% does not include any distributions that Noble may receive on common units or subordinated units that it owns.

Cash Distributions On October 26, 2017, the board of directors of our general partner declared a quarterly cash distribution of $0.4665 per unit. The distribution will be paid on November 13, 2017, to unitholders of record on November 6, 2017. Also on November 13, 2017, a cash incentive distribution of $0.2 million will be made to Noble related to its IDRs, based upon the level of distribution paid per common and subordinated unit.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements

Note 12. Net Income Per Limited Partner Unit

Net income per unit applicable to common and subordinated unitholders 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. The common and subordinated unitholders represent an aggregate 100% limited partner interest in us. Because we have more than one class of participating securities, we use the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include common units and subordinated units.

Pursuant to our partnership agreement, to the extent that the quarterly distributions exceed certain target levels, Noble, as the holder of our IDRs, is entitled to receive certain incentive distributions that will result in more net income proportionately being allocated to Noble than to the holders of common units and subordinated units.

Our calculation of net income per limited partner common and subordinated unit is as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Net Income Attributable to Noble Midstream Partners LP	$	41,670	$	3,093	$	97,604	$	3,093
Less: Net Income Attributable to Incentive Distribution Rights	223		—		315		—
Net Income Attributable to Limited Partners	$	41,447	$	3,093	$	97,289	$	3,093

Net Income Allocable to Common Units — Public	$	20,670	$	1,398	$	46,001	$	1,398
Net Income Allocable to Common Units — Noble	2,414		149		5,116		149
Net Income Allocable to Subordinated Units — Noble	18,363		1,546		46,172		1,546
Net Income Attributable to Limited Partners	$	41,447	$	3,093	$	97,289	$	3,093

Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
Common Units	$	1.15	$	0.10	$	2.93	$	0.10
Subordinated Units	$	1.15	$	0.10	$	2.92	$	0.10

Weighted Average Limited Partner Units Outstanding — Basic
Common Units — Public	17,900		14,375		15,627		14,375
Common Units — Noble	2,090		1,528		1,727		1,528
Subordinated Units — Noble	15,903		15,903		15,903		15,903

Weighted Average Limited Partner Units Outstanding — Diluted
Common Units — Public	17,915		14,375		15,638		14,375
Common Units — Noble	2,090		1,528		1,727		1,528
Subordinated Units — Noble	15,903		15,903		15,903		15,903

Antidilutive Restricted Units	4		—		6		—

Note 13. Income Taxes

We are not a taxable entity for U.S. 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 accordingly for the periods subsequent to the IPO, we do not record deferred taxes related to the aggregate difference in the basis of our assets for financial and tax reporting purposes. We recorded a de minimis tax provision for the three and nine months ended September 30, 2017 associated with state income taxes. The income tax provision for the three and nine months ended September 30, 2016 is the income tax provision of our Predecessor. The provision was prepared on a separate return basis as if the Predecessor were a stand-alone entity.

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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:


•	Executive Overview;


•	Operating Outlook;


•	Results of Operations; and


•	Liquidity and Capital Resources.

Predecessor This quarterly report on Form 10-Q includes the assets, liabilities and results of operations of the Contributed Businesses on a carve-out basis (our Predecessor for accounting purposes) for periods prior to September 20, 2016, the date on which we completed the IPO. Our results of operations may not be comparable to our Predecessor’s historical results of operations.

Unless otherwise stated or the context otherwise indicates, references in this report to “Predecessor,” “we,” “our,” “us” or like terms, when referring to periods prior to September 20, 2016, refer to Noble’s Contributed Businesses, our Predecessor for accounting purposes. All references to “Noble Midstream Partners,” “the Partnership,” “us,” “our,” “we” or similar expressions, when referring to periods after September 20, 2016, refer to Noble Midstream Partners LP, including its consolidated subsidiaries. References to Noble may refer to Noble and/or its subsidiaries, depending on the context.

Management’s Discussion and Analysis is the Partnership’s analysis of its 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, 2016. It contains forward-looking statements including, without limitation, statements relating to the Partnership’s 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. The Partnership does 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 the Partnership’s disclosures under the heading: “Disclosure Regarding Forward-Looking Statements.”

EXECUTIVE OVERVIEW

Overview

We are a growth-oriented Delaware master limited partnership formed by Noble to own, operate, develop and acquire a wide range of domestic midstream infrastructure assets. We currently provide crude oil, natural gas, and water-related midstream services through long-term, fixed-fee contracts.

Our current areas of focus are in the DJ Basin in Colorado and the Delaware Basin in Texas, where additional midstream assets are currently under construction. Noble intends for us to become the primary vehicle for its midstream operations in the onshore United States. We believe that our diverse midstream infrastructure assets and our relationship with Noble position us as a leading midstream service provider.

Operating and Financial Results

The following discussion highlights significant operating and financial results for third quarter 2017.

Significant Operating Highlights Included:


•	average crude oil gathering volumes of 70.9 MBbl/d;


•	average natural gas gathering volumes of 190.0 BBtu/d;


•	average produced water gathered volumes of 26.9 MBbl/d;


•	average fresh water delivered volumes of 174.8 MBbl/d;


•	commencement of crude oil and produced water gathering services to an unaffiliated third party in the Greeley Crescent IDP area;


•	commencement of crude oil, natural gas and produced water gathering services in the Delaware Basin; and


•	completion of construction of the connection from the Billy Miner I CGF in the Delaware Basin to the Advantage pipeline.

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Significant Financial Highlights Included:


•	net income of $43.8 million, of which $41.7 million is attributable to the Partnership;


•	net cash provided by operating activities of $124.4 million;


•	declared a distribution of $0.4665 per unit, an increase of 4.7% above the second quarter 2017 distribution per unit;


•	EBITDA (non-GAAP financial measure) of $48.2 million, of which $46.0 million is attributable to the Partnership; and


•	distributable cash flow (non-GAAP financial measure) of $40.7 million.

For additional information regarding our non-GAAP financial measures, please see — EBITDA, Distributable Cash Flow and Reconciliation of Non-GAAP Financial Measures, below.

OPERATING OUTLOOK

Dedication and Right of First Refusal Update

On April 24, 2017, Noble completed the acquisition of Clayton Williams Energy, Inc.. Upon closing of the acquisition, approximately 64,000 net acres in Reeves County, Texas, were dedicated to us for infield crude oil, natural gas, and produced water gathering. We have a right of first refusal (ROFR) on the remaining acreage acquired by Noble. Additionally, an infield natural gas gathering dedication was added to the existing crude oil and produced water gathering dedication on substantially all of Noble's legacy 47,000 Delaware Basin net acres. Both acreage dedications are held by the Blanco River DevCo.

In conjunction with the new dedications, we waived our ROFR for natural gas processing on approximately 80,000 net acres in the Delaware Basin, of which, approximately 35,000 net acres were dedicated to a third party through 2021.

2017 Capital Investment Program

Our 2017 capital expenditures are expected to total between $385 million to $405 million, or $230 million to $240 million attributable to the Partnership, as compared to our prior 2017 capital guidance of $365 million to $405 million, or $215 million to $235 million attributable the Partnership. Our 2017 capital expenditure midpoint guidance for total capital expenditures and capital expenditures attributable to the Partnership has increased by $10 million primarily due to spending in Colorado River DevCo LP.

During the nine months ended September 30, 2017, our capital expenditures, excluding acquisitions, totaled approximately $254 million, or $164 million attributable to the Partnership. See Liquidity and Capital Resources — Capital Requirements, below.

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;


•	operating and construction costs and our ability to achieve material supplier price reductions;


•	impact of new laws and regulations on our business practices;


•	indebtedness levels; and


•	availability of financing or other sources of funding.

We plan to fund our investment 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

Laramie River DevCo LP During third quarter 2017, we began gathering crude oil and produced water for an unaffiliated third party in the Greeley Crescent IDP area. Additionally, we connected four well pad facilities to the system.

Blanco River DevCo LP During third quarter 2017, our Billy Miner I CGF received first production from Noble's Monroe wells. Billy Miner I had initial crude oil, natural gas and produced water capacity of 10 MBbl/d, 20 MMcf/d and 15 MBw/d, respectively. As a result of the strong well performance and plans for additional wells to be tied into the facility, we completed a debottlenecking project with minor facility modifications in late August, increasing crude oil, natural gas and produced water throughput capacity to 15 MBbl/d, 30 MMcf/d, and 30 MBw/d, respectively. Construction of our second CGF, Jesse James, has begun, and we expect the facility to be online by the end of 2017.

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Trinity River DevCo LLC During third quarter 2017, we completed construction of the 15-mile connection from the Billy Miner I CGF in the Delaware Basin to the Advantage pipeline. Crude oil from the Billy Miner I CGF began flowing through the connection to the Advantage pipeline in late August.

Colorado River DevCo LP During third quarter 2017, we connected 65 equivalent wells, normalized to 4,500 lateral feet, to our gathering systems in the Wells Ranch and East Pony IDP areas. We also delivered fresh water to 30 equivalent wells in the Wells Ranch IDP area.

Green River DevCo LP Construction activities on the expansion of our freshwater system in the Mustang IDP area continued in the third quarter in anticipation of deliveries toward year end 2017. In addition, late in the quarter, construction began on the backbone gathering infrastructure buildout, which we expect to complete in early 2018.

San Juan River DevCo LP During third quarter 2017, we delivered freshwater to 19 equivalent wells in the East Pony IDP area.

RESULTS OF OPERATIONS

Results of operations were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(thousands)	2017			2016			2017			2016
Revenues
Midstream Services — Affiliate	$	56,755		$	47,167		$	161,186		$	112,259
Midstream Services — Third Party	6,356			—			10,022			—
Total Revenues	63,111			47,167			171,208			112,259
Costs and Expenses
Direct Operating	13,712			7,426			39,406			19,999
Depreciation and Amortization	3,562			2,290			8,483			6,652
General and Administrative	3,087			2,587			9,281			7,411
Total Operating Expenses	20,361			12,303			57,170			34,062
Operating Income	42,750			34,864			114,038			78,197
Other (Income) Expense
Interest Expense, Net of Amount Capitalized	594			2,462			961			3,107
Investment Income	(1,633		)	(1,070		)	(4,339		)	(3,509		)
Total Other (Income) Expense	(1,039		)	1,392			(3,378		)	(402		)
Income Before Income Taxes	43,789			33,472			117,416			78,599
Income Tax Provision	33			11,105			33			28,288
Net Income and Comprehensive Income	43,756			22,367			117,383			50,311
Less: Net Income Prior to the IPO on September 20, 2016	—			18,046			—			45,990
Net Income Subsequent to the IPO on September 20, 2016	43,756			4,321			117,383			4,321
Less: Net Income Attributable to Noncontrolling Interests	2,086			1,228			19,779			1,228
Net Income Attributable to Noble Midstream Partners LP	$	41,670		$	3,093		$	97,604		$	3,093

EBITDA⁽¹⁾ Attributable to Noble Midstream Partners LP	$	46,005		$	3,285		$	106,386		$	3,285

Distributable Cash Flow⁽¹⁾ of Noble Midstream Partners LP	$	40,702		$	3,080		$	95,263		$	3,080

⁽¹⁾

EBITDA and Distributable Cash Flow are not defined in GAAP and should not be considered an alternative to, or more meaningful than, net income, net cash provided by operating activities or any other measure as reported in accordance with GAAP. For additional information regarding our non-GAAP financial measures, please see — EBITDA, Distributable Cash Flow and Reconciliation of Non-GAAP Financial Measures, below.

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How We Evaluate Our Operations

Our management uses a variety of financial and operating metrics, each as described in more detail below, to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include:


•	throughput volumes;


•	operating costs and expenses;


•	EBITDA (non-GAAP financial measure);


•	distributable cash flow (non-GAAP financial measure); and


•	capital expenditures.

Throughput Volumes

The amount of revenue we generate primarily depends on the volumes of crude oil, natural gas and water for which we provide midstream services. These volumes are affected primarily by the level of drilling and completion activity by our customers in our areas of operations, and by changes in the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets.

Our customers' willingness to engage in drilling and completion activity is determined by a number of factors, the most important of which are the prevailing and projected prices of crude oil and natural gas, the cost to drill and operate a well, expected well performance, the availability and cost of capital, and environmental and government regulations. We generally expect the level of drilling to positively correlate with long-term trends in commodity prices. Similarly, production levels nationally and regionally generally tend to positively correlate with drilling activity.

Our customers have dedicated acreage to us based on the services we provide. Our commercial agreements with Noble provide that, in addition to our existing dedicated acreage, any future acreage that is acquired by Noble in the IDP areas, and that is not subject to a pre-existing third-party commitment, will be included in the dedication to us for midstream services, including gathering and treating.

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Revenues and throughput volumes related to gathering and fresh water delivery services were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Colorado River DevCo LP
Crude Oil Gathering Volumes (Bbl/d)	61,736		44,830		53,308		45,226
Natural Gas Gathering Volumes (MMBtu/d)	182,054		141,624		162,364		127,579
Produced Water Gathering Volumes (Bbl/d)	14,424		11,555		12,048		10,448
Fresh Water Delivery Volumes (Bbl/d)	80,395		113,466		89,372		60,316
Gathering and Fresh Water Delivery Revenues — Affiliate (in thousands)	$	45,501	$	41,899	$	126,442	$	95,658

San Juan River DevCo LP
Fresh Water Delivery Volumes (Bbl/d)	29,280		19,211		34,902		13,647
Fresh Water Delivery Revenues — Affiliate (in thousands)	$	8,366	$	3,006	$	28,829	$	6,801

Green River DevCo LP
Fresh Water Delivery Volumes (Bbl/d)	—		3,348		—		10,016
Fresh Water Delivery Revenues — Affiliate (in thousands)	$	—	$	625	$	—	$	4,822

Blanco River DevCo LP
Crude Oil Gathering Volumes (Bbl/d)	3,791		—		1,277		—
Natural Gas Gathering Volumes (MMBtu/d)	7,926		—		2,671		—
Produced Water Gathering Volumes (Bbl/d)	7,670		—		2,585		—
Gathering Revenues — Affiliate (in thousands)	$	1,576	$	—	$	1,576	$	—

Laramie River DevCo LP
Crude Oil Gathering Volumes (Bbl/d)	5,353		—		1,804		—
Produced Water Gathering Volumes (Bbl/d)	4,764		—		1,605		—
Fresh Water Delivery Volumes (Bbl/d)	65,085		—		38,709		—
Gathering and Fresh Water Delivery Revenues — Third Party (in thousands)	$	6,356	$	—	$	10,022	$	—

Total Gathering Systems
Crude Oil Gathering Volumes (Bbl/d)	70,880		44,830		56,389		45,226
Natural Gas Gathering Volumes (MMBtu/d)	189,980		141,624		165,035		127,579
Produced Water Gathering Volumes (Bbl/d)	26,858		11,555		16,238		10,448
Gathering Revenues (in thousands)	$	39,428	$	24,250	$	100,165	$	67,313

Total Fresh Water Delivery
Fresh Water Delivery Volumes (Bbl/d)	174,760		136,025		162,983		83,979
Fresh Water Delivery Revenues (in thousands)	$	22,371	$	21,280	$	66,704	$	39,968

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Revenues Trend Analysis

Revenues from Midstream Services were as follows:



(in thousands)	2017		2016		Increase (Decrease) From Prior Year
Three Months Ended September 30,
Crude Oil, Natural Gas and Produced Water Gathering — Affiliate	$	37,854	$	24,250	56	%
Crude Oil, Natural Gas and Produced Water Gathering — Third Party	1,574		—		N/M
Fresh Water Delivery — Affiliate	17,589		21,280		(17	)%
Fresh Water Delivery — Third Party	4,782		—		N/M
Crude Oil Treating — Affiliate	1,037		1,397		(26	)%
Other — Affiliate	275		240		15	%
Total Midstream Services Revenues	$	63,111	$	47,167	34	%

Nine Months Ended September 30,
Crude Oil, Natural Gas and Produced Water Gathering — Affiliate	$	98,591	$	67,313	46	%
Crude Oil, Natural Gas and Produced Water Gathering — Third Party	1,574		—		N/M
Fresh Water Delivery — Affiliate	58,256		39,968		46	%
Fresh Water Delivery — Third Party	8,448		—		N/M
Crude Oil Treating — Affiliate	3,473		4,090		(15	)%
Other — Affiliate	866		888		(2	)%
Total Midstream Services Revenues	$	171,208	$	112,259	53	%

N/M Amount is not meaningful

Revenues from Midstream Services We derive a substantial portion of our revenues from commercial agreements with Noble. Revenues from Midstream Services increased during third quarter 2017 as compared with third quarter 2016 due to the following:


•	an increase of $6.4 million in crude oil and produced water gathering services revenues and fresh water delivery revenues due to the commencement of services in the Greeley Crescent IDP to an unaffiliated third party during 2017;


•	an increase of $4 million in crude oil gathering services revenues driven by increased throughput volumes in our Wells Ranch IDP and East Pony IDP crude oil gathering systems resulting from expansion and gathering system growth;


•	an increase of $3.5 million in water logistic services revenues, including revenues derived from water transfer, hauling, recycling, and disposal services, driven by an increased scope of services in the Wells Ranch IDP and East Pony IDP;


•	an increase of $2.5 million in natural gas gathering services revenues driven by increased throughput volumes in our Wells Ranch IDP natural gas gathering systems resulting from expansion and gathering system growth;


•	an increase of $1.6 million in crude oil, natural gas, and produced water gathering services due to the commencement of services in the Delaware Basin during third quarter 2017;


•	an increase of $1.4 million in fresh water delivery revenues driven by increased fresh water volumes delivered to the East Pony IDP due to fresh water volumes required per well for higher intensity completions;


•	an increase of $1.1 million in gathering revenues and fresh water delivery revenues driven by rate escalations;

partially offset by:


•	a decrease of $4.7 million in fresh water delivery revenues related to the Wells Ranch IDP due to the timing of well completion activity by Noble.

Revenues from Midstream Services increased during the first nine months of 2017 as compared with the first nine months of 2016 due to the following:


•	an increase of $20.8 million in fresh water delivery revenues driven by increased fresh water volumes delivered to the Wells Ranch IDP and East Pony IDP due to fresh water volumes required per well for higher intensity completions;

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•	an increase of $14.3 million in water logistic services revenues, including revenue derived from water transfer, hauling, recycling, and disposal services, driven by an increased scope of services in the Wells Ranch IDP and East Pony IDP;


•	an increase of $10.0 million in crude oil and produced water gathering services revenues and fresh water delivery revenues due to the commencement of services in the Greeley Crescent IDP to an unaffiliated third party during 2017;


•	an increase of $6.1 million in natural gas gathering services revenues driven by increased throughput volumes in our Wells Ranch IDP natural gas gathering systems resulting from expansion and gathering system growth;


•	an increase of $5.4 million in crude oil gathering services revenues driven by increased throughput volumes in our Wells Ranch IDP and East Pony IDP crude oil gathering systems resulting from expansion and gathering system growth;


•	an increase of $2.9 million in gathering revenues and fresh water delivery revenues driven by rate escalations;


•	an increase of $1.6 million in crude oil, natural gas, and produced water gathering services due to the commencement of services in the Delaware Basin during third quarter 2017;


•	an increase of $1.2 million in charges associated with dedicated crude oil and produced water gathering volumes that did not flow through our gathering facilities;

partially offset by:


•	a decrease of $4.8 million in fresh water delivery revenues related to the Mustang IDP due to the timing of well completion activity by Noble.

Costs and Expenses

Direct Operating Expense

We seek to maximize the profitability of our operations in part by minimizing, to the extent appropriate, expenses directly associated with operating our assets. Direct labor costs, ad valorem taxes, repair and non-capitalized maintenance costs, integrity management costs, utilities and contract services comprise the most significant portion of our operations and maintenance expense. Many of these expenses remain relatively stable across broad ranges of throughput volumes, but a portion of these expenses can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses. We also seek to manage operating expenditures on our midstream systems by scheduling maintenance over time to avoid significant variability in our maintenance expenditures and minimize their impact on our cash flow.

General and Administrative Expense

Following the completion of the IPO, Noble charges us a combination of direct and allocated charges for general and administrative services. Direct charges include a fixed fee under our omnibus agreement and compensation of our executives under our secondment agreement based on the percentage of time spent working on us. Between January 2015 and the IPO, Noble charged us a fixed fee for overhead and support services.

Following the completion of the IPO, we also began incurring incremental general and administrative expenses attributable to being a publicly traded partnership, including expenses associated with: annual, quarterly and current reporting with the SEC; tax return and Schedule K-1 preparation and distribution; Sarbanes-Oxley compliance; NYSE listing; independent auditor fees; legal fees; investor relations expenses; transfer agent and registrar fees; incremental salary and benefits costs of seconded employees; outside director fees; director and officer insurance coverage expenses; and compensation expense associated with the LTIP.

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Costs and Expenses Trend Analysis

Costs and expenses were as follows:



(in thousands)	2017		2016		Increase from Prior Year
Three Months Ended September 30,
Direct Operating	$	13,712	$	7,426	85	%
Depreciation and Amortization	3,562		2,290		56	%
General and Administrative	3,087		2,587		19	%
Total Operating Expenses	$	20,361	$	12,303	65	%

Nine Months Ended September 30,
Direct Operating	$	39,406	$	19,999	97	%
Depreciation and Amortization	8,483		6,652		28	%
General and Administrative	9,281		7,411		25	%
Total Operating Expenses	$	57,170	$	34,062	68	%

Direct Operating Expenses Direct operating expenses increased during third quarter 2017 as compared with third quarter 2016 and during the first nine months of 2017 as compared with the first nine months of 2016 due to an increase in water delivery and logistics expense driven by increased fresh water volumes required per well for higher intensity completions and an expanded scope of services delivered for produced water.

Depreciation and Amortization Depreciation and amortization expense increased during third quarter 2017 as compared with third quarter 2016. The increase is primarily related to assets placed in service after third quarter 2016. Assets placed in service were associated with the expansion of the Wells Ranch CGF and gathering system, expansion of the Mustang fresh water system, construction of the Greeley Crescent gathering system, and construction of the Delaware Basin gathering system.

Depreciation and amortization expense increased during the first nine months of 2017 as compared with the first nine months of 2016. The increase is primarily related to assets placed in service after third quarter 2017. Assets placed in service were associated with the construction of the Greeley Crescent and Delaware Basin gathering systems.

General and Administrative Expense General and administrative expense increased during third quarter 2017 as compared with third quarter 2016 and during the first nine months of 2017 as compared with the first nine months of 2016. The increase is due primarily to increased third party general and administrative expenses such as legal and financial advisory fees.

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Other (Income) Expense Trend Analysis



(in thousands)	2017			2016			Increase (Decrease) from Prior Year
Three Months Ended September 30,
Other (Income) Expense
Interest Expense	$	1,493		$	2,582		(42	)%
Capitalized Interest	(899		)	(120		)	649	%
Interest Expense, Net	594			2,462			(76	)%
Investment Income	(1,633		)	(1,070		)	53	%
Total Other (Income) Expense	$	(1,039	)	$	1,392		(175	)%

Nine Months Ended September 30,
Other (Income) Expense
Interest Expense	$	2,471		$	3,901		(37	)%
Capitalized Interest	(1,510		)	(794		)	90	%
Interest Expense, Net	961			3,107			(69	)%
Investment Income	(4,339		)	(3,509		)	24	%
Total Other (Income) Expense	$	(3,378	)	$	(402	)	740	%

N/M Amount is not meaningful

Interest Expense, Net For periods prior to the IPO, interest expense represents allocations from Noble to our Predecessor. The allocations were based on the percentage that our Predecessor's capital expenditures comprised of Noble's total consolidated capital expenditures. For periods subsequent to the IPO, interest expense represents interest incurred in connection with our revolving credit facility. Our interest expense includes interest on outstanding balances and commitment fees on the undrawn portion of our revolving credit facility as well as the non-cash amortization of origination fees. A portion of the interest expense is capitalized based upon construction-in-progress activity during the year.

Interest expense decreased during third quarter 2017 as compared with third quarter 2016 and during the first nine months of 2017 as compared with the first nine months of 2016. The decrease is due primarily to increased interest expense allocations from Noble during the 2016 periods partially offset by interest incurred in connection with our revolving credit facility during the 2017 periods.

Capitalized interest increased during third quarter 2017 as compared with third quarter 2016 and during the first nine months of 2017 as compared with the first nine months of 2016. The increase is due primarily to increased construction-in-progress activity during the 2017 periods as compared with the 2016 periods.

Investment Income Investment income increased during third quarter 2017 as compared with third quarter 2016 and during the first nine months of 2017 as compared with the first nine months of 2016. The increase is primarily due to earnings from our investment in the Advantage Joint Venture. Crude oil throughput volumes during the quarter averaged 36 MBbl/d. See Item 1. Financial Statements. Note 5. Investments.

Income Tax Provision

See Item 1. Financial Statements. Note 13. Income Taxes.

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EBITDA (Non-GAAP Financial Measure)

EBITDA should not be considered an alternative to net income, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income or net cash, and these measures may vary from those of other companies. As a result, our EBITDA may not be comparable to similar measures of other companies in our industry.

For a reconciliation of EBITDA to its most comparable measures calculated and presented in accordance with GAAP, see — Reconciliation of Non-GAAP Financial Measures, below.

We define EBITDA as net income (loss) before income taxes, net interest expense, depreciation and amortization. EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:


•	our operating performance as compared with those of other companies in the midstream energy industry, without regard to financing methods, historical cost basis or capital structure;


•	the ability of our assets to generate sufficient cash flow to make distributions to our partners;


•	our ability to incur and service debt and fund capital expenditures; and


•	the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that the presentation of EBITDA provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA are net income and net cash provided by operating activities. EBITDA should not be considered an alternative to, or more meaningful than, net income, net cash provided by operating activities or any other measure as reported in accordance with GAAP.

Distributable Cash Flow (Non-GAAP Financial Measure)

Distributable cash flow should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Distributable cash flow excludes some, but not all, items that affect net income or net cash provided by operating activities, and these measures may vary from those of other companies. As a result, our distributable cash flow may not be comparable to similar measures of other companies in our industry.

For a a reconciliation of distributable cash flow to its most comparable measures calculated and presented in accordance with GAAP, see — Reconciliation of Non-GAAP Financial Measures, below.

We define distributable cash flow as EBITDA less estimated maintenance capital expenditures and cash interest paid. Distributable cash flow does not reflect changes in working capital balances. Our partnership agreement requires us to distribute all available cash on a quarterly basis, and distributable cash flow is one of the factors used by the board of directors of our general partner to help determine the amount of cash that is available to our unitholders for a given period. Therefore, we believe distributable cash flow provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities. Distributable cash flow should not be considered an alternative to, or more meaningful than, net income, net cash provided by operating activities or any other measure as reported in accordance with GAAP.

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Reconciliation of Non-GAAP Financial Measures

The following tables present reconciliations of EBITDA and distributable cash flow from net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Reconciliation of Net Income to EBITDA and Distributable Cash Flow



	Three Months Ended September 30,				Nine Months Ended September 30,
(thousands)	2017		2016		2017		2016
Reconciliation from Net Income
Net Income and Comprehensive Income	$	43,756	$	22,367	$	117,383	$	50,311
Add:
Depreciation and Amortization	3,562		2,290		8,483		6,652
Interest Expense, Net of Amount Capitalized	594		2,462		961		3,107
Income Tax Provision	33		11,105		33		28,288
Unit-Based Compensation	248		—		581		—
EBITDA	48,193		$	38,224	127,441		$	88,358
Less:
EBITDA Prior to the IPO on September 20, 2016	—		33,646		—		83,780
EBITDA Subsequent to the IPO on September 20, 2016	48,193		4,578		127,441		4,578
EBITDA Attributable to Noncontrolling Interests	2,188		1,293		21,055		1,293
EBITDA Attributable to Noble Midstream Partners LP	46,005		3,285		106,386		3,285
Less:
Cash Interest Paid	1,351		—		2,119		—
Maintenance Capital Expenditures	3,952		205		9,004		205
Distributable Cash Flowof Noble Midstream Partners LP	$	40,702	$	3,080	$	95,263	$	3,080

Reconciliation of Net Cash Provided by Operating Activities to EBITDA and Distributable Cash Flow



	Three Months Ended September 30,						Nine Months Ended September 30,
(thousands)	2017			2016			2017		2016
Reconciliation from Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities	$	49,830		$	33,564		$	124,357	$	80,573
Add:
Interest Expense, Net of Amount Capitalized	594			2,462			961		3,107
Changes in Operating Assets and Liabilities	(2,583		)	11,617			1,557		4,810
Change in Income Tax Payable	33			(9,367		)	33		—
Other Adjustments	319			(52		)	533		(132		)
EBITDA	48,193			$	38,224		127,441		$	88,358
Less:
EBITDA Prior to the IPO on September 20, 2016	—			33,646			—		83,780
EBITDA Subsequent to the IPO on September 20, 2016	48,193			4,578			127,441		4,578
EBITDA Attributable to Noncontrolling Interests	2,188			1,293			21,055		1,293
EBITDA Attributable to Noble Midstream Partners LP	46,005			3,285			106,386		3,285
Less:
Cash Interest Paid	1,351			—			2,119		—
Maintenance Capital Expenditures	3,952			205			9,004		205
Distributable Cash Flowof Noble Midstream Partners LP	$	40,702		$	3,080		$	95,263	$	3,080

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LIQUIDITY AND CAPITAL RESOURCES

Financing Strategy

Our primary sources of liquidity is cash flows generated from operations based on commercial agreements with Noble and an unaffiliated third party. We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our revolving credit facility and issuances of additional equity or debt securities. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements and to make quarterly cash distributions. We do not have any commitment from Noble or our general partner or any of their respective affiliates to fund our cash flow deficits or provide other direct or indirect financial assistance to us. Certain consolidated subsidiaries make distributions to or receive contributions from Noble in proportion to Noble's ownership in the subsidiary.

Our partnership agreement requires that we distribute all of our available cash to our unitholders. As a result, we expect to rely primarily upon external financing sources, including our revolving credit facility and the issuance of debt and equity securities, to fund acquisitions and our expansion capital expenditures.

During the first nine months of 2017, we utilized external financing sources to fund a portions of our construction activities, the Advantage acquisition, and the cash consideration for the Contributed Assets. Our external financing sources consisted of the Private Placement and borrowings under our revolving credit facility. See Item 1. Financial Statements – Note 1. Organization and Nature of Operations and See Item 1. Financial Statements – Note 6. Debt.

Available Liquidity

Information regarding liquidity was as follows:



(in thousands)	September 30, 2017		December 31, 2016
Total Cash	$	10,682	$	57,421
Amount Available to be Borrowed Under Our Revolving Credit Facility ⁽¹⁾	150,000		350,000
Available Liquidity	$	160,682	$	407,421


⁽¹⁾	See Item 1. Financial Statements – Note 6. Debt.

Cash Flows

Summary cash flow information was as follows:



	Nine Months Ended September 30,
(in thousands)	2017			2016
Total Cash Provided By (Used in)
Operating Activities	$	124,357		$	80,573
Investing Activities	(253,218		)	(21,054		)
Financing Activities	82,122			(38,662		)
(Decrease) Increase in Cash and Cash Equivalents	$	(46,739	)	$	20,857

Net cash provided by operating activities increased during the first nine months of 2017 as compared with the first nine months of 2016 primarily due to an increase of $67.1 million in net income driven by increased revenues resulting from higher throughput volumes.

Cash used in investing activities increased during the first nine months of 2017 as compared with the first nine months of 2016. Additions to property, plant and equipment were higher in 2017 primarily due to the construction of the Greeley Crescent gathering and fresh water delivery system as well as construction of the Delaware Basin gathering system. Additions to investments were also higher in 2017 due to our investment in the Advantage Joint Venture.

Cash provided by financing activities increased during the first nine months of 2017 as compared with the first nine months of 2016. Our primary financing activities during the first nine months of 2017 consisted of net borrowings on our revolving credit facility ($200 million), net proceeds from our Private Placement ($138.1 million), contributions from noncontrolling interest owners ($52.8 million), a distribution to Noble for the cash consideration paid for the Contributed Assets ($245 million), distributions to our unitholders ($42.9 million), and distributions to noncontrolling interest owners ($19.8 million). In comparison, our primary financing activities during the first nine months of 2016 consisted of proceeds from the IPO ($301.5 million), a distribution to Noble subsequent to the IPO ($296.8 million), and a cash distribution to our Parent ($42.5 million).

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Off-Balance Sheet Arrangements

We have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.

Contractual Obligations

As of December 31, 2016, we had a purchase obligation of approximately $19.3 million. Our purchase obligation represented the short-term obligation to purchase pipe for use in our capital projects. During the nine months ended September 30, 2017, we have fulfilled that obligation.

Capital Requirements

Capital Expenditures and Other Investing Activities

The midstream energy business is capital intensive, requiring the maintenance of existing gathering systems and other midstream assets and facilities and the acquisition or construction and development of new gathering systems and other midstream assets and facilities. Capital expenditures and other investing activities (on an accrual basis) were as follows:



	Nine Months Ended September 30,
(in thousands)	2017		2016
Gathering System Expenditures	$	239,054	$	12,488
Fresh Water Delivery System Expenditures	14,721		616
Total Capital Expenditures	$	253,775	$	13,104

Additions to Investments	$	68,504	$	147

For the nine months ended September 30, 2017, gathering system expenditures were primarily associated with the construction of the Greeley Crescent, Delaware Basin and Mustang gathering systems, expansion of the Wells Ranch gathering system and construction of the connection from the Billy Miner I CGF in the Delaware Basin to the Advantage pipeline. Fresh water delivery system expenditures were primarily associated with the construction of the Greeley Crescent fresh water delivery system and expansion of the Mustang fresh water delivery system.

For the nine months ended September 30, 2016, gathering system expenditures were primarily associated with the construction of the Greeley Crescent, Mustang and Delaware Basin gathering systems, as well as expansion of the Wells Ranch gathering system.

For the nine months ended September 30, 2017, additions to investments were related to our investment in the Advantage joint venture.

Cash Distributions

Our partnership agreement requires that we distribute all of our available cash quarterly. Quarterly distributions, if any, will be made within 45 days after the end of each calendar quarter to holders of record on the applicable record date.

On October 26, 2017, the board of directors of our general partner declared a quarterly cash distribution of $0.4665 per unit. The distribution will be paid on November 13, 2017, to unitholders of record on November 6, 2017. Also on November 13, 2017, a cash incentive distribution of $0.2 million will be made to Noble related to its IDRs, based upon the level of distribution paid per common and subordinated unit.

For future quarters, the minimum quarterly distribution of $0.375 per unit equates to $13.5 million per quarter, or $53.9 million million per year, based on the number of common and subordinated units outstanding as of September 30, 2017.

Other than the requirement in our partnership agreement to distribute all of our available cash each quarter, we have no legal obligation to make quarterly cash distributions in this or any other amount, and the board of directors of our general partner has considerable discretion to determine the amount of our available cash each quarter. In addition, the board of directors of our general partner may change our cash distribution policy at any time, subject to the requirement in our partnership agreement to distribute all of our available cash quarterly.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

We currently generate substantially all of our revenues pursuant to fee-based commercial agreements under which we are paid based on the volumes of crude oil, natural gas and produced water that we gather and handle and fresh water services we provide, rather than the underlying value of the commodity.

We have indirect exposure to commodity price risk in that persistent low commodity prices may cause our customers and other potential customers to delay drilling or shut in production, which would reduce the volumes available for gathering and processing by our infrastructure assets. If our customers delay drilling or completion activity, or temporarily shut in production due to persistently low commodity prices or for any other reason, we are not assured a certain amount of revenue as our commercial agreements do not contain minimum volume commitments. Because of the natural decline in production from existing wells, our success, in part, depends on our ability to maintain or increase hydrocarbon and water throughput volumes on our midstream systems, which depends on our customers’ level of drilling and completion activity on our dedicated acreage.

We may acquire or develop additional midstream assets in a manner that increases our exposure to commodity price risk. Future exposure to the volatility of crude oil, natural gas and NGL prices could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to make cash distributions to our unitholders.

Interest Rate Risk

Our primary exposure to interest rate risk results from outstanding borrowings under our revolving credit facility, which has a variable interest rate. As of September 30, 2017, $200 million was outstanding under our revolving credit facility. A 1.0% increase in our revolving credit facility interest rate would have resulted in an estimated $0.7 million increase in interest expense for the nine months ended September 30, 2017. As a result, our results of operations, cash flows and financial condition and, as a further result, our ability to make cash distributions to our unitholders, could be adversely affected by significant increases in interest rates.

Seasonality

Demand for crude oil and natural gas generally decreases during the spring and fall months and increases during the summer and winter months. However, seasonal anomalies such as mild winters or mild summers sometimes lessen this fluctuation. In addition, certain crude oil and natural gas users utilize natural gas storage facilities and purchase some of their anticipated winter requirements during the summer. This can also lessen seasonal demand fluctuations. These seasonal anomalies can increase demand for crude oil and natural gas during the summer and winter months and decrease demand for crude oil and natural gas during the spring and fall months. With respect to our completed midstream systems, we do not expect seasonal conditions to have a material impact on our throughput volumes. Severe or prolonged winters may, however, impact our ability to complete additional well connections or construction projects, which may impact the rate of our growth. In addition, severe winter weather may also impact or slow the ability of Noble to execute its drilling and development plans.

Disclosure Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are predictive in nature, depend upon or refer to future events or conditions or include the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. Our forward-looking statements may include statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such expenditures on our performance, the costs of being a publicly traded partnership and our capital programs.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. While we believe that we have chosen these assumptions or bases in good faith and that they are reasonable, you are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:


•	the ability of our customers to meet their drilling and development plans;


•	changes in general economic conditions;


•	competitive conditions in our industry;


•	actions taken by third-party operators, gatherers, processors and transporters;


•	the demand for crude oil and natural gas gathering and processing services;


•	our ability to successfully implement our business plan;


•	our ability to successfully integrate acquired assets or businesses;


•	our ability to complete internal growth projects on time and on budget;

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•	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;


•	competition from the same and alternative energy sources;


•	energy efficiency and technology trends;


•	operating hazards and other risks incidental to our midstream services;


•	natural disasters, weather-related delays, casualty losses and other matters beyond our control;


•	interest rates;


•	labor relations;


•	defaults by our customers under our gathering and processing agreements;


•	changes in availability and cost of capital;


•	changes in our tax status;


•	the effect of existing and future laws and government regulations; and


•	the effects of future litigation.

You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law. You should consider carefully the statements under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2016, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements. Our Annual Report on Form 10-K for the year ended December 31, 2016 is available on our website at www.nblmidstream.com.

Unless otherwise stated or the context otherwise indicates, references in this report to “Predecessor,” “we,” “our,” “us” or like terms, when referring to periods prior to September 20, 2016, refer to Noble’s Contributed Businesses (as defined herein), our Predecessor for accounting purposes. All references to “Noble Midstream Partners,” “NBLX,” “the Partnership,” “us,” “our,” “we” or similar expressions, when referring to periods after September 20, 2016, refer to Noble Midstream Partners LP, including its consolidated subsidiaries. References to Noble may refer to Noble and/or its subsidiaries, depending on the context. Our future results of operations may not be comparable to our Predecessor’s historical results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on the evaluation of our disclosure controls and procedures by our principal executive officer and our principal financial officer, as of the end of the period covered by this quarterly report, each of them has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

Information regarding legal proceedings is set forth in Part I. Financial Information, Item 1. Financial Statements -Note 9. Commitments and Contingencies of this Form 10-Q, which is incorporated by reference into this Part II. Item 1.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 6. Exhibits

The information required by this Part II. Item 6 is set forth in the Index to Exhibits accompanying this quarterly report on Form 10-Q and is incorporated by reference into this Part II. Item 6.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Noble Midstream Partners LP
		By: Noble Midstream GP, LLC, its General Partner

Date	October 31, 2017	By: /s/ John F. Bookout, IV
		John F. Bookout, IV Chief Financial Officer

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Index to Exhibits



Exhibit Number		Exhibit

2.1		Advantage Pipeline Holdings LLC Subscription Agreement, dated February 12, 2017, by and among Advantage Pipeline Holdings LLC, Trinity River DevCo LLC and Plains Pipeline, L.P. (filed as Exhibit 2.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-37640) filed February 14, 2017 and incorporated herein by reference)

2.2		Contribution Agreement, dated June 20, 2017, by and among the Registrant, Noble Midstream GP LLC, Noble Midstream Services, LLC, NBL Midstream, LLC and Blanco River DevCo GP LLC (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (Date of Event: June 20, 2017) filed June 26, 2017 and incorporated herein by reference).

3.1		Certificate of Limited Partnership of the Registrant (filed as Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-207560) filed October 22, 2015 and incorporated herein by reference).

3.2		Amendment to the Certificate of Limited Partnership of the Registrant (filed as Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-207560) filed October 22, 2015 and incorporated herein by reference).

3.3		Amendment to the Certificate of Limited Partnership of the Registrant (filed as Exhibit 3.3 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-207560) filed November 6, 2015 and incorporated herein by reference).

3.4		First Amended and Restated Agreement of Limited Partnership of the Registrant (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (Date of Event: September 14, 2016) filed September 20, 2016 and incorporated herein by reference).

3.5		Certificate of Formation of Noble Midstream GP LLC (filed as Exhibit 3.4 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-207560) filed October 22, 2015 and incorporated herein by reference).

3.6		Amendment to Certificate of Formation of Noble Midstream GP LLC (filed as Exhibit 3.5 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-207560) filed October 22, 2015 and incorporated herein by reference).

3.7		First Amended and Restated Limited Liability Company Agreement of Noble Midstream GP LLC (filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (Date of Event: September 14, 2016) filed September 20, 2016 and incorporated herein by reference).

4.1		Registration Rights Agreement, dated June 26, 2017, by and among the Registrant and the Purchasers named therein (filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (Date of Event: June 26, 2017) filed June 26, 2017 and incorporated herein by reference).

31.1*		Certification of the Company’s Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

31.2*		Certification of the Company’s Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

32.1*		Certification of the Company’s Chief Executive Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

32.2*		Certification of the Company’s Chief Financial Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

101.INS*		XBRL Instance Document

101.SCH*		XBRL Schema Document

101.CAL*		XBRL Calculation Linkbase Document

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101.LAB*		XBRL Label Linkbase Document

101.PRE*		XBRL Presentation Linkbase Document

101.DEF*		XBRL Definition Linkbase Document



*	Filed herewith.

Noble Midstream Partners LP - FORM 10-Q - October 31, 2017

Attached files

Noble Midstream Partners LP Reports