UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2019~~2020

☐ 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~~

(281) 872-3100

(Registrant’s telephone number, including area code)



Securities registered pursuant to section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units, Representing Limited Partner Interests	NBLX	~~New York~~The Nasdaq Stock ~~Exchange~~Market LLC
		(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth ~~company ”~~company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐ No ☒

As of ~~October 31, 2019,~~June 30, 2020, the registrant had ~~39,707,343~~90,369,975 Common Units outstanding.

Table of Contents



Part I. Financial Information	3

Item 1. Financial Statements	3

Consolidated Balance Sheets	3

Consolidated Statements of Operations and Comprehensive Income	4

Consolidated Statements of Cash Flows	5

Consolidated Statements of Changes in Equity	6

Notes to Consolidated Financial Statements	87

Note 1. Organization and Nature of Operations	87
Note 2. Basis of Presentation	98
Note 3. ~~Acquisition~~Transactions with Affiliates	12
Note 4. ~~Transactions with Affiliates~~Property, Plant and Equipment	12
Note 5. Debt	13
Note ~~5. Property, Plant and Equipment~~6. Investments	13
Note 7. Segment Information	14
Note ~~6. Debt~~8. Partnership Distributions	14
~~Note 7. Investments~~	15
~~Note 8. Segment Information~~	1516
Note 9. ~~Leases~~	17
~~Note 10. Partnership Distributions~~	18
~~Note 11.~~ Net Income per Limited Partner Unit	1816
Note ~~12.~~10. Commitments and Contingencies	1917

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2018

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3331

Item 4. Controls and Procedures	3534

Part II. Other Information	3534

Item 1. Legal Proceedings	3534

Item 1A. Risk Factors	3534

Item 6. Exhibits	3639

Signatures	3740

Part I. Financial Information

Item 1. Financial Statements

Noble Midstream Partners LP

Consolidated Balance Sheets

(in thousands, unaudited)


	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
ASSETS
Current Assets
Cash and Cash Equivalents	$	17,571		$	10,740		$	12,729		$	12,676
Accounts Receivable — Affiliate	40,475			31,613			37,298			42,428
Accounts Receivable — Third Party	20,251			23,091			24,751			44,093
Other Current Assets	8,579			5,875			7,196			8,730
Total Current Assets	86,876			71,319			81,974			107,927
Property, Plant and Equipment
Total Property, Plant and Equipment, Gross	1,682,820			1,500,609			2,056,882			2,006,995
Less: Accumulated Depreciation and Amortization	(114,789		)	(79,357		)	(279,115		)	(244,038		)
Total Property, Plant and Equipment, Net	1,568,031			1,421,252			1,777,767			1,762,957
Investments							860,817			660,778
Intangible Assets, Net	286,042			310,202			261,794			277,900
Goodwill	109,734			109,734			—			109,734
Investments	565,387			82,317
Other Noncurrent Assets	6,696			3,093			25,995			6,786
Total Assets	$	2,622,766		$	1,997,917		$	3,008,347		$	2,926,082
LIABILITIES, MEZZANINE EQUITY AND EQUITY
Current Liabilities
Accounts Payable — Affiliate	$	2,568		$	2,778		$	6,557		$	8,155
Accounts Payable — Trade	100,157			92,756			46,138			107,705
Other Current Liabilities	10,238			9,217			11,096			11,680
Total Current Liabilities	112,963			104,751			63,791			127,540
Long-Term Liabilities
Long-Term Debt	948,907			559,021			1,635,919			1,495,679
Asset Retirement Obligations	19,268			17,330			40,762			37,842
Other Long-Term Liabilities	1,410			582			3,849			4,160
Total Liabilities	1,082,548			681,684			1,744,321			1,665,221
Mezzanine Equity
Redeemable Noncontrolling Interest, Net	102,830			—			112,646			106,005
Equity
Limited Partner
Common Units (39,712 and 23,759 units outstanding, respectively)	618,049			699,866
Subordinated Units (15,903 units outstanding as of December 31, 2018)	—			(130,207		)
General Partner	5,820			2,421
Total Partners’ Equity	623,869			572,080
Common Units (90,164 and 90,136 units outstanding, respectively)							787,584			813,999
Noncontrolling Interests	813,519			744,153			363,796			340,857
Total Equity	1,437,388			1,316,233			1,151,380			1,154,856
Total Liabilities, Mezzanine Equity and Equity	$	2,622,766		$	1,997,917		$	3,008,347		$	2,926,082

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

Noble Midstream Partners LP

Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per unit amounts, unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019		2020			2019
Revenues
Midstream Services — Affiliate	$	100,846		$	73,136		$	278,724		$	204,323		$	93,739		$	97,269	$	207,523		$	201,072
Midstream Services — Third Party	19,607			19,934			63,298			44,763			22,997			21,609		50,895			45,638
Crude Oil Sales — Third Party	48,870			46,093			133,522			109,781			29,214			51,782		111,577			84,652
Total Revenues	169,323			139,163			475,544			358,867			145,950			170,660		369,995			331,362
Costs and Expenses
Cost of Crude Oil Sales	46,240			44,379			125,217			105,830			29,104			48,079		108,963			78,977
Direct Operating	22,524			23,955			77,677			59,496			20,039			32,866		46,889			63,289
Depreciation and Amortization	20,851			18,376			60,487			46,076			26,354			23,980		52,285			47,013
General and Administrative	4,129			4,204			12,990			19,626			6,446			5,171		11,932			9,532
Other Operating (Income) Expense	(469		)	—			(488		)	—
Goodwill Impairment													—			—		109,734			—
Other Operating Expense													2,576			—		3,862			—
Total Operating Expenses	93,275			90,914			275,883			231,028			84,519			110,096		333,665			198,811
Operating Income	76,048			48,249			199,661			127,839			61,431			60,564		36,330			132,551
Other Expense (Income)
Interest Expense, Net of Amount Capitalized	3,952			3,506			11,507			6,220			6,633			2,322		13,490			7,550
Investment Loss (Income)	5,621			(3,866		)	5,028			(10,825		)	2,730			1,748		8,139			(593		)
Other Non-Operating Expense													1,336			—		1,336			—
Total Other Expense (Income)	9,573			(360		)	16,535			(4,605		)	10,699			4,070		22,965			6,957
Income Before Income Taxes	66,475			48,609			183,126			132,444			50,732			56,494		13,365			125,594
State Income Tax Provision	92			(94		)	290			163
Income Tax (Benefit) Expense													(128		)	731		21			2,040
Net Income	66,383			48,703			182,836			132,281			50,860			55,763		13,344			123,554
Less: Net Income Attributable to Noncontrolling Interests	25,751			4,086			62,236			11,719
Less: Net Income Prior to the Drop-Down and Simplification Transaction													—			2,565		—			7,101
Net Income Subsequent to the Drop-Down and Simplification Transaction													50,860			53,198		13,344			116,453
Less: Net Income (Loss) Attributable to Noncontrolling Interests													2,624			16,789		(44,995		)	36,485
Net Income Attributable to Noble Midstream Partners LP	40,632			44,617			120,600			120,562			48,236			36,409		58,339			79,968
Less: Net Income Attributable to Incentive Distribution Rights	5,820			1,462			13,967			3,415			—			4,640		—			8,147
Net Income Attributable to Limited Partners	$	34,812		$	43,155		$	106,633		$	117,147		$	48,236		$	31,769	$	58,339		$	71,821

Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic
Common Units	$	0.88		$	1.09		$	2.65		$	2.96
Subordinated Units	$	—		$	1.09		$	2.89		$	2.96

Net Income Attributable to Limited Partners Per Limited Partner Unit — Diluted
Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
Common Units	$	0.88		$	1.09		$	2.64		$	2.96		$	0.53		$	0.79	$	0.65		$	1.77
Subordinated Units	$	—		$	1.09		$	2.89		$	2.96		$	—		$	0.84	$	—		$	1.91

Weighted Average Limited Partner Units Outstanding — Basic
Common Units	39,604			23,688			31,855			23,686			90,163			32,090		90,158			27,916
Subordinated Units	—			15,903			7,747			15,903			—			7,514		—			11,685

Weighted Average Limited Partner Units Outstanding —Diluted
Common Units	39,624			23,704			31,879			23,701			90,164			32,121		90,163			27,944
Subordinated Units	—			15,903			7,747			15,903			—			7,514		—			11,685

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

Noble Midstream Partners LP

Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Cash Flows From Operating Activities
Net Income	$	182,836		$	132,281		$	13,344		$	123,554
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Depreciation and Amortization	60,487			46,076			52,285			47,013
Loss (Income) from Equity Method Investees	8,858			(7,569		)
Income Taxes							—			1,842
Goodwill Impairment							109,734			—
Loss from Equity Method Investees							10,276			2,083
Distributions from Equity Method Investees	8,655			3,520			18,820			6,944
Unit-Based Compensation	683			1,057
Other Adjustments for Noncash Items Included in Income	573			523			6,354			1,647
Changes in Operating Assets and Liabilities, Net of Assets Acquired and Liabilities Assumed
Increase in Accounts Receivable	(8,696		)	(14,054		)
Increase in Accounts Payable	16,886			7,173
Decrease (Increase) in Accounts Receivable							24,472			(12,284		)
(Decrease) Increase in Accounts Payable							(16,630		)	22,739
Other Operating Assets and Liabilities, Net	(4,161		)	(1,071		)	796			(4,593		)
Net Cash Provided by Operating Activities	266,121			167,936			219,451			188,945
Cash Flows From Investing Activities
Additions to Property, Plant and Equipment	(189,021		)	(540,991		)	(96,777		)	(141,716		)
Black Diamond Acquisition, Net of Cash Acquired	—			(649,868		)
Additions to Investments	(501,344		)	(426		)	(228,226		)	(414,587		)
Distributions from Cost Method Investee and Other	856			1,020
Loan to Equity Method Investee							(22,500		)	—
Other							2,224			588
Net Cash Used in Investing Activities	(689,509		)	(1,190,265		)	(345,279		)	(555,715		)
Cash Flows From Financing Activities
Distributions to Noncontrolling Interests	(17,973		)	(5,814		)
Distributions to Noncontrolling Interests and Parent							(13,224		)	(26,476		)
Contributions from Noncontrolling Interests	45,494			593,034			81,158			34,110
Borrowings Under Revolving Credit Facility	655,000			690,000			350,000			560,000
Repayment of Revolving Credit Facility	(665,000		)	(725,000		)	(210,000		)	(250,000		)
Proceeds from Term Loan Credit Facilities	400,000			500,000
Distributions to Unitholders	(83,517		)	(63,220		)	(79,020		)	(53,459		)
Proceeds from Preferred Equity, Net of Issuance Costs	97,198			—			—			99,450
Debt Issuance Costs and Other	(1,884		)	(3,050		)
Other							(3,083		)	(980		)
Net Cash Provided by Financing Activities	429,318			985,950			125,831			362,645
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash	5,930			(36,379		)	3			(4,125		)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period⁽¹⁾	11,691			55,531			12,726			15,712
Cash, Cash Equivalents, and Restricted Cash at End of Period⁽¹⁾	$	17,621		$	19,152		$	12,729		$	11,587


⁽¹⁾	See Note 2. Basis of Presentation for our reconciliation of total cash.

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

Noble Midstream Partners LP

Consolidated Statements of Changes in Equity

(in thousands, unaudited)



			Partner's Equity
	Parent Net Investment		Common Units			Subordinated Units		General Partner		Noncontrolling Interests			Total
December 31, 2019	$	—	$	813,999		$	—	$	—	$	340,857		$	1,154,856
Net Income (Loss)	—		10,103			—		—		(47,619		)	(37,516		)
Contributions from Noncontrolling Interests	—		—			—		—		77,966			77,966
Distributions to Noncontrolling Interests	—		—			—		—		(5,700		)	(5,700		)
Distributions to Unitholders	—		(62,114		)	—		—		—			(62,114		)
Preferred Equity Accretion	—		(3,276		)	—		—		—			(3,276		)
Other	—		433			—		—		—			433
March 31, 2020	—		759,145			—		—		365,504			1,124,649
Net Income	—		48,236			—		—		2,624			50,860
Contributions from Noncontrolling Interests	—		—			—		—		3,192			3,192
Distributions to Noncontrolling Interests	—		—			—		—		(7,524		)	(7,524		)
Distributions to Unitholders	—		(16,906		)	—		—		—			(16,906		)
Preferred Equity Accretion	—		(3,366		)	—		—		—			(3,366		)
Other	—		475			—		—		—			475
June 30, 2020	$	—	$	787,584		$	—	$	—	$	363,796		$	1,151,380

Partnership
Common Units Subordinated Units General Partner Noncontrolling Interests Total
December 31, 2018 $ 699,866
$ (130,207 ) $ 2,421
$ 744,153
$ 1,316,233
Net Income 23,967
16,085
3,507
19,696
63,255
Contributions from Noncontrolling Interests —
—
—
15,969
15,969
Distributions to Noncontrolling Interests —
—
—
(4,669 ) (4,669 )
Distributions to Unitholders (13,930 ) (9,316 ) (2,421 ) —
(25,667 )
Black Diamond Equity Ownership Promote Vesting⁽¹⁾
4,092
2,746
—
(6,838 ) —
Unit-Based Compensation and Other 470
—
—
—
470
March 31, 2019 714,465
(120,692 ) 3,507
768,311
1,365,591
Net Income 25,487
6,282
4,640
16,789
53,198
Contributions from Noncontrolling Interests —
—
—
18,141
18,141
Distributions to Noncontrolling Interests —
—
—
(7,316 ) (7,316 )
Distributions to Unitholders (14,534 ) (9,751 ) (3,507 ) —
(27,792 )
Black Diamond Equity Ownership Promote Vesting⁽¹⁾
8,196
—
—
(8,196 ) —
Conversion of Subordinated Units to Common Units ⁽²⁾
(124,161 ) 124,161
—
—
—
Preferred Equity Accretion (3,151 ) —
—
—
(3,151 )
Unit-Based Compensation and Other 273
—
—
—
273
June 30, 2019 606,575
—
4,640
787,729
1,398,944
Net Income 34,812
—
5,820
25,751
66,383
Contributions from Noncontrolling Interests —
—
—
11,384
11,384
Distributions to Noncontrolling Interests —
—
—
(5,988 ) (5,988 )
Distributions to Unitholders (25,418 ) —
(4,640 ) —
(30,058 )
Black Diamond Equity Ownership Promote Vesting⁽¹⁾
5,357
—
—
(5,357 ) —
Preferred Equity Accretion (3,114 ) —
—
—
(3,114 )
Unit-Based Compensation and Other (163 ) —
—
—
(163 )
September 30, 2019 $ 618,049
$ —
$ 5,820
$ 813,519
$ 1,437,388


⁽¹⁾	~~See Note~~ ~~2. Basis of Presentation~~ ~~for further discussion of the Black Diamond equity ownership promote vesting.~~


⁽²⁾	~~See Note 10. Partnership Distributions~~ ~~for further discussion of the conversion of Subordinated Units.~~

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

~~Noble Midstream Partners LP~~

~~Consolidated Statements of Changes in Equity~~

~~(in thousands, unaudited)~~

Partnership
Common Units Subordinated Units General Partner Noncontrolling Interests Total
December 31, 2017 $ 642,616
$ (168,136 ) $ 520
$ 141,230
$ 616,230
Net Income 23,058
15,484
819
(225 ) 39,136
Contributions from Noncontrolling Interests —
—
—
409,865
409,865
Distributions to Noncontrolling Interests —
—
—
(3,007 ) (3,007 )
Distributions to Unitholders (11,575 ) (7,765 ) (520 ) —
(19,860 )
Black Diamond Equity Ownership Promote Vesting⁽¹⁾
1,215
1,214

(2,429 ) —
Unit-Based Compensation and Other 288
—
—
—
288
March 31, 2018 655,602
(159,203 ) 819
545,434
1,042,652
Net Income 21,210
14,240
1,134
7,858
44,442
Contributions from Noncontrolling Interests —
—
—
105,757
105,757
Distributions to Noncontrolling Interests —
—
—
(522 ) (522 )
Distributions to Unitholders (12,108 ) (8,126 ) (819 ) —
(21,053 )
Black Diamond Equity Ownership Promote Vesting⁽¹⁾
2,731
1,833
—
(4,564 ) —
Unit-Based Compensation and Other 395
—
—
—
395
June 30, 2018 667,830
(151,256 ) 1,134
653,963
1,171,671
Net Income 25,825
17,330
1,462
4,086
48,703
Contributions from Noncontrolling Interests —
—
—
77,412
77,412
Distributions to Noncontrolling Interests —
—
—
(2,285 ) (2,285 )
Distributions to Unitholders (12,669 ) (8,504 ) (1,134 ) —
(22,307 )
Black Diamond Equity Ownership Promote Vesting ⁽¹⁾
3,389
2,275
—
(5,664 ) —
Unit-Based Compensation and Other 340
—
—
—
340
September 30, 2018 $ 684,715
$ (140,155 ) $ 1,462
$ 727,512
$ 1,273,534



December 31, 2018	$	170,322		$	699,866		$	(130,207	)	$	2,421		$	744,153		$	1,486,555
Net Income	4,536			23,967			16,085			3,507			19,696			67,791
Contributions from Noncontrolling Interests and Parent	—			—			—			—			15,969			15,969
Distributions to Noncontrolling Interests and Parent	(6,495		)	—			—			—			(4,669		)	(11,164		)
Distributions to Unitholders	—			(13,930		)	(9,316		)	(2,421		)	—			(25,667		)
Black Diamond Equity Ownership Promote Vesting	—			4,092			2,746			—			(6,838		)	—
Other	—			470			—			—			—			470
March 31, 2019	168,363			714,465			(120,692		)	3,507			768,311			1,533,954
Net Income	2,565			25,487			6,282			4,640			16,789			55,763
Contributions from Noncontrolling Interests	—			—			—			—			18,141			18,141
Distributions to Noncontrolling Interests and Parent	(9,905		)	—			—			—			(7,316		)	(17,221		)
Distributions to Unitholders	—			(14,534		)	(9,751		)	(3,507		)	—			(27,792		)
Black Diamond Equity Ownership Promote Vesting	—			8,196			—			—			(8,196		)	—
Conversion of Subordinated Units to Common Units	—			(124,161		)	124,161			—			—			—
Preferred Equity Accretion	—			(3,151		)	—			—			—			(3,151		)
Other	—			273			—			—			—			273
June 30, 2019	$	161,023		$	606,575		$	—		$	4,640		$	787,729		$	1,559,967


⁽¹⁾	~~See Note~~ ~~2. Basis of Presentation~~ ~~for further discussion of the Black Diamond equity ownership promote vesting.~~

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

Table of Contents

Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

Note 1. Organization and Nature of Operations

Organization Noble Midstream Partners LP (the ~~Partnership, NBLX, we, us~~“Partnership”, “NBLX”, “we”, “us” or ~~our)~~“our”) is a growth-oriented Delaware master limited partnership formed in December 2014 by our sponsor, Noble Energy, Inc. ~~(Noble~~(“Noble” or ~~Parent)~~“Parent”), to own, operate, develop and acquire a wide range of domestic midstream infrastructure assets. Our current focus areas are the Denver-Julesburg Basin ~~(DJ Basin)~~(“DJ Basin”) in Colorado and the Southern Delaware Basin position of the Permian Basin ~~(Delaware Basin)~~(“Delaware Basin”) in Texas.

Chevron Merger On July 20, 2020, Noble, our sponsor and majority unitholder, entered into a definitive merger agreement (the “Chevron Merger Agreement”) with Chevron Corporation (NYSE: CVX) pursuant to which, and subject to the conditions of the agreement, all outstanding shares of Noble will be acquired by Chevron in an all-stock transaction (the “Chevron Merger”). The transaction was approved by the Boards of Directors of both Noble and Chevron and is anticipated to close in fourth quarter 2020. The transaction is subject to Noble stockholder approval, regulatory approvals, and other customary closing conditions. See Item 1A. Risk Factors for a discussion of risks related to the Chevron Merger.

Partnership Assets Our assets consist of ownership interests in certain ~~development~~ companies ~~(DevCos)~~ which serve specific areas and integrated development plan ~~(IDP)~~(“IDP”) areas and consist of the following:

DevCo

Areas Served

NBLX Dedicated Service

NBLX Ownership

Noncontrolling Interest ⁽¹⁾

Areas Served

NBLX Dedicated Service

NBLX Ownership

Noncontrolling Interest ⁽¹⁾

Colorado River DevCo LP

Wells Ranch IDP (DJ Basin)

East Pony IDP (DJ Basin)

All Noble DJ Basin Acreage

Crude Oil Gathering

Natural Gas Gathering

Water Services

Crude Oil Gathering

Crude Oil Treating

100%

N/A

San Juan River DevCo LP

East Pony IDP (DJ Basin)

Water Services

25%

75%

Green River DevCo LP

Mustang IDP (DJ Basin)

Crude Oil Gathering

Natural Gas Gathering

Water Services

25%

75%

Laramie River DevCo LP

Greeley Crescent IDP (DJ Basin)

Crude Oil Gathering

Water Services

100%

N/A

Black Diamond Dedication Area (DJ Basin)(3)

Crude Oil Gathering

Natural Gas Gathering

54.4%

45.6%

Blanco River DevCo LP

Delaware Basin

Crude Oil Gathering

Natural Gas Gathering

Produced Water Services

40%

60%

Colorado River LLC ⁽²⁾

Wells Ranch IDP (DJ Basin)

East Pony IDP (DJ Basin)

All Noble DJ Basin Acreage

Crude Oil Gathering

Natural Gas Gathering

Water Services

Crude Oil Gathering

Crude Oil Treating

100%

N/A

San Juan River LLC ⁽²⁾

East Pony IDP (DJ Basin)

Water Services

100%

N/A

Green River DevCo LLC ⁽²⁾

Mustang IDP (DJ Basin)

Crude Oil Gathering

Natural Gas Gathering

Water Services

100%

N/A

Laramie River LLC ⁽²⁾

Greeley Crescent IDP (DJ Basin)

Crude Oil Gathering

Water Services

100%

N/A

Black Diamond Dedication Area (DJ Basin)(3)

Crude Oil Gathering

Natural Gas Gathering

Crude Oil Transmission

54.4%

45.6%

Gunnison River DevCo LP

Bronco IDP (DJ Basin)

Crude Oil Gathering

Water Services

95%

Bronco IDP (DJ Basin)⁽⁴⁾

Crude Oil Gathering

Water Services

95%

Blanco River LLC ⁽²⁾

Delaware Basin

Crude Oil Gathering

Natural Gas Gathering

Produced Water Services

100%

N/A

Trinity River DevCo LLC ⁽²⁾⁽⁵⁾

Delaware Basin

Crude Oil Transmission

Natural Gas Compression

100%

N/A

Delaware Basin

Crude Oil Transmission

Natural Gas Compression

100%

N/A

Dos Rios DevCo LLC ⁽³⁾⁽⁶⁾

Delaware Basin

Crude Oil Transmission

Y-Grade Transmission

100%

N/A

Delaware Basin

Crude Oil Transmission

Y-Grade Transmission

100%

N/A

NBL Midstream Holdings LLC

East Pony IDP (DJ Basin)

Natural Gas Gathering
Natural Gas Processing

100%

N/A

Delaware Basin

Crude Oil Gathering
Natural Gas Gathering
Produced Water Services

100%

N/A


⁽¹⁾	The noncontrolling interest represents Noble’s retained ownership interest in ~~each DevCo.~~the Gunnison River DevCo LP. The noncontrolling interest in Black Diamond Gathering LLC ~~(Black Diamond)~~(“Black Diamond”) represents Greenfield ~~Member’s~~Midstream, LLC's (the “Greenfield Member”) interest in Black Diamond.


⁽²⁾	~~Our ownership interest in Advantage Pipeline Holdings, L.L.C. (the Advantage Joint Venture) is owned through Trinity River DevCo LLC.~~ ~~See Note~~ ~~7. Investments~~. On December 31, 2019, the general partner and limited partnership of each of the companies were merged into limited liability companies.


⁽³⁾	Our ownership interest in Saddlehorn Pipeline Company, LLC (“Saddlehorn”) is owned through a wholly-owned subsidiary of Black Diamond. See Note 6. Investments.


⁽⁴⁾	The Bronco IDP is a future development area. We currently have no midstream infrastructure assets in the Bronco IDP.


⁽⁵⁾	Our interest in Advantage Pipeline Holdings, L.L.C. (“Advantage”) is owned through Trinity River DevCo LLC.


⁽⁶⁾	Our ownership interests in Delaware Crossing LLC ~~(the~~ (“Delaware ~~Crossing Joint Venture)~~Crossing”), EPIC Y-Grade, LP ~~(EPIC Y-Grade) and~~(“EPIC Y-Grade”), EPIC Crude Holdings, LP ~~(EPIC Crude)~~(“EPIC Crude”) and EPIC Propane Pipeline Holdings, LP (“EPIC Propane”) are owned through wholly-owned subsidiaries of Dos Rios DevCo LLC. See Note 7.6. Investments.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

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

crude oil gathering systems;

natural gas gathering and processing systems and compression units;

crude oil treating facilities;

produced water collection, gathering, and cleaning systems;

fresh water storage and delivery systems; and

investments in midstream entities that provide transportation and fractionation services.

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

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~~Noble Midstream Partners LP~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Note 2. Basis of Presentation

~~Basis of~~ Presentation ~~and Consolidation~~ The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ~~(U.S. GAAP)~~(“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~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and equity for such periods.

In ~~Note~~ ~~8. Segment Information~~, we report a new Investments in Midstream Entities reportable segment and present prior period amounts on a comparable basis. Prior period segment information has been reclassified to conform to the current period presentation.

Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020. We have no items of other comprehensive income; therefore, our net income is identical to our comprehensive income.

~~Variable Interest Entities~~Consolidation Our consolidated financial statements include our accounts, the accounts of subsidiaries which the Partnership wholly owns and the accounts of subsidiaries in which the 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 unconsolidated investments are owned through certain DevCos, all financial statement activity associated with our unconsolidated investments are captured within the Investments in Midstream Entities reportable segment. See ~~Note~~ ~~7. Investments~~ ~~and~~ ~~Note~~ ~~8. Segment Information~~.Partnership has partial ownership.

On January 31, 2018, Black Diamond, an entity formed by Black Diamond Gathering Holdings LLC (the Noble Member), a wholly-owned subsidiary of Noble Midstream Partners LP, and Greenfield Midstream, LLC (the Greenfield Member), completed the acquisition of all of the issued and outstanding limited liability company interests in Saddle Butte Rockies Midstream, LLC and certain affiliates (collectively, Saddle Butte) from Saddle Butte Pipeline II, LLC (Seller). The acquisition of Saddle Butte will be referred to as the Black Diamond Acquisition. ~~See Note~~ ~~3. Acquisition~~Variable Interest Entities. Our consolidated financial statements include the accounts of Black Diamond, which we control. We have determined that the partners with equity at risk in Black Diamond lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance. Therefore, Black Diamond is considered a ~~VIE.~~variable interest entity. Through our majority representation on the Black Diamond ~~company~~ board of directors as well as our responsibility as operator of the ~~acquired~~Black Diamond system, we have the authority to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate Black Diamond in our financial statements.

Financial statement activity associated with Black Diamond ~~Equity Ownership Promote Vesting~~ ~~In accordance with~~is captured within the limited liability company agreement of Black Diamond, Noble Member received an equity ownership promote. The limited liability company agreement of Black Diamond required special allocations of gross income to balanceGathering Systems and the ratio of each member’s capital account to its agreed equity ownership interest over time. The special allocations were accounted for as equity transactions between the Partnership and a subsidiary with no gain or loss recognized. As of September 30, 2019, each member’s capital account agreed to its equity ownership interest and no further special allocations are required.Investments in Midstream Entities reportable segments. See Note ~~3. Acquisition~~7. Segment Information.

~~Noncontrolling Interests~~Drop-Down and Simplification Transaction ~~We present our~~On November 14, 2019, we entered into a Contribution, Conveyance, Assumption and Simplification Agreement with Noble. Pursuant to such agreement, we acquired (i) the remaining 60% limited partner interest in Blanco River DevCo LP, (ii) the remaining 75% limited partner interest in Green River DevCo LP, (iii) the remaining 75% limited partner interest in San Juan River DevCo LP and (iv) all of the issued and outstanding limited liability company interests of NBL Midstream Holdings LLC (“NBL Holdings”). Additionally, all of the Incentive Distribution Rights (“IDRs”) were converted into common units representing limited partner interests in the Partnership (“Common Units”). The acquisition of the interests and conversion of the IDRs are collectively referred to as the “Drop-Down and Simplification Transaction.” The total consideration paid by the Partnership for the Drop-Down and Simplification Transaction was $1.6 billion, which consisted of $670 million in cash and 38,455,018 Common Units issued to Noble.

The Drop-Down and Simplification Transaction represented a transaction between entities under common control. Prior to the acquisition of the remaining limited partner interests in Blanco River DevCo LP, Green River DevCo LP and San Juan River DevCo LP, the interests were reflected as noncontrolling interests in the Partnership’s consolidated financial statements. As we acquired additional interests in already-consolidated entities, the acquisition of these interests did not result in a change in reporting entity, as defined under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 805, Business Combinations. Therefore, results of operations related to these entities are accounted for on a prospective basis.

Conversely, the acquisition of all of the issued and outstanding limited liability company interests of NBL Holdings is characterized as a change in reporting entity, as defined under FASB Accounting Standards Codification Topic 805, Business Combinations, as this entity previously had not been consolidated by us. Therefore, results of operations related to NBL Holdings have been accounted for on a retrospective basis. Our financial information has been recast to include the historical results of NBL Holdings for the three and six months ended June 30, 2019. The financial statements ~~with a noncontrolling interest section representing Noble’s retained ownership~~ of ~~our DevCos as well as Greenfield Member’s ownership of Black Diamond.~~

~~Redeemable Noncontrolling Interest~~ On March 25, 2019, we, through Dos Rios Crude Intermediate LLC, a wholly-owned subsidiary of Dos Rios DevCo LLC, secured a $200 million equity commitment from GIP CAPS Dos Rios Holding Partnership, L.P. (GIP). Upon securingNBL Holdings for the equity commitment, we issued 100,000 preferred units, with a face value of $1,000 per preferred unit (Preferred Equity). Proceeds from the Preferred Equity totaled $100 million and we incurred offering costs of $3.4 million. The remaining $100 million equity commitment is available for a one-year period, subject to certain conditions precedent. Proceeds from the Preferred Equity were utilized to repay a portion of outstanding borrowings under our revolving credit facility. ~~See Note~~ ~~6. Debt~~.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

period prior to the Drop-Down and Simplification Transaction have been prepared from the separate records maintained by Noble and may not necessarily be indicative of the results of operations had these entities operated on a consolidated basis during those periods. Because a direct ownership relationship did not exist among the Partnership and NBL Holdings prior to the Drop-Down and Simplification Transaction, the net investment in NBL Holdings is shown as Parent Net Investment, in lieu of partners’ equity, in the accompanying Consolidated Statement of Changes in Equity for periods prior to the Drop-Down and Simplification Transaction.

Equity Method of AccountingWe use the equity method of accounting for investments in entities that we do not control but over which we exert significant influence. For certain entities, we serve as the operator and exert significant influence over the day-to-day operations. For other entities, we do not serve as the operator; however, our voting position on management committees or the board of directors allows us to exert significant influence over decisions regarding capital investments, budgets, turnarounds, maintenance, monetization decisions and other project matters. Under the equity method of accounting, initially we record the investment at our cost. Differences in the cost, or basis, of the investment and the net asset value of the investee will be amortized into earnings over the remaining useful life of the underlying assets. See Note 6. Investments.

Cost Method of AccountingWe use the cost method of accounting for our 3.33% interest in White Cliffs Pipeline L.L.C. (“White Cliffs”) as we have virtually no influence over its operations and financial policies. Under the cost method of accounting, we recognize cash distributions from White Cliffs as investment income in our consolidated statements of operations to the extent there is net income and record cash distributions in excess of our ratable share of earnings as return of investment. See Note 6. Investments.

Redeemable Noncontrolling InterestOur redeemable noncontrolling interest is related to the preferred equity issuance by one of our subsidiaries. We can redeem the ~~Preferred Equity~~preferred equity in whole or in part at any time for cash at a predetermined redemption price. The predetermined redemption price is ~~based on~~ the greater of (i) an amount necessary to achieve a ~~defined~~12% internal rate of return or ~~the~~(ii) an amount necessary to achieve a 1.375x multiple on invested capital. GIP CAPS Dos Rios Holding Partnership, L.P. (“GIP”) can request redemption of the ~~Preferred Equity following the later of the sixth anniversary of the Preferred Equity closing~~preferred equity on or ~~the fifth anniversary of the EPIC Crude pipeline completion date at a pre-determined base return.~~after March 25, 2025. As GIP’s redemption right is outside of our control, the ~~Preferred Equity~~preferred equity is not considered to be a component of equity on the consolidated balance sheet, and ~~such Preferred Equity~~ is reported as mezzanine equity on the consolidated balance sheet. In addition, because the ~~Preferred Equity~~preferred equity was issued by a subsidiary of the Partnership and is held by a third party, it is considered a redeemable noncontrolling interest.

The ~~Preferred Equity~~preferred equity was recorded initially at fair value on the issuance date. Subsequent to issuance, we accrete changes in the redemption value of the ~~Preferred Equity~~preferred equity from the date of issuance to GIP’s earliest redemption ~~date of the Preferred Equity.~~date. The ~~Preferred Equity~~preferred equity is perpetual and has a 6.5% annual dividend rate, payable quarterly in cash, with the ability to accrue unpaid dividends during the first two years following the closing. During any quarter in which a dividend is accrued, the accreted value of the ~~Preferred Equity~~preferred equity will be increased by the accrued but unpaid dividend (i.e., a paid-in-kind dividend). ~~The dividends for the first three quarters of 2019 were paid-in-kind.~~ Accretion during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was approximately ~~$3.1~~$3.4 million and ~~$6.3~~$6.6 million, respectively.

~~Accounting for Investments~~ Noncontrolling InterestsWe ~~use the equity method~~present our consolidated financial statements with a noncontrolling interest section representing Greenfield Member’s ownership of ~~accounting for our investments~~Black Diamond and Noble’s retained ownership in the ~~Advantage Joint Venture,~~Gunnison River DevCo LP.

Segment Information Accounting policies for reportable segments are the ~~Delaware Crossing Joint Venture, EPIC Y-Grade and EPIC Crude,~~same as wethose described in this footnote. Transfers between segments are accounted for at market value. We do not ~~control, but do exert significant influence over their operations. We use~~consider interest income and expense or income tax benefit or expense in our evaluation of the ~~cost method~~performance of ~~accounting for our investment in White Cliffs Pipeline L.L.C. (White Cliffs) as we have virtually no influence over its operations and financial policies.~~reportable segments. See Note 7. ~~Investments~~Segment Information.

~~Leases~~ We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains a lease, at the commencement date, we record a right-of-use (ROU) asset and a corresponding lease liability based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate to determine the present value of lease payments, we use our hypothetical secured borrowing rate based on information available at lease commencement. The weighted average discount rate is 3.69% for operating leases and 2.80% for our finance lease.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, it is reasonably likely that we will exercise the option.

Additionally, we have lease agreements that include lease and non-lease components, which are generally accounted for as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. ~~See Note~~ ~~9. Leases~~

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. The current commodity price, supply and demand environment coupled with the novel coronavirus (“COVID-19”) pandemic contributed to an unusually high degree of uncertainty in our estimates this quarter and have increased the likelihood that actual results could differ significantly from those estimates.

Impairments During second quarter 2020, we performed qualitative impairment assessments over property, plant and equipment, investments, and intangible assets. No impairment indicators were identified and no impairments were recorded.

During first quarter 2020, we identified certain impairment indicators including the significant decrease in commodity prices, changes to our customers’ development outlook due to reductions in demand resulting from the novel coronavirus (“COVID-19”) pandemic and excess crude oil and natural gas inventories, and a decrease in our market capitalization. Due to these impairment indicators, we conducted impairment testing of certain of our assets, as follows:

Property, Plant and Equipment and Intangible Assets Due to publicly announced changes to our customers’ development outlook within the Delaware Basin and the Black Diamond dedication area, we concluded impairment indicators existed and

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

conducted an undiscounted cash flow test. We developed estimates of future undiscounted cash flows expected in connection with providing midstream services within the dedication areas and compared the estimates to the carrying amount of the assets utilized to provide midstream services. Assumptions used in the estimates include expectations of throughput volumes, future development and capital spending plans. Based upon the results of the undiscounted cash flow test, we concluded that the carrying amount of the assets were recoverable and no impairment was recorded.

Goodwill All of our goodwill was assigned to the Black Diamond reporting unit within the Gathering Systems reportable segment. We performed a qualitative assessment and concluded it was more likely than not that the fair value of the Black Diamond reporting unit was less than its carrying value. We then performed a fair value assessment using the income approach. Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions for operating and development costs as well as taking into account changes and uncertainties in our customers’ development outlook. Based on these assessments, we concluded that our goodwill was fully impaired and recorded a non-cash charge of $109.7 million in March 2020.

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

Intangible Assets Our intangible asset accumulated amortization totaled approximately ~~$53.7~~$78.0 million and ~~$29.6~~$61.9 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Intangible asset amortization expense totaled approximately $8.1 million for the three months ended ~~September~~June 30, 2020 and 2019 and ~~2018 and $24.2~~$16.1 million and ~~$21.4~~$16.0 million for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, respectively.

Loan to Equity Method Investee On April 2, 2020, we entered into a loan agreement with EPIC Y-Grade. In accordance with the loan agreement, we loaned $22.5 million to EPIC Y-Grade, to be used for construction and working capital purposes. The maturity date of the loan is December 15, 2023. As the loan does not represent an in-substance capital contribution, it is recorded within other noncurrent assets in our consolidated balance sheets.

The loan bears interest at a rate equal to applicable margins plus the London Interbank Offered Rate (“LIBOR”), or alternate base rate. EPIC Y-Grade has the option to defer payment of interest (“PIK Interest”) for a 12-month period commencing on April 2, 2020. All PIK Interest is added to the outstanding principal amount of the loan and shall be paid on the maturity date. The loan plus accrued PIK Interest totaled $23.1 million at June 30, 2020. We recorded an allowance for expected credit losses of $1.3 million that is recorded within other non-operating expense in our consolidated statement of operations.

The carrying amount of the loan, net of the allowance for expected credit losses, approximates fair value as a portion of the interest rate is variable and reflective of market rates.

Tax Provision We are not a taxable entity for United States federal income tax purposes or for the majority of states that impose an income tax. Taxes are generally borne by our partners through the allocation of taxable income and we do not record deferred taxes related to the aggregate difference in the basis of our assets for financial and tax reporting purposes. We are subject to a Texas margin tax due to our operations in the Delaware Basin and we recorded a de minimis state tax provision for the three months ended June 30, 2020 and 2019.

For periods prior to the Drop-Down and Simplification Transaction, our consolidated financial statements include a provision for tax expense on income related to the assets contributed to the Partnership. Deferred federal and state income taxes were provided on temporary differences between the financial statement carrying amounts of recognized assets and liabilities and their respective tax bases as if the Partnership filed tax returns as a stand-alone entity. Substantially all of our tax provision for the three months ended June 30, 2019 represents federal income taxes associated with the assets contributed in the Drop-Down and ~~2018, respectively. The weighted average amortization period for our intangible assets is approximately 11 years.~~

~~Recently Adopted Accounting Standards~~

~~Leases~~ ~~In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 (ASU 2016-02), which creates~~ ~~Topic 842 – Leases~~ (ASC 842). The standard requires lessees to recognize a ROU asset and lease liability on the balance sheet for the rights and obligations created by leases. ASC 842 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

Simplification Transaction.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

~~The new standard provided a number of optional practical expedients. We elected:~~

~~the package of ‘practical expedients’, permitting us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs;~~

~~the practical expedient pertaining to land easements, allowing us to account for existing land easements under previous accounting policy; and~~

~~the practical expedient to not separate lease and non-lease components for the majority of our leases.~~

We adopted ASC 842 on January 1, 2019 using the modified retrospective approach. The standard did not materially impact our consolidated balance sheet or consolidated statement of operations and had no impact on our consolidated statement of cash flows. Prior period financial statements were not adjusted. ~~See Note~~ ~~9. Leases~~.

Recently ~~Issued~~Adopted Accounting Standards

~~Financial Instruments: Credit Losses~~Clarifying Certain Accounting Standards Codification (“ASC”) Topics In ~~June 2016,~~first quarter 2020, the FASB issued ~~Accounting Standards Update~~ASU No. ~~2016-13 (ASU 2016-13):~~2020-01: ~~Financial Instruments – Credit Losses~~Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), ~~which replaces~~to clarify the ~~incurred loss impairment methodology with a methodology that reflects current expected credit losses.~~interactions between these Topics. The ~~standard applies to a broad scope of financial instruments, including financial assets measured at amortized cost and off-balance sheet credit exposures not~~update provides clarifications for entities investing in equity securities accounted for ~~as insurance, such as financial guarantees~~under the ASC 321 measurement alternative and ~~other unfunded loan commitments.~~companies that hold certain non-derivative forward contracts and purchased options to acquire equity securities. ASU ~~2016-13~~2020-01 is effective for fiscal years beginning after December 15, ~~2019,~~2020, with early adoption permitted.

We ~~are executing an implementation plan, which includes data collection, contract review and assessment, and determination of necessary systems, processes and internal controls. We continue to evaluate~~early adopted this ASU ~~2016-03; based on our current credit portfolio we do~~in first quarter 2020. This adoption did not ~~believe adoption of the standard will~~ have a material impact on our financial statements.

Recently Issued Accounting Standards

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

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


	Nine Months Ended September 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2020		2019
Cash and Cash Equivalents at Beginning of Period	$	10,740	$	18,026	$	12,676	$	14,761
Restricted Cash at Beginning of Period^{(1) (2)}	951		37,505
Restricted Cash at Beginning of Period⁽¹⁾					50		951
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	$	11,691	$	55,531	$	12,726	$	15,712

Cash and Cash Equivalents at End of Period	$	17,571	$	18,201	$	12,729	$	11,537
Restricted Cash at End of Period⁽¹⁾	50		951		—		50
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	17,621	$	19,152	$	12,729	$	11,587


⁽¹⁾	Restricted cash represents the amount held as collateral ~~at December 31, 2018 and September 30, 2019~~ for certain of our letters of credit.


⁽²⁾	~~Restricted cash represents the amount held in escrow at December 31, 2017 for the Black Diamond Acquisition.~~

Revenue Recognition We recognize revenue at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer, using a five-step process, in accordance with ASC 606 – Revenue from Contracts with Customers (ASC 606).

Under ASC 606, remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied as of ~~September~~June 30, ~~2019.~~2020. A certain fresh water delivery affiliate revenue agreement contains a minimum volume commitment for the delivery of fresh water for a fixed fee per barrel with annual percentage escalations. The following table includes estimated revenues, as of ~~September~~June 30, ~~2019,~~2020, for the agreement. Our actual volumes delivered may exceed the future minimum volume commitment.


(in thousands)	Midstream Services — Affiliate		Midstream Services — Affiliate
Remainder of 2019	$	7,616
2020	36,817
Remainder of 2020			$	18,736
2021	37,635		37,635
Total	$	82,068	$	56,371

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

~~Note 3. Acquisition~~

On January 31, 2018, Black Diamond completed the Black Diamond Acquisition for approximately $638.5 million in cash. Noble Member and Greenfield Member each funded its share of the purchase price, approximately $319.9 million and $318.6 million, respectively, through contributions to Black Diamond. Noble Member funded its share of the purchase price through a combination of cash on hand and borrowings under its revolving credit facility. ~~See Note~~ ~~6. Debt~~.

In addition to the payment to the Seller, Black Diamond, through an additional contribution from Greenfield Member, paid PDC Energy, Inc. (PDC Energy) approximately $24.1 million to expand PDC Energy’s acreage dedication as well as extend the duration of the acreage dedication by five years. In accordance with the limited liability company agreement of Black Diamond, Noble Member received a 54.4% equity ownership interest in Black Diamond and Greenfield Member received a 45.6% equity ownership interest in Black Diamond. Noble Member’s agreed equity ownership interest included a 4.4% equity ownership interest promote which was designed to vest only after Noble Member was allocated an amount of gross revenue equal to the contributions by Greenfield Member in excess of its agreed equity ownership interest. As of September 30, 2019, Noble Member has received the necessary allocations of gross revenue and the equity ownership interest promote has vested. ~~See Note~~ ~~2. Basis of Presentation~~.

We serve as the operator of the Black Diamond system. We acquired a large-scale integrated gathering system located in the DJ Basin with approximately 160 miles of pipeline in operation and delivery capacity of approximately 300 MBbl/d as well as approximately 141,000 dedicated acres from six customers under fixed-fee arrangements.

~~Purchase Price Allocation~~ The transaction has been accounted for as a business combination, using the acquisition method. The following table represents the final allocation of the total Black Diamond Acquisition purchase price to the assets acquired and the liabilities assumed based on the fair value at the acquisition date, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill. The following table sets forth our final purchase price allocation:

(in thousands)
Cash Consideration $ 638,266
PDC Energy Payment 24,120
Current Liabilities Assumed 18,259
Total Purchase Price and Liabilities Assumed $ 680,645

Cash and Restricted Cash $ 12,518
Accounts Receivable 10,661
Other Current Assets 2,206
Property, Plant and Equipment 205,766
Intangible Assets⁽¹⁾
339,760
Fair Value of Identifiable Assets 570,911
Implied Goodwill ⁽²⁾
109,734
Total Asset Value $ 680,645


⁽¹⁾	The customer contracts we acquired are long-term, fixed-fee contracts for the purchase and sale of crude oil. Fair value was calculated using the multi-period excess earnings method under the income approach for the existing customers. The fair value was determined using unobservable inputs and is considered to be a Level 3 measurement on the fair value hierarchy.


⁽²⁾	Based upon the final purchase price allocation, we have recognized $109.7 million of goodwill, all of which is assigned to the Black Diamond reporting unit within the Gathering Systems reportable segment. As a result of the acquisition, we expect to realize certain synergies which may result from our operation of the Black Diamond system.

~~Table of Contents~~

~~Noble Midstream Partners LP~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~Pro Forma Results~~ The following pro forma consolidated financial information was derived from the historical financial statements of the Partnership and Saddle Butte and gives effect to the acquisition as if it had occurred on January 1, 2018. The pro forma results of operations do not include any cost savings or other synergies that may result from the Black Diamond Acquisition or any estimated costs that have been or will be incurred by us to integrate the acquired assets. The pro forma consolidated financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the acquisition taken place on January 1, 2018; furthermore, the financial information is not intended to be a projection of future results.

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per unit amounts)
2019 ⁽¹⁾

2018 ⁽¹⁾

2019 ⁽¹⁾
2018
Revenues $ 169,323
$ 139,163
$ 475,544
$ 369,379
Net Income 66,383
48,703
182,836
129,796
Net Income Attributable to Noble Midstream Partners LP 40,632
44,617
120,600
118,896

Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic
Common Units $ 0.88
$ 1.09
$ 2.65
$ 2.92
Subordinated Units $ —
$ 1.09
$ 2.89
$ 2.92

Net Income Attributable to Limited Partners Per Limited Partner Unit — Diluted
Common Units $ 0.88
$ 1.09
$ 2.64
$ 2.92
Subordinated Units $ —
$ 1.09
$ 2.89
$ 2.92


⁽¹⁾	~~No pro forma adjustments were made for the period as Black Diamond operations are included in our results for the full period.~~

Note 4.3. 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,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
Crude Oil, Natural Gas and Produced Water Gathering	$	79,208	$	54,674	$	209,530	$	144,569
Gathering and Processing									$	82,671	$	78,136	$	171,969	$	153,516
Fresh Water Delivery	20,847		17,416		66,801		56,774		10,300		18,367		33,899		45,954
Other	791		1,046		2,393		2,980		768		766		1,655		1,602
Total Midstream Services — Affiliate	$	100,846	$	73,136	$	278,724	$	204,323	$	93,739	$	97,269	$	207,523	$	201,072

Expenses General and administrative expense consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018		2020		2019		2020		2019
General and Administrative Expense — Affiliate	$	1,805	$	1,894	$	5,601	$	5,599	$	4,107	$	2,178	$	6,782	$	4,456
General and Administrative Expense — Third Party	2,324		2,310		7,389		14,027		2,339		2,993		5,150		5,076
Total General and Administrative Expense	$	4,129	$	4,204	$	12,990	$	19,626	$	6,446	$	5,171	$	11,932	$	9,532

Omnibus AgreementOur omnibus agreement with Noble contractually requires us to pay a fixed annual fee to Noble for certain administrative and operational support services being provided to us. The omnibus agreement generally remains in full force and effect so long as Noble controls our general partner, Noble Midstream GP LLC (“General Partner”). The cap on the initial rate of $6.9 million expired in September 2019 and we completed the annual fee redetermination process during February 2020. The redetermined rate is $15.7 million and became effective March 1, 2020.

~~Table of Contents~~

~~Noble Midstream Partners LP~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Note 5.4. Property, Plant and Equipment

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


(in thousands)	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Crude Oil, Natural Gas and Produced Water Gathering Systems and Facilities	$	1,403,678		$	1,199,679
Gathering and Processing Systems							$	1,898,488		$	1,795,957
Fresh Water Delivery Systems	80,840			78,820			95,802			96,004
Crude Oil Treating Facilities	23,140			20,027
Construction-in-Progress ⁽¹⁾	175,162			202,083			62,592			115,034
Total Property, Plant and Equipment, at Cost	1,682,820			1,500,609			2,056,882			2,006,995
Accumulated Depreciation and Amortization	(114,789		)	(79,357		)	(279,115		)	(244,038		)
Property, Plant and Equipment, Net	$	1,568,031		$	1,421,252		$	1,777,767		$	1,762,957

⁽¹⁾

~~Construction-in-Progress~~Construction-in-progress at ~~September~~June 30, ~~2019~~2020 primarily includes ~~$146.7~~$49.0 million in gathering system projects ~~$8.3 million in fresh water delivery system projects~~ and ~~$18.8~~$11.6 million in equipment for use in future projects. ~~Construction-in-Progress~~Construction-in-progress at December 31, ~~2018~~2019 primarily includes ~~$147.1~~$98.4 million in gathering system projects ~~$21.6 million in fresh water delivery system projects~~ and ~~$32.8~~$15.4 million in equipment for use in future projects.

Table of Contents

Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

Note 6.5. Debt

Debt consists of the following:


	September 30, 2019					December 31, 2018					June 30, 2020					December 31, 2019
(in thousands, except percentages)	Debt			Interest Rate		Debt			Interest Rate		Debt			Interest Rate		Debt			Interest Rate
Revolving Credit Facility, due March 9, 2023(1)	$	50,000		3.45	%	$	60,000		3.67	%	$	735,000		1.61	%	$	595,000		3.11	%
2018 Term Loan Credit Facility, due July 31, 2021	500,000			3.17	%	500,000			3.42	%
2019 Term Loan Credit Facility, due August 23, 2022	400,000			3.05	%	—			—	%
Term Loan Credit Facility, due July 31, 2021											500,000			1.36	%	500,000			2.85	%
Term Loan Credit Facility, due August 23, 2022											400,000			1.24	%	400,000			2.74	%
Finance Lease Obligation ⁽¹⁾	2,082			—	%	3,231			—	%	2,033			—	%	2,005			—	%
Total	952,082					563,231					1,637,033					1,497,005
Term Loan Credit Facility Unamortized Debt Issuance Costs	(1,432		)			(979		)
Unamortized Debt Issuance Costs											(1,114		)			(1,326		)
Total Debt	950,650					562,252					1,635,919					1,495,679
Finance Lease Obligation Due Within One Year ⁽¹⁾	(1,743		)			(3,231		)			—					—
Long-Term Debt	$	948,907				$	559,021				$	1,635,919				$	1,495,679


⁽¹⁾	~~See Note~~ ~~9. Leases~~. Our revolving credit facility has a total borrowing capacity of $1.15 billion. As of June 30, 2020 and December 31, 2019, our revolving credit facility had $415 million and $555 million available for borrowing, respectively.

~~2019 Term Loan Credit Facility~~ ~~On August 23, 2019,~~During the first six months of 2020, we ~~entered into~~borrowed a three-year senior unsecured term loan credit facility that permits aggregate borrowings of up to $400 million. Proceeds from the term loan were primarily used to repay a portion of the outstanding borrowingsnet $140 million under our revolving credit ~~facility and pay fees and expenses in connection with the term loan credit~~ facility. ~~We incurred approximately $0.6 million of fees and expenses.~~

The term loan credit facility contains usual and customary representations and warranties, affirmative and negative covenants, and events of default that are substantially the same as those contained inProceeds from our revolving credit facility were utilized to fund portions of our capital contributions to investments, capital program and the 2018 term loan credit facility. Upon the occurrence and during the continuation of an event of default under the term loan credit facility the lenders may declare all amounts outstanding under the term loan credit facility to be immediately due and payable and exercise other remedies as provided by applicable law.for working capital purposes.

Compliance with Covenants The revolving credit facility and term loan credit facilities require us to comply with certain financial covenants as of the end of each fiscal quarter. We were in compliance with such covenants as of ~~September~~June 30, ~~2019.~~2020.

Fair Value of Long-Term Debt Our revolving credit facility and term loan credit facilities are variable-rate, non-public debt. The fair value of our revolving credit facility and term loan credit facilities approximates the carrying amount. The fair value is estimated based on observable inputs. As such, we consider the fair value of these facilities to be a Level 2 measurement on the fair value hierarchy.

Note 6. Investments

We have ownership interests in the following entities:

3.33% interest in White Cliffs;

50% interest in Advantage;

50% interest in Delaware Crossing;

15% interest in EPIC Y-Grade;

30% interest in EPIC Crude;

15% interest in EPIC Propane; and

20% interest in Saddlehorn.

Delaware Crossing On February 7, 2019, we executed definitive agreements with Salt Creek Midstream LLC and completed the formation of Delaware Crossing, a crude oil pipeline system in the Delaware Basin which began delivering crude oil into all connection points in April 2020. During the first six months of 2020, we made capital contributions of approximately $16.9 million.

EPIC Y-Grade On January 31, 2019, we exercised and closed an option with EPIC Midstream Holdings, LP (“EPIC”) to acquire an interest in EPIC Y-Grade, which owns the EPIC Y-Grade pipeline from the Delaware Basin to Corpus Christi, Texas. Interim crude service on the EPIC Y-Grade mainline ended in March 2020. EPIC Y-Grade began the transition to NGL service in May 2020 and completed construction of its first new build fractionator in June 2020. During the first six months of 2020, we made capital contributions of approximately $12.8 million.

EPIC Crude On January 31, 2019, we exercised an option with EPIC to acquire an interest in EPIC Crude, and on March 8, 2019, we closed the option to acquire the interest. EPIC Crude has been engaged in the construction of the EPIC crude oil pipeline from the Delaware Basin to Corpus Christi, Texas. Construction of the EPIC Crude pipeline was completed, and the pipeline was commissioned in February 2020 and entered full service on April 1, 2020. During the first six months of 2020, we made capital contributions of approximately $30.0 million.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

~~Note 7. Investments~~

~~We have ownership interests in the following entities:~~

~~3.33% interest in White Cliffs;~~

~~50% interest in the Advantage Joint Venture;~~

~~50% interest in the Delaware Crossing Joint Venture;~~

~~15% interest in~~ EPIC ~~Y-Grade; and~~

~~30% interest in EPIC Crude.~~

~~Delaware Crossing Joint Venture~~ On February 7, 2019, we executed definitive agreements with Salt Creek Midstream LLC (Salt Creek) and completed the formation of the Delaware Crossing Joint Venture to construct a crude oil pipeline system with a capacity of 160 MBbl/d in the Delaware Basin. During the first nine months of 2019, we have made capital contributions of approximately $51.5 million.

~~EPIC Y-Grade~~Propane On ~~January 31,~~December 19, 2019, we exercised and closed ~~our~~an option with EPIC ~~Midstream Holdings, LP (EPIC)~~ to acquire an interest in EPIC ~~Y-Grade.~~Propane, which is constructing a propane pipeline that will run from the EPIC Y-Grade ~~is constructing an approximately 700-mile pipeline linking natural gas liquid (NGL) reserves~~Logistics, LP fractionator complex in Robstown, Texas to the ~~Permian Basin and Eagle Ford Shale~~Phillips 66 petrochemical facility in Sweeney, Texas, with additional connectivity to ~~Gulf Coast refiners, petrochemical companies, and export markets.~~the Markham underground storage caverns. EPIC Propane completed construction of its first new build fractionator in June 2020. During the first ~~nine~~six months of ~~2019,~~2020, we ~~have~~ made capital contributions of approximately ~~$166.1~~$4.0 million.

~~EPIC Crude~~Saddlehorn Pipeline On ~~January 31, 2019, we~~February 1, 2020, Black Diamond exercised ~~our~~and closed an option to acquire ana 20% ownership interest in ~~EPIC Crude. On March 8, 2019, we closed our option with EPIC~~Saddlehorn for $160 million, or $87.0 million net to ~~acquire~~ the Partnership. Greenfield Member contributed $73.0 million for its portion of the purchase price. Black Diamond purchased a 10% interest from each of Magellan Midstream Partners, L.P. (“Magellan”) and Plains All American Pipeline, L.P. (“Plains”). After the transaction, Magellan and Plains each own a 30% membership interest and Black Diamond and Western Midstream each own a 20% membership interest in ~~EPIC Crude. EPIC Crude is constructing an approximately 700-mile pipeline with a capacity~~Saddlehorn. Magellan continues to serve as operator of ~~590 MBbl/d from~~ the ~~Delaware Basin to the Gulf Coast. During the first nine months of 2019, we have made capital contributions of approximately $268.7 million.~~Saddlehorn pipeline.

The following table presents our investments at the dates indicated:


(in thousands)	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
White Cliffs	$	10,274	$	9,373	$	10,363	$	10,268
Advantage Joint Venture	74,711		72,944
Delaware Crossing Joint Venture	50,435		—
Advantage					72,651		76,834
Delaware Crossing					84,671		68,707
EPIC Y-Grade	166,491		—		163,244		162,850
EPIC Crude	263,476		—		362,912		339,116
EPIC Propane					7,028		3,003
Saddlehorn					159,948		—
Total Investments	$	565,387	$	82,317	$	860,817	$	660,778

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018			2020			2019			2020			2019
White Cliffs	$	(716	)	$	(912	)	$	(2,605	)	$	(2,716	)	$	(549	)	$	(841	)	$	(1,264	)	$	(1,889	)
Advantage Joint Venture	(1,867		)	(2,772		)	(5,621		)	(7,569		)
Delaware Crossing Joint Venture	512			—			2,050			—
Advantage													(1,311		)	(1,513		)	(3,387		)	(3,754		)
Delaware Crossing													752			355			1,472			1,538
EPIC Y-Grade	2,000			—			3,054			—			7,977			1,024			13,595			1,054
EPIC Crude	6,130			—			9,375			—			1,972			3,245			8,873			3,245
EPIC Propane													36			—			61			—
Saddlehorn													(5,712		)	—			(10,338		)	—
Other ⁽¹⁾	(438		)	(182		)	(1,225		)	(540		)	(435		)	(522		)	(873		)	(787		)
Total Investment Loss (Income)	$	5,621		$	(3,866	)	$	5,028		$	(10,825	)	$	2,730		$	1,748		$	8,139		$	(593	)


⁽¹⁾	Represents income associated with our fee for serving as the operator of ~~the~~ Advantage ~~Joint Venture~~ and Delaware ~~Crossing Joint Venture.~~Crossing.

Note 8.7. Segment Information

We manage our operations by the nature of the services we offer. Our reportable segments comprise the structure used to make key operating decisions and assess performance. As a result of our increased investment in midstream entities during first quarter 2019, we have established an Investments in Midstream Entities reportable segment. Our Investments in Midstream Entities reportable segment includes all activity associated with our unconsolidated investments. ~~See Note~~ ~~7. Investments.~~

We are ~~now~~ organized into the following reportable segments: Gathering Systems ~~(crude~~(primarily includes crude oil gathering, natural gas gathering and processing, produced water gathering, ~~crude oil treating,~~ and crude oil sales), Fresh Water Delivery, Investments in Midstream Entities and Corporate. We often refer to the services of our Gathering Systems and Fresh Water Delivery reportable segments collectively as our midstream services.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

often refer to the services of our Gathering Systems and Fresh Water Delivery reportable segments collectively as our midstream services. Prior period segment information has been reclassified to conform to the current period presentation.

Summarized financial information concerning our reportable segments is as follows:


(in thousands)	Gathering Systems⁽¹⁾		Fresh Water Delivery⁽¹⁾		Investments in Midstream Entities			Corporate⁽²⁾			Consolidated		Gathering Systems		Fresh Water Delivery		Investments in Midstream Entities			Corporate⁽¹⁾			Consolidated
Three Months Ended September 30, 2019
Three Months Ended June 30, 2020
Midstream Services — Affiliate	$	79,999	$	20,847	$	—		$	—		$	100,846	$	83,439	$	10,300	$	—		$	—		$	93,739
Midstream Services — Third Party	17,475		2,132		—			—			19,607		21,186		1,811		—			—			22,997
Crude Oil Sales — Third Party	48,870		—		—			—			48,870		29,214		—		—			—			29,214
Total Revenues	146,344		22,979		—			—			169,323		133,839		12,111		—			—			145,950
Income (Loss) Before Income Taxes	61,952		18,825		(5,621		)	(8,681		)	66,475		58,392		10,336		(2,730		)	(15,266		)	50,732
Additions to Long-Lived Assets	56,781		4,646		—			299			61,726		4,849		—		—			148			4,997
Additions to Investments	—		—		86,757			—			86,757		—		—		2,627			—			2,627

Three Months Ended September 30, 2018
Three Months Ended June 30, 2019
Midstream Services — Affiliate	$	55,720	$	17,416	$	—		$	—		$	73,136	$	78,902	$	18,367	$	—		$	—		$	97,269
Midstream Services — Third Party	14,005		5,929		—			—			19,934		19,155		2,454		—			—			21,609
Crude Oil Sales — Third Party	46,093		—		—			—			46,093		51,782		—		—			—			51,782
Total Revenues	115,818		23,345		—			—			139,163		149,839		20,821		—			—			170,660
Income (Loss) Before Income Taxes	34,780		18,129		3,866			(8,166		)	48,609		52,668		13,621		(1,748		)	(8,047		)	56,494
Additions to Long-Lived Assets	72,948		6,159		—			—			79,107		56,739		1,113		—			240			58,092
Additions to Investments	—		—		307			—			307		—		—		143,984			—			143,984

Nine Months Ended September 30, 2019
Six Months Ended June 30, 2020
Midstream Services — Affiliate													$	173,624	$	33,899	$	—		$	—		$	207,523
Midstream Services — Third Party													44,910		5,985		—			—			50,895
Crude Oil Sales — Third Party													111,577		—		—			—			111,577
Total Revenues													330,111		39,884		—			—			369,995
Goodwill Impairment													109,734		—		—			—			109,734
Income (Loss) Before Income Taxes													17,174		32,779		(8,139		)	(28,449		)	13,365
Additions to Long-Lived Assets													52,468		—		—			257			52,725
Additions to Investments													—		—		228,226			—			228,226

Six Months Ended June 30, 2019
Midstream Services — Affiliate	$	211,923	$	66,801	$	—		$	—		$	278,724	$	155,118	$	45,954	$	—		$	—		$	201,072
Midstream Services — Third Party	54,903		8,395		—			—			63,298		39,375		6,263		—			—			45,638
Crude Oil Sales — Third Party	133,522		—		—			—			133,522		84,652		—		—			—			84,652
Total Revenues	400,348		75,196		—			—			475,544		279,145		52,217		—			—			331,362
Income (Loss) Before Income Taxes	158,671		55,655		(5,028		)	(26,172		)	183,126		106,328		36,830		593			(18,157		)	125,594
Additions to Long-Lived Assets	187,437		6,040		—			810			194,287		134,388		1,394		—			511			136,293
Additions to Investments	—		—		501,344			—			501,344		—		—		414,587			—			414,587

Nine Months Ended September 30, 2018
Midstream Services — Affiliate	$	147,549	$	56,774	$	—		$	—		$	204,323
Midstream Services — Third Party	31,831		12,932		—			—			44,763
Crude Oil Sales — Third Party	109,781		—		—			—			109,781
Total Revenues	289,161		69,706		—			—			358,867
Income (Loss) Before Income Taxes	94,674		54,066		10,825			(27,121		)	132,444
Additions to Long-Lived Assets	669,908		18,711		—			—			688,619
Additions to Investments	—		—		426			—			426

September 30, 2019
June 30, 2020
Total Assets	$	1,953,417	$	87,100	$	565,387		$	16,862		$	2,622,766	$	2,019,477	$	92,823	$	860,817		$	35,230		$	3,008,347

December 31, 2018
December 31, 2019
Total Assets	$	1,804,100	$	96,280	$	82,317		$	15,220		$	1,997,917	$	2,160,026	$	91,840	$	660,778		$	13,438		$	2,926,082

⁽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 unconsolidated investments are owned through certain DevCos, all financial statement activity associated with our unconsolidated investments is captured within the Investments in Midstream Entities reportable segment. As our DevCos represent VIEs, see the above reportable segments for our VIEs impact to the consolidated financial statements.


⁽²⁾	The Corporate segment includes all general Partnership activity not attributable to our ~~DevCos.~~operating subsidiaries.

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Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

~~Note 9. Leases~~

~~In the normal course of business, we enter into lease agreements to support our operations. We lease field equipment as well as water and pipeline transportation assets.~~

~~Operating Leases~~ Our operating leases consist of field equipment and transportation assets. Our field equipment leases have fixed monthly payments over a minimum term with options to extend the rental period on a month-to-month basis. Our leased transportation assets have variable monthly payments (price per barrel throughput) over a minimum term with the option to extend on a year-to-year basis. Our operating and variable lease expense is recorded in direct operating expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019.

~~Finance Leases~~ We lease water assets for use in the performance of our fresh water delivery services. The amount of the lease obligation is based on the discounted present value of future minimum lease payments, and therefore does not reflect future cash lease payments. Our finance lease expense is recorded in depreciation and amortization expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019. Interest expense for our finance lease is recorded in interest expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019.

~~Short Term Leases~~ Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Short term lease expense is recorded in direct operating expense in our consolidated statement of operations and was de minimis for the three and nine months ended September 30, 2019.

~~Balance Sheet Information~~ ~~ROU assets and lease liabilities are as follows:~~

(thousands) Balance Sheet Location September 30, 2019
Assets
Operating ⁽¹⁾
Other Noncurrent Assets $ 3,303
Finance ⁽²⁾
Total Property, Plant and Equipment, Net 3,958
Total ROU Assets $ 7,261
Liabilities
Current
Operating Other Current Liabilities $ 2,621
Finance Other Current Liabilities 1,743
Noncurrent
Operating Other Noncurrent Liabilities 667
Finance ⁽³⁾
Long-Term Debt 339
Total Lease Liabilities $ 5,370


⁽¹⁾	~~All of our operating leases mature between 2019 through 2021. Future operating lease payments of $0.7 million are due in 2019, $2.5 million are due in 2020 and $0.2 million are due in 2021.~~


⁽²⁾	~~Finance lease assets are recorded net of accumulated amortization of $1.0 million as of September 30, 2019.~~


⁽³⁾	~~Our finance lease matures during 2021.~~

~~Table of Contents~~

~~Noble Midstream Partners LP~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Note ~~10.~~8. Partnership Distributions

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to unitholders of record on the applicable record date. The following table details the distributions paid in respect of the periods presented below:


					Distributions (in thousands)												Distributions (in thousands)
					Limited Partners												Limited Partners
Period	Record Date	Distribution Date	Distribution per Limited Partner Unit		Common Unitholders⁽¹⁾		Subordinated Unitholders		Holder of IDRs		Total		Record Date	Distribution Date	Distribution per Limited Partner Unit		Common Unitholders⁽¹⁾		Subordinated Unitholders ⁽²⁾		Holder of IDRs ⁽³⁾		Total
Q4 2017	February 5, 2018	February 12, 2018	$	0.4883	$	11,566	$	7,765	$	520	$	19,851
Q1 2018	May 7, 2018	May 14, 2018	$	0.5110	$	12,103	$	8,126	$	819	$	21,048
Q2 2018	August 6, 2018	August 13, 2018	$	0.5348	$	12,668	$	8,504	$	1,134	$	22,306
Q4 2018	February 4, 2019	February 11, 2019	$	0.5858	$	13,876	$	9,316	$	2,421	$	25,613	February 4, 2019	February 11, 2019	$	0.5858	$	13,876	$	9,316	$	2,421	$	25,613
Q1 2019	May 6, 2019	May 13, 2019	$	0.6132	$	14,534	$	9,751	$	3,507	$	27,792	May 6, 2019	May 13, 2019	$	0.6132	$	14,534	$	9,751	$	3,507	$	27,792
Q2 2019	August 5, 2019	August 12, 2019	$	0.6418	$	25,418	$	—	$	4,640	$	30,058	August 5, 2019	August 12, 2019	$	0.6418	$	25,418	$	—	$	4,640	$	30,058
Q3 2019													November 4, 2019	November 12, 2019	$	0.6716	$	26,598	$	—	$	5,820	$	32,418
Q4 2019													February 4, 2020	February 14, 2020	$	0.6878	$	62,012	$	—	$	—	$	62,012
Q1 2020													May 8, 2020	May 15, 2020	$	0.1875	$	16,906	$	—	$	—	$	16,906


⁽¹⁾	Distributions to common unitholders does not include distribution equivalent rights on units that vested under the Noble Midstream Partners LP 2016 Long-Term Incentive Plan (the ~~LTIP)~~“LTIP”).


⁽²⁾	On May 14, 2019, all Subordinated Units were converted into Common Units.


⁽³⁾	In November 2019, we acquired all of Noble’s IDRs. See Note 2. Basis of Presentation.

~~Incentive Distribution Rights~~Cash Distributions ~~Noble currently holds Incentive Distribution Rights (IDRs) that entitle it to receive increasing percentages, up to~~On July 24, 2020, the Board of Directors of our General Partner approved a ~~maximum of 50%, of the available cash we distribute from operating surplus in excess of $0.4313 per unit per quarter. The maximum~~quarterly distribution of ~~50% does not include any distributions that Noble may receive on Common Units or Subordinated Units that it owns.~~

~~Conversion of Subordinated Units~~ ~~On April 25, 2019, the board of directors of our general partner declared a quarterly cash distribution of $0.6132 per unit~~ for the quarter ended March 31, 2019. The distribution was paid on May 13, 2019 to unitholders of record as of the close of business on May 6, 2019. Upon payment of the distribution, the requirements for the conversion of all Subordinated Units were satisfied under our partnership agreement. As a result, on May 14, 2019, all 15,902,584 Subordinated Units, which were owned entirely by Noble, converted into Common Units on a one-for-one basis and thereafter will participate on terms equal with all other Common Units in distributions from available cash.

~~Cash Distributions~~ ~~On October 24, 2019, the board of directors of our general partner declared a quarterly cash distribution of $0.6716~~$0.1875 per unit. The distribution will be paid on ~~November 11, 2019,~~August 14, 2020, to unitholders of record as of ~~November 4, 2019. Also on November 11, 2019, a cash incentive distribution of $5.8 million will be made to Noble related to its IDRs, based upon the level of distribution paid per Common Unit.~~August 7, 2020.

Note ~~11.~~9. Net Income Per Limited Partner Unit

Our net income is attributed to limited partners, in accordance with their respective ownership percentages, and when applicable, giving effect to incentive distributions paid to ~~Noble, the holder of our IDRs. The Common and Subordinated unitholders represent an aggregate 100% limited partner interest in us. Pursuant to our partnership agreement,~~Noble. For periods prior to the ~~extent that the quarterly distributions exceed certain target levels, Noble, as the holder~~conversion 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~~Subordinated Units and ~~Subordinated Units.~~

~~Because~~simplification of IDRs, we ~~have~~had more than one class of participating securities and we ~~use~~utilized the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include Common Units, Subordinated Units and IDRs.

Basic and diluted net income per limited partner Common Unit and Subordinated Unit is computed by dividing the respective limited partners’ interest in net income for the period by the weighted-average number of Common Units and Subordinated Units outstanding for the period. Diluted net income per limited partner Common Unit and Subordinated Unit reflects the potential dilution that could occur if agreements to issue Common Units, such as awards under the LTIP, were settled or converted into Common Units. When it is determined that potential Common Units resulting from an award should be included in the diluted net income per limited partner Common and Subordinated Unit calculation, the impact is reflected by applying the treasury stock method.~~See Note 10. Partnership Distributions~~ ~~for further discussion of the conversion of Subordinated Units on May 14, 2019.~~

1816

Table of Contents

Noble Midstream Partners LP

Notes to Consolidated Financial Statements (Unaudited)

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, except per unit amounts) 2019 2018 2019 2018
Net Income Attributable to Noble Midstream Partners LP $ 40,632
$ 44,617
$ 120,600
$ 120,562
Less: Net Income Attributable to Incentive Distribution Rights 5,820
1,462
13,967
3,415
Net Income Attributable to Limited Partners $ 34,812
$ 43,155
$ 106,633
$ 117,147

Net Income Attributable to Common Units $ 34,812
$ 25,825
$ 84,266
$ 70,093
Net Income Attributable to Subordinated Units —
17,330
22,367
47,054
Net Income Attributable to Limited Partners $ 34,812
$ 43,155
$ 106,633
$ 117,147

Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic
Common Units $ 0.88
$ 1.09
$ 2.65
$ 2.96
Subordinated Units $ —
$ 1.09
$ 2.89
$ 2.96

Net Income Attributable to Limited Partners Per Limited Partner Unit — Diluted
Common Units $ 0.88
$ 1.09
$ 2.64
$ 2.96
Subordinated Units $ —
$ 1.09
$ 2.89
$ 2.96

Weighted Average Limited Partner Units Outstanding — Basic
Common Units 39,604
23,688
31,855
23,686
Subordinated Units —
15,903
7,747
15,903

Weighted Average Limited Partner Units Outstanding — Diluted
Common Units 39,624
23,704
31,879
23,701
Subordinated Units —
15,903
7,747
15,903

Antidilutive Restricted Units 44
21
66
22



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per unit amounts)	2020		2019		2020		2019
Net Income Attributable to Noble Midstream Partners LP	$	48,236	$	36,409	$	58,339	$	79,968
Less: Net Income Attributable to Incentive Distribution Rights	—		4,640		—		8,147
Net Income Attributable to Limited Partners	$	48,236	$	31,769	$	58,339	$	71,821

Net Income Attributable to Common Units	$	48,236	$	25,487	$	58,339	$	49,454
Net Income Attributable to Subordinated Units ⁽¹⁾	—		6,282		—		22,367
Net Income Attributable to Limited Partners	$	48,236	$	31,769	$	58,339	$	71,821

Net Income Attributable to Limited Partners Per Limited Partner Unit — Basic and Diluted
Common Units	$	0.53	$	0.79	$	0.65	$	1.77
Subordinated Units ⁽¹⁾	$	—	$	0.84	$	—	$	1.91

Weighted Average Limited Partner Units Outstanding — Basic
Common Units	90,163		32,090		90,158		27,916
Subordinated Units ⁽¹⁾	—		7,514		—		11,685

Weighted Average Limited Partner Units Outstanding — Diluted
Common Units	90,164		32,121		90,163		27,944
Subordinated Units ⁽¹⁾	—		7,514		—		11,685

Antidilutive Restricted Units	207		68		187		71


⁽¹⁾	On May 14, 2019, all Subordinated Units were converted into Common Units.

Note ~~12.~~10. Commitments and Contingencies

We may become involved in various legal proceedings in the ordinary course of business. These proceedings would be subject to the uncertainties inherent in any litigation, and we will regularly assess the need for accounting recognition or disclosure of these contingencies. We would expect to defend ourselves vigorously in all such matters. Based on currently available information, we believe it is unlikely that the outcome of known matters would have a material adverse impact on our combined financial condition, results of operations or cash flows.

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)~~(“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;


•	and Operating Outlook;


•	Results of Operations; and


•	Liquidity and Capital Resources.

MD&A is our analysis of the Partnership’s financial performance and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. It contains forward-looking statements including, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions identify forward-looking statements. We do not undertake to update, revise or correct any of the forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with our disclosures in Item 3 of this report under the heading: “Disclosure Regarding Forward-Looking Statements.”

EXECUTIVE OVERVIEW AND OPERATING OUTLOOK

The following discussion highlights the current operating environment, as well as significant operating and financial results for ~~third~~second quarter ~~2019.~~2020. This discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, which includes disclosures regarding our critical accounting policies as part of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The impacts on our business of both the significant decline in commodity prices and the COVID-19 pandemic are unprecedented. We will continue to focus on our customer base and maintaining safe and reliable operations. We are continuing to work with our customers to further align activity and volume expectations.

Chevron Merger On July 20, 2020, Noble, our sponsor and majority unitholder, entered into the Chevron Merger Agreement with Chevron Corporation pursuant to which, and subject to the conditions of the agreement, all outstanding shares of Noble will be acquired by Chevron in an all-stock transaction. The transaction was approved by the Boards of Directors of both Noble and Chevron and is anticipated to close in fourth quarter 2020. The transaction is subject to Noble stockholder approval, regulatory approvals, and other customary closing conditions.

Second Quarter 2020 Significant Results

The following discussion ~~highlights~~outlines significant ~~operating, financial and transactional~~ results for ~~third~~second quarter ~~2019.~~

~~Significant Operating Results Include:~~

~~average crude oil sales volumes of 10 MBbl/d, an increase of 32% as compared with third quarter 2018;~~

~~average crude oil gathering volumes of 230 MBbl/d, an increase of 31% as compared with third quarter 2018;~~

~~average natural gas gathering volumes of 618 BBtu/d, an increase of 91% as compared with third quarter 2018;~~

~~average produced water gathered volumes of 180 MBbl/d, an increase of 48% as compared with third quarter 2018; and~~

~~average fresh water delivered volumes of 135 MBbl/d, a decrease of 31% as compared with third quarter 2018.~~2020.

Significant Financial Results Include:


•	Net Income Attributable to Limited Partnersof $48.2 million, an increase of 52% as compared with second quarter 2019;

~~net income of $66.4 million, an increase of 36% as compared with third quarter 2018;~~

~~net~~Net cash provided by operating activities of ~~$93.4 million, an increase of 49% as compared with third quarter 2018;~~

~~declared a distribution of $0.6716 per unit, an increase of 20% above the third quarter 2018 distribution per unit;~~

~~Adjusted EBITDA (non-GAAP financial measure) of $94.0 million, an increase of 31% as compared with third quarter 2018; and~~

~~distributable cash flow (non-GAAP financial measure) of $50.3~~$101.1 million, an increase of 8% as compared with ~~third~~second quarter ~~2018.~~2019;

Adjusted EBITDA (non-GAAP financial measure) of $102.7 million, an increase of 27% as compared with second quarter 2019; and

Distributable cash flow (non-GAAP financial measure) of $79.7 million, an increase of 96% as compared with second quarter 2019.

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

COVID-19

Market ConditionsDuring second quarter 2020, continued containment measures and responsive actions to the COVID-19 pandemic continue to result in severe declines in general economic activity and energy demand. As a result, the global economy has experienced a slowing of economic growth, disruption of global manufacturing supply chains, stagnation of crude oil and natural gas consumption and interference with workforce continuity.

~~OPERATING OUTLOOK~~Current and Future Expected Impact to the Partnership The virus continues to impact the global demand for commodities, a trend we expect to continue into the third quarter, and beyond. Additionally, the risks associated with COVID-19 have impacted our workforce and the way we meet our business objectives. In response to this, we executed the following actions:

•

Remote workforce –Due to concerns over health and safety, the majority of our global workforce continues to work remotely until further notice. As of June 30, 2020, working remotely has not significantly impacted our ability to maintain operations, including use of financial reporting systems, nor has it significantly impacted our internal control environment. In addition, certain of our employees and contractors work in remote field locations. We have implemented various health and safety protocols including, among others, reduction of certain operational workloads to critical maintenance and personnel, mandating use of certain secure travel options, review of critical medical supplies and procedures and implementation of other safeguards to protect operational personnel. We have not incurred, and in the future do not expect to incur, significant expenses related to business continuity as employees work from home.

•

Mobilized a Crisis Management Team (“CMT”) –Our corporate CMT is responsible for ensuring the organization implements our corporate Employee Health and Wellness plan elements pertaining to pandemic response. This plan follows the Centers for Disease Control and Prevention (“CDC”), national, state and local guidance in preparing and responding to COVID-19. The CMT implemented communication protocols should an employee become sick, and we continue to follow CDC guidance, which is subject to change in the future. To date, we have not experienced significant business or operational interruption due to workforce health or safety concerns pertaining to COVID-19.

The rapid and unprecedented decreases in energy demand have continued to impact certain elements of our distribution channels. We are also continuing to experience impacts from downstream markets, as certain pipelines have limited ability to transport production as refineries reduce activity or are declaring force majeure. Additionally, inventory surpluses have, at times, overwhelmed U.S. storage capacity, leading to a further strain on the supply chain. Certain of our customers, including Noble, temporarily shut-in production in response to decreases in energy demand and low commodity prices.

~~2019~~Commodity Prices

Market ConditionsThe COVID-19 pandemic has continued to cause unprecedented and prolonged declines in the global demand for crude oil and natural gas. While relaxing certain containment measures in order to resume economic activity resulted in increased demand and commodity prices in late second quarter 2020, demand continues to be significantly lower than levels experienced prior to the COVID-19 pandemic. Even as commodity prices began to improve in June 2020, additional outbreaks and/or a return of containment measures or further restrictions could negatively impact commodity prices in the near future. The continuing uncertainty regarding the longevity and severity of the impacts of COVID-19 to the crude oil and natural gas industry, including the reduced demand for crude oil and natural gas commodities and its resulting impact on commodity prices, may continue until a vaccine or alternative treatment is made widely available across the globe.

Contemporaneously with the COVID-19 pandemic, the crude oil and natural gas industry continues to be impacted by excess supply in the global marketplace. The Organization of Petroleum Exporting Countries (“OPEC”) and certain non-OPEC producers agreed to production cuts beginning in May 2020 which extend through first quarter 2022. While these production cuts have proven unable to sufficiently offset the ongoing decreases in demand caused by COVID-19, production from these producers has fallen to its lowest levels in decades.

These factors have caused a number of producers, including our customers, to reduce capital spending levels and shut-in production at certain fields. While these shut-ins have decreased operating cash flows for producers, they have also served to lower inventory levels and thereby alleviate some of the crude oil storage constraints experienced in the beginning of second quarter 2020.

In addition to the U.S. crude oil market, the U.S. domestic natural gas market continues to be oversupplied and has contributed to depressed pricing. We expect that if development activity remains at lower levels in the U.S. leading to reduced crude oil and associated natural gas production, U.S. domestic natural gas prices will adjust as supply and demand levels equalize.

Current and Future Expected Impact to the PartnershipThe sustained decline in commodity prices adversely affected shale producers in the U.S., including our customers. In response, certain of our customers have reduced their capital investment programs and voluntarily shut-in production. The actions by our customers have resulted in decreased throughput volumes on our gathering systems as compared with first quarter 2020 and significant decreases in fresh water deliveries due to decreases in well completion activity.

The commodity price environment is expected to remain depressed based on sustained decreases in demand, over-supply and global economic instability caused by COVID-19, discussed further below. In addition, we expect downstream capacity and storage constraints to continue to have a negative impact on the ability to transport production. If constraints continue such that storage becomes unavailable to our customers or commodity prices remain depressed, they may be forced or elect to further shut-in production and delay or discontinue drilling plans, which would result in a further decline in demand for our services.

In this market environment, we are focused on prioritizing free cash flow and protecting our balance sheet. In response, we executed the following in second quarter 2020:


•	Reduced 2020 capital program –In May 2020, we reduced our organic capital program to a range of $60 to $80 million. In total, we have lowered capital expectations by more than 65% from our original February 2020 guidance. These reductions highlight our resiliency and ability to efficiently reallocate resources to align with customer activity.

•

Maintained our reduced quarterly distribution from first quarter 2020 –The Board of Directors of our General Partner approved a 73% reduction of the quarterly distribution to $0.1875 per unit for first quarter 2020. Our second quarter 2020 distribution will also be $0.1875 per unit. We intend to utilize funds from our distribution reduction and maintenance to reduce our debt levels. Our Board of Directors of our General Partner will continue reviewing the quarterly distribution in context of market conditions.

Global Economic Instability

Market Conditions COVID-19, coupled with the drop in commodity prices, have contributed to equity market volatility and what experts have now concluded amounted to a recession in first quarter 2020. Estimated ranges of the duration of these impacts to equity markets and the global economy vary widely, especially given the continued impacts of COVID-19 are unknown. In recent months, the U.S. government has passed a series of stimulus packages which, collectively, have provided the largest relief packages in U.S. history. These packages include various provisions intended to provide relief to individuals and businesses in the form of tax changes, loans and grants, among others. At this time, we do not believe these stimulus measures will have a material impact on the Partnership; however, we do believe they could aid the economy by providing relief to certain individuals and smaller businesses.

Current and Future Expected Impact to the Partnership The decline in our unit price and corresponding reduction in our market capitalization were sustained throughout second quarter 2020, a condition that is consistent across our sector. We do not have any debt covenants or other lending arrangements that depend upon our unit price. As of June 30, 2020, we are in compliance with the covenants contained in our revolving credit facility and term loans, which provide that our consolidated leverage ratio as of the end of each fiscal quarter may not exceed 5.00 to 1.0, and our consolidated interest coverage ratio as of the end of each fiscal quarter to be no less than 3.00 to 1.0. The consolidated leverage ratio and consolidated interest coverage ratio are defined in the respective agreements.

As cities, states and countries continue relaxing confinement restrictions, the risk for the resurgence and recurrence of COVID-19 remains. The reinstatement of containment measures could potentially lead to an extended period of reduced demand for crude oil and natural gas commodities, as well as assert further pressure on the global economy.

Potential Future Impacts

Impairment testing involves uncertainties related to key assumptions such as expectations of our customers’ development and

capital spending plans, among others, and a significant number of interdependent variables are derived from these key

assumptions. There is a high degree of complexity in their application in determining use and value in recovery tests and fair

value determinations.

We performed impairment assessments as of March 31, 2020 and fully impaired our goodwill during first quarter 2020. See Item 1. Financial Statements – Note 2. Basis of Presentation. We performed impairment assessments as of June 30, 2020, including assessments of property, plant and equipment, customer-related intangible assets, and equity method investments. We did not identify any impairment indicators based on these procedures. As mentioned above, we are in compliance with the covenants contained in our revolving credit facility and term loan credit facilities.

Given the inherent volatility of the current market conditions driven by the COVID-19 pandemic and the oil and gas supply dynamics, the potential for future conditions to deviate from our current assumptions exists. For instance, further erosion in consumer energy demand, lower crude oil and natural gas development and production, or lower commodity prices could trigger future impairments of our assets or non-compliance with the financial covenants in our revolving credit facility and term loans.

Workforce Adjustments

As previously disclosed, the officers of our General Partner manage our operations and activities. All of the employees required to conduct and support our operations are employed by Noble and are subject to the operational services and secondment agreement and omnibus agreement that we entered into with Noble.

During second quarter 2020, Noble engaged in corporate restructuring activities, resulting in reductions in its employee and contractor work forces. Additionally, certain Noble employees are still participating in the furlough and part-time work programs implemented by Noble in first quarter 2020. Certain employees that support our operations were impacted by these activities. These programs are expected to continue into third quarter 2020 for the majority of impacted employees.

Additionally, Noble lowered executive leadership salaries by 10% to 20%. Certain officers of our General Partner were impacted by the salary reductions. These reductions are expected to extend through the end of 2020. The aforementioned actions by Noble have not significantly impacted our ability to maintain operations, including use of financial reporting systems, nor have they significantly impacted our internal control environment.

Organic Capital Program

~~We have revised~~In May 2020, we reduced our ~~2019~~2020 organic capital program excluding investment capital, to accommodate a gross investment level of $265 to $275 million, with $141 to $151 million attributable to the Partnership. Our capital expenditures during the first nine months of 2019 have been below the expectations set forth in our initial capital program primarily due to a ~~consistent focus on cost saving initiatives and the timing~~range of ~~our customers’ activity.~~approximately $60 to $80 million. We will continue to evaluate the level of capital spending throughout the year based on the following factors, among others, and their effect on project financial returns:

pace of our customers’ ~~development;~~development based on current commodity prices;

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

impact of new laws and regulations on our business ~~practices;~~practices, including those related to COVID-19;

indebtedness levels; and

availability of financing or other sources of funding.

We plan to fund our capital program with cash on hand, ~~from~~ cash generated from operations, borrowings under our revolving credit facility and, if necessary, the issuance of additional equity or debt ~~offerings.~~securities.

~~Investment Capital Program~~

~~Delaware Crossing Joint Venture~~ The Delaware Crossing Joint Venture is constructing a 95-mile pipeline system that will originate in Pecos County, Texas, and have additional connections in Reeves County and Winkler County, Texas. The project footprint will be served by a combination of in-field crude oil gathering lines and a trunkline to a hub in Wink, Texas. The project is underpinned by approximately 210,000 dedicated gross acres and nearly 100 miles of pipeline in Pecos, Reeves, Ward and Winkler Counties, Texas. The pipeline is expected to be operational in the first quarter of 2020. During the first nine months of 2019, we made capital contributions of $51.5 million. Our total cash contributions are expected to be approximately $75 million to $85 million. We intend to fund our remaining cash contributions with our revolving credit facility. Construction on the project is anticipated to be complete in early 2020.

~~EPIC Y-Grade~~ EPIC Y-Grade is constructing an approximately 700-mile pipeline linking NGL reserves in the Permian Basin and Eagle Ford Shale to Gulf Coast refiners, petrochemical companies, and export markets. The pipeline will have a throughput capacity of approximately 440 MBbl/d with multiple origin points. During the first nine months of 2019, we made capital contributions of $166.1 million, which represents approximately 90% of our expected capital contributions. We intend to fund substantially all of the remaining cash contributions in fourth quarter 2019 and will utilize our revolving credit facility. Construction is nearing completion on the EPIC Y-Grade project. Interim crude services commenced during the third quarter of 2019.

~~EPIC Crude~~ EPIC Crude is constructing an approximately 700-mile pipeline with a capacity of 590 MBbl/d from the Delaware Basin to the Gulf Coast. EPIC Crude’s petition for declaratory order seeking approval of its rates and terms and conditions of its tariff was approved by the Federal Energy Regulatory Commission. During the first nine months of 2019, we made capital contributions of $268.7 million. Our total cash contributions are expected to be approximately $330 million to $350 million, with substantially all of the remaining cash contributions in fourth quarter 2019. We intend to fund our remaining cash contributions with our revolving credit facility. Construction on the project is anticipated to be complete in the first quarter of 2020.

~~Commercial Update~~

Black Diamond added a long-term oil gathering dedication from Verdad Resources LLC (Verdad Resources). The dedication from Verdad Resources increases Black Diamond dedicated acres by approximately 85,000 acres, or 54%.

~~Saddlehorn Transportation Commitment and Investment Option~~

Black Diamond entered into a strategic relationship with Saddlehorn Pipeline Company, LLC (Saddlehorn). Saddlehorn is jointly owned by affiliates of Magellan Midstream Partners, L.P. (Magellan), Plains All American Pipeline, L.P. (Plains) and Western Midstream Partners, LP (WES). The Saddlehorn pipeline is currently capable of transporting approximately 190 MBbl/d of crude oil and condensate from the DJ Basin and the Powder River Basin to storage facilities in Cushing, Oklahoma owned by Magellan and Plains. With the recent successful open season, the Saddlehorn pipeline will be expanded by 100 MBbl/d, to a new total capacity of 290 MBbl/d. The higher capacity is expected to be available in late 2020 following the addition of incremental pumping and storage capabilities.

As part of the strategic relationship, Black Diamond and Noble entered into long-term firm transportation commitments. Black Diamond received an option to acquire up to 20% ownership interest in Saddlehorn. Black Diamond’s investment option expires in April 2020.

~~Third Quarter 2019~~ Development Project Updates

~~Laramie River DevCo LP~~ DJ Basin

In the Greeley Crescent IDP area, ~~we commenced construction~~infrastructure build out was put on hold due to changes in third party development plans with minimal activity during the ~~trunk line extensions supporting future produced water gathering and fresh water delivery services. During the quarter, we~~quarter. We connected 1224 wells in the Greeley Crescent IDP ~~for two stream gathering services~~area and delivered fresh water to ~~12 wells.~~13 wells during the quarter.

In the Black Diamond dedication area, wethe joint venture progressed with installing new crude oil gathering infrastructure for upcoming well connections from third-party ~~producers.~~producers, as well as facility expansion and upgrade projects. During the quarter, we connected 8960 third-party wells to the Black Diamond gathering system.

~~Green River DevCo LP~~ ~~We extended~~In the Mustang IDP area, we continued to extend infrastructure for crude oil, natural gas, and produced water gathering systems to facilitate further development, at a reduced pace due to a slowdown in ~~the Mustang IDP area and support future well connections.~~customer activity levels. During the quarter, we connected 1516 affiliate wells to the Mustang gathering ~~system.~~system; however, no fresh water was delivered.

~~Colorado River DevCo LP~~ ~~During~~In the ~~quarter,~~Wells Ranch IDP area, we ~~commenced~~continued construction on extensions of gathering infrastructure to support future well ~~connections in~~connections. We did not deliver fresh water to any wells during the ~~Wells Ranch IDP. We~~quarter.

Delaware Basin

In the Permian, we connected 23six affiliate wells inand one third-party well to our gathering systems during the ~~Wells Ranch IDP and no wells were connected in the East Pony IDP. Fresh water was also delivered to 10 wells in the Wells Ranch IDP.~~

~~San Juan River DevCo LP~~quarter. During the quarter, ~~fresh water was delivered~~both affiliate and third-party activity levels slowed with the decline in commodity prices.

Investment Capital Program

Our 2020 investment capital program will accommodate a net investment level of $240 to ~~15 wells~~$260 million. During the first six months of 2020, capital contributions to investments totaled approximately $224 million, or $151 million net to the Partnership. A substantial portion of the remaining spend will be for EPIC Y-Grade and EPIC Crude to support completion of the crude storage and marine terminal equipment as well as NGL fractionator commissioning.

Investment Project Updates

Delaware Crossing Delaware Crossing began delivering crude oil into all connection points in April 2020. Operational capacity is 135 MBbl/d with capability to expand to 200 MBbl/d. The Liberty Terminal in Reeves County Texas and the Wink Terminal in Winkler County Texas, which deliver into the EPIC Crude pipeline, were completed and placed in service during the second quarter of 2020. The pipeline gathers volumes from producers across approximately 200,000 acres in the ~~East Pony IDP area.~~southern Delaware Basin.

~~Blanco River DevCo LP~~EPIC Y-Grade ~~During~~The pipeline was commissioned in February 2020. The clean out process and transition of the ~~quarter, we connected 17 sponsored wells and 5 third-party wells~~EPIC Y-Grade mainline from crude interim service to ~~our gathering systems. We are now connected~~NGL service began during May 2020. In June 2020, the project completed construction of its first new build fractionator increasing capacity to ~~138 sponsor and 9 third-party wells, and we are actively preparing for additional well connections during the fourth quarter~~180 MBbl/d of ~~2019.~~

~~Colorado Senate Bill 19-181~~

~~For some time, initiatives have been underway~~NGLs from 70 MBbl/d in the ~~State~~first quarter 2020.

EPIC Crude Construction of ~~Colorado~~the mainline and west dock of the marine terminal was completed in December 2019. The project entered full service on April 1, 2020.

EPIC Propane The EPIC Propane pipeline is currently under construction with anticipated completion in late 2020. In June 2020, the project completed construction of its first new build fractionator.

Saddlehorn The pipeline is currently undergoing expansion to ~~limit or ban~~increase crude oil ~~and natural gas exploration, development or operations. During first quarter 2019, Senate Bill 19-181 (SB 181) was passed~~capacity by ~~the State Legislature. On April 16, 2019, the Governor signed the bill into law.~~100 MBbl/d to a new total capacity of approximately 290 MBbl/d. The ~~legislation makes sweeping changes~~incremental capacity is expected to be available in Colorado oil and gas law, including, among other matters, requiring the Colorado Oil and Gas Conservation Commission (Colorado Commission) to prioritize public health and environmental concerns in its decisions, instructing the Colorado Commission to adopt rules to minimize emissions of methane and other air contaminants, and delegating considerable new authority to local governments to regulate surface impacts. Some local communities have adopted additional restrictions for oil and gas activities, such as requiring greater setbacks, and other groups have sought a cessation of permit issuances entirely until the Colorado Commission publishes new rules in keeping with SB 181.late 2020.

Nevertheless, at this time, we are not aware of any significant changes to Noble’s or other third party customers’ development plans. For example, Noble has all necessary state approvals for more than 550 permits to drill wells over the next several years. The approved permits are for wells in multiple IDP areas, many of which are in the Mustang IDP area. However, if additional regulatory measures are adopted, Noble and other third party customers in Colorado could experience delays and/or curtailment in the permitting or pursuit of their exploration, development, or production activities. Such compliance costs and delays, curtailments, limitations, or prohibitions in their development plans could result in decreased demand for our services, which could have a material adverse effect on our cash flows, results of operations, financial condition, and liquidity.

RESULTS OF OPERATIONS

Results of operations were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
(thousands)	2019			2018			2019			2018			2020			2019		2020			2019
Revenues
Midstream Services — Affiliate	$	100,846		$	73,136		$	278,724		$	204,323		$	93,739		$	97,269	$	207,523		$	201,072
Midstream Services — Third Party	19,607			19,934			63,298			44,763			22,997			21,609		50,895			45,638
Crude Oil Sales — Third Party	48,870			46,093			133,522			109,781			29,214			51,782		111,577			84,652
Total Revenues	169,323			139,163			475,544			358,867			145,950			170,660		369,995			331,362
Costs and Expenses
Cost of Crude Oil Sales	46,240			44,379			125,217			105,830			29,104			48,079		108,963			78,977
Direct Operating	22,524			23,955			77,677			59,496			20,039			32,866		46,889			63,289
Depreciation and Amortization	20,851			18,376			60,487			46,076			26,354			23,980		52,285			47,013
General and Administrative	4,129			4,204			12,990			19,626			6,446			5,171		11,932			9,532
Other Operating (Income) Expense	(469		)	—			(488		)	—
Goodwill Impairment													—			—		109,734			—
Other Operating Expense													2,576			—		3,862			—
Total Operating Expenses	93,275			90,914			275,883			231,028			84,519			110,096		333,665			198,811
Operating Income	76,048			48,249			199,661			127,839			61,431			60,564		36,330			132,551
Other Expense (Income)
Interest Expense, Net of Amount Capitalized	3,952			3,506			11,507			6,220			6,633			2,322		13,490			7,550
Investment Loss (Income)	5,621			(3,866		)	5,028			(10,825		)	2,730			1,748		8,139			(593		)
Other Non-Operating Expense													1,336			—		1,336			—
Total Other Expense (Income)	9,573			(360		)	16,535			(4,605		)	10,699			4,070		22,965			6,957
Income Before Income Taxes	66,475			48,609			183,126			132,444			50,732			56,494		13,365			125,594
State Income Tax Provision	92			(94		)	290			163
Income Tax (Benefit) Expense													(128		)	731		21			2,040
Net Income	66,383			48,703			182,836			132,281			50,860			55,763		13,344			123,554
Less: Net Income Attributable to Noncontrolling Interests	25,751			4,086			62,236			11,719
Less: Net Income Prior to the Drop-Down and Simplification Transaction													—			2,565		—			7,101
Net Income Subsequent to the Drop-Down and Simplification Transaction													50,860			53,198		13,344			116,453
Less: Net Income (Loss) Attributable to Noncontrolling Interests													2,624			16,789		(44,995		)	36,485
Net Income Attributable to Noble Midstream Partners LP	$	40,632		$	44,617		$	120,600		$	120,562		$	48,236		$	36,409	$	58,339		$	79,968

Adjusted EBITDA⁽¹⁾ Attributable to Noble Midstream Partners LP	$	59,504		$	59,930		$	177,976		$	164,208		$	94,752		$	55,621	$	201,963		$	118,471

Distributable Cash Flow⁽¹⁾ of Noble Midstream Partners LP	$	50,282		$	46,446		$	144,889		$	132,355		$	79,681		$	40,641	$	173,401		$	94,606

⁽¹⁾

Adjusted EBITDA and Distributable Cash Flow are not measures as determined by 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 — Adjusted EBITDA (Non-GAAP Financial Measure), Distributable Cash Flow (Non-GAAP Financial Measure) and Reconciliation of Non-GAAP Financial Measures, below.

Throughput and Crude Oil Sales 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 as well as the crude oil volumes we sell to customers. Throughput and crude oil sales volumes related to our Gathering Systems and Fresh Water Delivery reportable segments were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018	2020	2019	2020	2019
Colorado River DevCo LP (Wells Ranch IDP and East Pony IDP) ⁽¹⁾
DJ Basin
Crude Oil Sales Volumes (Bbl/d)					13,025	9,750	16,346	8,401
Crude Oil Gathering Volumes (Bbl/d)					176,184	174,485	179,645	178,328
Natural Gas Gathering Volumes (MMBtu/d)					468,971	458,961	484,088	438,695
Natural Gas Processing Volumes (MMBtu/d)					42,566	51,167	42,617	51,755
Produced Water Gathering Volumes (Bbl/d)					40,819	41,830	41,457	39,948
Fresh Water Delivery Volumes (Bbl/d)					30,335	179,289	128,636	199,390

Delaware Basin
Crude Oil Gathering Volumes (Bbl/d)	48,089	59,145	48,918	63,630	60,980	45,501	59,768	43,840
Natural Gas Gathering Volumes (MMBtu/d)	244,069	223,354	248,862	216,191	174,845	137,498	178,564	119,124
Produced Water Gathering Volumes (Bbl/d)	15,444	15,007	13,466	17,348	147,994	137,584	155,086	130,818
Fresh Water Delivery Volumes (Bbl/d)	38,880	72,216	44,075	58,295

San Juan River DevCo LP (East Pony IDP)⁽¹⁾
Fresh Water Delivery Volumes (Bbl/d)	68,819	—	36,456	—

Green River DevCo LP (Mustang IDP)⁽¹⁾
Crude Oil Gathering Volumes (Bbl/d)	35,808	5,657	29,333	1,942
Natural Gas Gathering Volumes (MMBtu/d)	195,544	9,062	148,160	3,111
Produced Water Gathering Volumes (Bbl/d)	14,936	8,123	14,157	2,816
Fresh Water Delivery Volumes (Bbl/d)	—	49,672	63,223	61,450

Blanco River DevCo LP (Delaware Basin)⁽¹⁾
Crude Oil Gathering Volumes (Bbl/d)	48,722	33,689	43,147	23,272
Natural Gas Gathering Volumes (MMBtu/d)	173,405	89,439	135,142	59,477
Produced Water Gathering Volumes (Bbl/d)	138,765	90,162	121,995	58,845

Laramie River DevCo LP (Greeley Crescent IDP and Black Diamond Dedication Area)⁽¹⁾
Crude Oil Sales Volumes (Bbl/d)	9,625	7,266	8,813	6,164
Crude Oil Gathering Volumes (Bbl/d)	97,589	77,736	101,141	73,766
Natural Gas Gathering Volumes (MMBtu/d)	4,935	1,227	6,266	1,319
Produced Water Gathering Volumes (Bbl/d)	11,127	8,919	12,851	6,468
Fresh Water Delivery Volumes (Bbl/d)	26,930	73,507	33,811	54,694

Total Gathering Systems
Crude Oil Sales Volumes (Bbl/d)	9,625	7,266	8,813	6,164	13,025	9,750	16,346	8,401
Crude Oil Gathering Volumes (Bbl/d)	230,208	176,227	222,539	162,610	237,164	219,986	239,413	222,168
Natural Gas Gathering Volumes (MMBtu/d)	617,953	323,082	538,430	280,098	643,816	596,459	662,652	557,819
Barrels of Oil Equivalent (Boe/d)	319,058	224,914	300,381	204,684
Barrels of Oil Equivalent (Boe/d) ⁽¹⁾					323,816	300,594	329,654	298,190
Natural Gas Processing Volumes (MMBtu/d)					42,566	51,167	42,617	51,755
Produced Water Gathering Volumes (Bbl/d)	180,272	122,211	162,469	85,477	188,813	179,414	196,543	170,766

Total Fresh Water Delivery
Fresh Water Delivery Volumes (Bbl/d)	134,629	195,395	177,565	174,439	30,335	179,289	128,636	199,390


⁽¹⁾	~~See Item 1. Financial Statements – Note~~ ~~1. Organization~~Includes crude oil sales volumes that are transported on our gathering systems and ~~Nature of Operations~~ ~~for our DevCo ownership interests.~~ sold to third-party customers.

Revenues

Revenues from our Gathering System and Fresh Water Delivery reportable segments were as follows:


(in thousands)	2019		2018		Increase (Decrease) From Prior Year		2020		2019		Increase (Decrease) From Prior Year
Three Months Ended September 30,
Crude Oil, Natural Gas and Produced Water Gathering — Affiliate	$	79,208	$	54,674	45	%
Crude Oil, Natural Gas and Produced Water Gathering — Third Party	16,196		12,459		30	%
Three Months Ended June 30,
Gathering and Processing — Affiliate							$	82,671	$	78,136	6	%
Gathering and Processing — Third Party							20,002		17,863		12	%
Fresh Water Delivery — Affiliate	20,847		17,416		20	%	10,300		18,367		(44	)%
Fresh Water Delivery — Third Party	2,132		5,929		(64	)%	1,811		2,454		(26	)%
Crude Oil Sales — Third Party	48,870		46,093		6	%	29,214		51,782		(44	)%
Other — Affiliate	791		1,046		(24	)%	768		766		—	%
Other — Third Party	1,279		1,546		(17	)%	1,184		1,292		(8	)%
Total Revenues	$	169,323	$	139,163	22	%	$	145,950	$	170,660	(14	)%

Nine Months Ended September 30,
Crude Oil, Natural Gas and Produced Water Gathering — Affiliate	$	209,530	$	144,569	45	%
Crude Oil, Natural Gas and Produced Water Gathering — Third Party	51,344		28,796		78	%
Six Months Ended June 30,
Gathering and Processing — Affiliate							$	171,969	$	153,516	12	%
Gathering and Processing — Third Party							41,970		37,095		13	%
Fresh Water Delivery — Affiliate	66,801		56,774		18	%	33,899		45,954		(26	)%
Fresh Water Delivery — Third Party	8,395		12,932		(35	)%	5,985		6,263		(4	)%
Crude Oil Sales — Third Party	133,522		109,781		22	%	111,577		84,652		32	%
Other — Affiliate	2,393		2,980		(20	)%	1,655		1,602		3	%
Other — Third Party	3,559		3,035		17	%	2,940		2,280		29	%
Total Revenues	$	475,544	$	358,867	33	%	$	369,995	$	331,362	12	%

Revenues Trend Analysis

Revenues ~~increased~~decreased during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018.~~2019. The ~~increases~~decreases in revenues by reportable segment were as follows:

Gathering Systems Gathering Systems revenues ~~increased~~decreased by ~~$30.5~~$16.0 million during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018~~2019 due to the following:

~~an increase~~a decrease of ~~$15.0~~$22.6 million in crude oil sales due to decreased commodity prices, which was partially offset by increased activity associated with the fulfillment of our transportation commitments;

a decrease of $3.3 million in crude oil, natural gas and produced water gathering services revenues ~~due to an increase~~driven by shut-ins in the ~~number of wells connected to our gathering system in the Mustang IDP;~~Wells Ranch IDP area;

partially offset by;

an increase of ~~$8.0~~$6.4 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes in the Delaware Basin resulting from an increase in the number of wells connected to our gathering ~~systems;~~

~~an increase of $3.3 million in gathering services revenues due to an increase in the number of wells connected to the Black Diamond system;~~systems after second quarter 2019; and

an increase of ~~$2.8 million in crude oil sales due to an increase in crude oil sales volumes;~~

~~Fresh Water Delivery~~ ~~Fresh Water Delivery revenues decreased by $0.4 million during third quarter 2019 as compared with third quarter 2018 due to the following:~~

a decrease of $11.7 million in fresh water delivery revenues due to a decrease in fresh water deliveries in the Wells Ranch, Greeley Crescent and Mustang IDP areas resulting from reduced well completion activity by Noble and third party customers;

~~substantially offset by;~~

~~an increase of $11.3 million in fresh water delivery revenues due to an increase in fresh water deliveries in the East Pony IDP area resulting from increased well completion activity by Noble.~~

~~Gathering Systems~~ ~~Gathering Systems revenues increased by $111.2 million during the first nine months of 2019 as compared with the first nine months of 2018 due to the following:~~

~~an increase of $39.3~~$4.4 million in crude oil, natural gas and produced water gathering services revenues ~~due to a full nine months of services provided during 2019 as well as~~driven by an increase in throughput volumes in the Mustang IDP area resulting from an increase in the number of wells connected to our gathering ~~system~~systems after second quarter 2019.

Fresh Water Delivery Fresh Water Delivery revenues decreased by $8.7 million during second quarter 2020 as compared with second quarter 2019 due to due to minimal fresh water deliveries in the ~~Mustang IDP;~~DJ Basin resulting from reduced well completion activity by Noble.

Revenues increased during the first six months of 2020 as compared with the first six months of 2019. The changes in revenues by reportable segment were as follows:

Gathering Systems Gathering Systems revenues increased by $51.0 million during the first six months of 2020 as compared with the first six months of 2019 due to the following:

an increase of ~~$29.3~~$26.9 million in crude oil sales due to increased activity associated with the fulfillment of our transportation commitments, which was partially offset by decreased commodity prices during 2020;

an increase of $14.8 million in crude oil, natural gas and produced water gathering services revenues driven by an increase in throughput volumes in the Delaware Basin resulting from an increase in the number of wells connected to our gathering systems;

an increase of $23.8 million in crude oil sales due to a full period of crude oil sales during 2019 due to the commencement of crude oil sales upon closing of the Black Diamond Acquisition as well as an increase in crude oil sales volumes during 2019; and

an increase of $16.5 million in gathering services revenues due to increased sales volumes and a full nine months of activity, as sales activity commenced upon closing of the Black Diamond Acquisition during first quarter 2018.

~~partially offset by:~~

~~a decrease of $6.2~~$8.9 million in crude oil, natural gas and produced water gathering services revenues ~~due to the decreased activity~~driven by an increase in throughput volumes resulting from an increase in the ~~Wells Ranch and East Pony IDPs.~~number of wells connected to our gathering systems in the Mustang IDP area.

Fresh Water Delivery Fresh Water Delivery revenues ~~increased~~decreased by ~~$5.5~~$12.3 million during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018~~2019 due to ~~the following:~~

~~an increase of $19.7 million in fresh water delivery revenues due to an increase in~~minimal fresh water deliveries during second quarter 2020 in the ~~East Pony IDP;~~DJ Basin resulting from reduced well completion activity by Noble.

~~partially offset by;~~

~~a decrease of $14.2 million in fresh water delivery revenues due to a decrease in fresh water deliveries to our customers in the Wells Ranch and Greeley Crescent IDP areas.~~

Costs and Expenses

Costs and expenses were as follows:

(in thousands) 2019 2018 Increase (Decrease) from Prior Year
Three Months Ended September 30,
Cost of Crude Oil Sales $ 46,240
$ 44,379
4 %
Direct Operating 22,524
23,955
(6 )%
Depreciation and Amortization 20,851
18,376
13 %
General and Administrative 4,129
4,204
(2 )%
Other Operating (Income) Expense (469 ) —
N/M
Total Operating Expenses $ 93,275
$ 90,914
3 %

Nine Months Ended September 30,
Cost of Crude Oil Sales $ 125,217
$ 105,830
18 %
Direct Operating 77,677
59,496
31 %
Depreciation and Amortization 60,487
46,076
31 %
General and Administrative 12,990
19,626
(34 )%
Other Operating (Income) Expense (488 ) —
N/M
Total Operating Expenses $ 275,883
$ 231,028
19 %



(in thousands)	2020		2019		Increase (Decrease) from Prior Year
Three Months Ended June 30,
Cost of Crude Oil Sales	$	29,104	$	48,079	(39	)%
Direct Operating	20,039		32,866		(39	)%
Depreciation and Amortization	26,354		23,980		10	%
General and Administrative	6,446		5,171		25	%
Other Operating Expense	2,576		—		N/M
Total Operating Expenses	$	84,519	$	110,096	(23	)%

Six Months Ended June 30,
Cost of Crude Oil Sales	$	108,963	$	78,977	38	%
Direct Operating	46,889		63,289		(26	)%
Depreciation and Amortization	52,285		47,013		11	%
General and Administrative	11,932		9,532		25	%
Goodwill Impairment	109,734		—		N/M
Other Operating Expense	3,862		—		N/M
Total Operating Expenses	$	333,665	$	198,811	68	%

N/M Amount is not meaningful

Costs and Expenses Trend Analysis

Cost of Crude Oil Sales Cost of crude oil sales is recorded within our Gathering Systems reportable segment. Cost of crude oil sales ~~increased~~decreased during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018 and~~2019. The decrease was primarily attributable to the significant decline in commodity prices. Cost of crude oil sales increased during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine months of 2018. The increase during third quarter 2019 as compared to third quarter 2018 is primarily attributable to increased sales volumes. The increase during the first nine~~six months of 2019 ~~as compared to the first nine months of 2018 is primarily attributable~~due to increased ~~sales volumes and a full nine months~~purchases of ~~activity, as sales activity commenced upon closing of the Black Diamond Acquisition during first quarter 2018.~~crude oil to meet our crude oil transportation commitments.

Direct Operating Direct operating expense decreased during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018~~2019 and ~~increased~~ during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The changes in direct operating expense by reportable segment were as follows:

Gathering Systems Gathering Systems direct operating expense decreased $7.6 million during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018. Gathering Systems direct operating expense increased~~2019 and $8.5 million during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The ~~decrease during third quarter 2019 was primarily~~decreases in direct operating expense are attributable to ~~lower~~our ability to capture cost efficiencies as well as defer non-essential maintenance ~~costs, contract services~~ and ~~rental expenses in the Delaware Basin.~~

~~The increase during the first nine months of 2019 was primarily attributable~~repair work due to operating expenses associated with the central gathering facilities (CGFs) in the Delaware Basin that were completed during 2018, operating expenses associated with increased volumes in the Permian Basin, Mustang IDP, and East Pony IDP areas and a full nine months of gathering services provided by the Black Diamond system.COVID-19.

Fresh Water Delivery Fresh Water Delivery direct operating expense ~~remained consistent~~decreased $5.5 million during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018 due to consistent well completion activity across quarters. Fresh Water Delivery direct operating expense increased~~2019 and $8.5 million during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The ~~increase was~~decrease is primarily ~~attributable~~due to ~~operating expenses associated with increased volumes~~the decreased use of third-party providers for water logistics services in the East Pony IDP area resulting from ~~increased~~reduced well completion activity by Noble.

Depreciation and Amortization Depreciation and amortization expense increased during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018~~2019 and during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The increases in depreciation and amortization expenses by reportable segment were as follows:

Gathering Systems Gathering Systems depreciation and amortization expense increased $2.3 million during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018~~2019 and $5.0 million during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The ~~increases were~~increase was due ~~in part,~~ to assets placed in service after ~~September~~June 30, ~~2018. Assets placed in service after September 30, 2018~~2019 and were primarily associated with the Mustang gathering system, expansion of the Delaware Basin ~~CGFs,~~infrastructure, and the continued development of the

Black Diamond assets. Additionally, depreciation and amortization expense includes a full nine months of intangible asset amortization during the first nine months of 2019 associated with customer contracts and relationships acquired in the Black Diamond Acquisition.

Fresh Water Delivery Fresh Water Delivery depreciation and amortization expense remained consistent during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018~~2019 and during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. Fresh Water Delivery depreciation and amortization expense has remained consistent, as our fresh water delivery infrastructure was substantially complete prior to ~~2018.~~2019.

General and Administrative Expense General and administrative expense is recorded within our Corporate reportable segment. General and administrative expense ~~remained consistent~~increased during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018. General~~2019 and ~~administrative expense decreased~~ during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The ~~decrease~~increase was primarily attributable to ~~legal~~the increase in the fixed annual fee payable under our omnibus agreement with Noble which became effective March 1, 2020. See Item 1. Financial Statements – Note 3. Transactions with Affiliates.

Goodwill Impairment During first quarter 2020, we fully impaired our goodwill. See Item 1. Financial Statements – Note 2. Basis of Presentation and ~~financial advisory transaction expenses associated with~~Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview and Operating Outlook.

Other Operating Expense Other expense during second quarter 2020 is primarily related to the ~~Black Diamond Acquisition. Transaction expenses associated with the Black Diamond Acquisition during the first nine months~~net loss of ~~2018 were~~ approximately ~~$7.5 million.~~$2.6 million on sale of assets.

Other (Income) Expense Trend Analysis


(in thousands)	2019			2018			Increase (Decrease) From Prior Year		2020			2019			Increase (Decrease) From Prior Year
Three Months Ended September 30,
Three Months Ended June 30,
Other (Income) Expense
Interest Expense	$	8,807		$	4,860		81	%	$	6,808		$	8,165		(17	)%
Capitalized Interest	(4,855		)	(1,354		)	259	%	(175		)	(5,843		)	(97	)%
Interest Expense, Net	3,952			3,506			13	%	6,633			2,322			186	%
Investment Loss (Income)	5,621			(3,866		)	N/M		2,730			1,748			56	%
Other Non-Operating Expense									1,336			—			N/M
Total Other Expense (Income)	$	9,573		$	(360	)	N/M		$	10,699		$	4,070		163	%

Nine Months Ended September 30,
Six Months Ended June 30,
Other (Income) Expense
Interest Expense	$	23,682		$	11,524		106	%	$	18,668		$	14,890		25	%
Capitalized Interest	(12,175		)	(5,304		)	130	%	(5,178		)	(7,340		)	(29	)%
Interest Expense, Net	11,507			6,220			85	%	13,490			7,550			79	%
Investment Loss (Income)	5,028			(10,825		)	N/M		8,139			(593		)	N/M
Other Non-Operating Expense									1,336			—			N/M
Total Other Expense (Income)	$	16,535		$	(4,605	)	N/M		$	22,965		$	6,957		230	%

N/M Amount is not meaningful

Interest Expense, Net Interest expense is recorded within our Corporate reportable segment. Interest expense represents interest incurred in connection with our revolving credit facility and term loan credit facilities. Our interest expense includes interest on outstanding balances on the facilities 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 our construction-in-progress activity as well as our investments in equity method investees engaged in construction activities during the year. ~~See~~ See Item 1. Financial Statements – Note 5.4. Property, Plant and Equipment for our Construction-in-Progress balances as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and See Item 1. Financial Statements – Note 7.6. Investments.

Interest expense decreased $1.4 million during second quarter 2020 as compared with second quarter 2019. The decrease in interest expense is attributable to higher interest rates during second quarter 2019 and interest income associated with our loan to EPIC Y-Grade and was partially offset by higher outstanding long-term debt balances during the second quarter 2020.

Interest expense increased ~~during third quarter 2019 as compared with third quarter 2018 and~~$3.8 million during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The increase ~~was~~is primarily attributable to the increased outstanding long-term debt balance in 2020 as compared to the first six months of 2019 and was partially offset by higher interest rates during ~~third~~the first six months of 2019 as well as interest income associated with our loan to EPIC Y-Grade.

Capitalized interest decreased $5.7 million during second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018~~2019 and $2.2 million during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~

~~Capitalized interest increased during third quarter 2019 as compared with third quarter 2018 and during the first nine months of 2019 as compared with the first nine months of 2018.~~2019. The ~~increase is~~decreases are primarily attributable to capitalized interest associated with our capital contributions to ~~the~~ Delaware Crossing, ~~Joint Venture,~~ EPIC Y-Grade and EPIC Crude. ~~The increase was partially offset by decreased construction-in-progress activity during third quarter 2019 and~~As the ~~first nine months of 2019 as compared~~aforementioned investments have commenced planned, principal operations, we no longer capitalize interest associated with ~~third quarter 2018 and the first nine months of 2018.~~our capital contributions.

Investment Income Investment income is recorded within our Investments in Midstream Entities reportable segment. Investment income decreased $1.0 million during ~~third~~second quarter ~~2019~~2020 as compared with ~~third~~second quarter ~~2018~~2019. Our investment loss is driven by increased losses from the Delaware Crossing, EPIC Y-Grade and EPIC Crude investments. The losses are primarily attributable to expenses incurred prior to service commencement and the gradual ramp of throughput volumes. The losses were partially offset by earnings from our investment in Saddlehorn.

Investment income decreased $8.7 million during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of 2018. Earnings from the Advantage Joint Venture decreased during third quarter 2019 and during the first nine months of 2019 as compared with third quarter 2018 and during the first nine months of 2018

~~primarily due to a~~2019. The decrease ~~in crude oil throughput volumes. Additionally, we had~~is driven by increased losses from the ~~Delaware Crossing Joint Venture,~~ EPIC Y-Grade and EPIC Crude investments and is primarily attributable to ~~expenses incurred in connection with the formation of the entities as well as general and administrative~~ expenses incurred prior to service commencement. The losses were partially offset by earnings from our investment in Saddlehorn.

Other Non-Operating Expense Other non-operating expense is recorded within our Corporate reportable segment. Other non-operating expense during second quarter 2020 is related to the $1.3 million allowance recorded for expected credit losses related to the loan to EPIC Y-Grade. See Item 1. Financial Statements – Note 2. Basis of Presentation.

Adjusted EBITDA (Non-GAAP Financial Measure)

Adjusted EBITDA 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. Adjusted 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 Adjusted EBITDA may not be comparable to similar measures of other companies in our industry. For a reconciliation of Adjusted EBITDA to its most comparable measures calculated and presented in accordance with GAAP, see — Reconciliation of Non-GAAP Financial Measures, below.

~~As a result of our increased investment in midstream entities, we have refined our presentation of Adjusted EBITDA to adjust for certain items with respect to our equity method investments.~~ We ~~now~~ define Adjusted EBITDA as net income before income taxes, net interest expense, depreciation and amortization ~~transaction expenses, unit-based compensation~~ and certain other items that we do not view as indicative of our ongoing performance. Additionally, Adjusted EBITDA reflects the adjusted earnings impact of our equity method investments by adjusting our equity earnings or losses from our equity method investments to reflect our proportionate share of the EBITDA of such equity method investments. ~~Prior period Adjusted EBITDA has been reclassified to conform to the current period presentation.~~

Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

our operating performance as compared 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 Adjusted EBITDA provides information useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA are net income and net cash provided by operating activities. Adjusted 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 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.

~~As a result of our increased investment in midstream entities, we have refined our presentation of distributable cash flow to adjust for certain items with respect to our equity method investments.~~ We ~~now~~ define distributable cash flow as Adjusted EBITDA plus distributions received from our equity method investments less our proportionate share of Adjusted EBITDA from such equity method investments, estimated maintenance capital expenditures and cash interest paid. ~~Prior period distributable cash flow has been reclassified to conform to the current period presentation.~~

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~~Board of ~~directors~~Directors of our ~~general partner~~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.

Reconciliation of Non-GAAP Financial Measures

The following tables present reconciliations of Adjusted 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 Adjusted EBITDA and Distributable Cash Flow


	Three Months Ended September 30,						Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019			2018			2019		2018		2020		2019		2020		2019
Reconciliation from Net Income
Net Income	$	66,383		$	48,703		$	182,836	$	132,281	$	50,860	$	55,763	$	13,344	$	123,554
Add:
Depreciation and Amortization	20,851			18,376			60,487		46,076		26,354		23,980		52,285		47,013
Interest Expense, Net of Amount Capitalized	3,952			3,506			11,507		6,220		6,633		2,322		13,490		7,550
State Income Tax Provision	92			(94		)	290		163
Transaction and Integration Expenses	106			301			175		7,550
Proportionate Share of Equity Method Investment EBITDA Adjustments	3,257			579			9,830		1,921		14,537		4,570		23,449		6,573
Unit-Based Compensation and Other	(630		)	343			382		1,057
Goodwill Impairment											—		—		109,734		—
Other											4,333		1,209		5,179		3,120
Adjusted EBITDA	94,011			71,714			265,507		195,268		102,717		87,844		217,481		187,810
Less:
Adjusted EBITDA Prior to Drop-Down and Simplification Transaction											—		6,897		—		16,315
Adjusted EBITDA Subsequent to Drop-Down and Simplification Transaction											102,717		80,947		217,481		171,495
Less:
Adjusted EBITDA Attributable to Noncontrolling Interests	34,507			11,784			87,531		31,060		7,965		25,326		15,518		53,024
Adjusted EBITDA Attributable to Noble Midstream Partners LP	59,504			59,930			177,976		164,208		94,752		55,621		201,963		118,471
Add:
Distributions from Equity Method Investments	1,711			—			8,655		3,520
Distributions from Equity Method Investments Attributable to Noble Midstream Partners LP											7,276		285		13,690		6,944
Less:
Proportionate Share of Equity Method Investment EBITDA	(3,518		)	3,350			972		9,490
Proportionate Share of Equity Method Investment EBITDA Attributable to Noble Midstream Partners LP											7,867		1,459		7,877		4,490
Cash Interest Paid	8,662			4,728			23,211		11,165		7,092		7,991		18,641		14,549
Maintenance Capital Expenditures	5,789			5,406			17,559		14,718		7,388		5,815		15,734		11,770
Distributable Cash Flowof Noble Midstream Partners LP	$	50,282		$	46,446		$	144,889	$	132,355	$	79,681	$	40,641	$	173,401	$	94,606

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018			2020			2019			2020			2019
Reconciliation from Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities	$	93,372		$	62,864		$	266,121		$	167,936		$	101,068		$	93,624		$	219,451		$	188,945
Add:
Interest Expense, Net of Amount Capitalized	3,952			3,506			11,507			6,220			6,633			2,322			13,490			7,550
Changes in Operating Assets and Liabilities	1,957			1,981			(4,029		)	7,952			(5,742		)	(8,960		)	(8,638		)	(5,862		)
Transaction and Integration Expenses	106			301			175			7,550
Equity Method Investment EBITDA Adjustments	(5,229		)	3,350			(7,683		)	5,970			635			1,174			(5,646		)	(2,454		)
Other Adjustments	(147		)	(288		)	(584		)	(360		)
Other													123			(316		)	(1,176		)	(369		)
Adjusted EBITDA	94,011			71,714			265,507			195,268			102,717			87,844			217,481			187,810
Less:
Adjusted EBITDA Prior to Drop-Down and Simplification Transaction													—			6,897			—			16,315
Adjusted EBITDA Subsequent to Drop-Down and Simplification Transaction													102,717			80,947			217,481			171,495
Less:
Adjusted EBITDA Attributable to Noncontrolling Interests	34,507			11,784			87,531			31,060			7,965			25,326			15,518			53,024
Adjusted EBITDA Attributable to Noble Midstream Partners LP	59,504			59,930			177,976			164,208			94,752			55,621			201,963			118,471
Add:
Distributions from Equity Method Investments	1,711			—			8,655			3,520
Distributions from Equity Method Investments Attributable to Noble Midstream Partners LP													7,276			285			13,690			6,944
Less:
Proportionate Share of Equity Method Investment EBITDA	(3,518		)	3,350			972			9,490
Proportionate Share of Equity Method Investment EBITDA Attributable to Noble Midstream Partners LP													7,867			1,459			7,877			4,490
Cash Interest Paid	8,662			4,728			23,211			11,165			7,092			7,991			18,641			14,549
Maintenance Capital Expenditures	5,789			5,406			17,559			14,718			7,388			5,815			15,734			11,770
Distributable Cash Flowof Noble Midstream Partners LP	$	50,282		$	46,446		$	144,889		$	132,355		$	79,681		$	40,641		$	173,401		$	94,606

LIQUIDITY AND CAPITAL RESOURCES

~~Financing Strategy~~Recent events, as further described in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview and Operating Outlook, have significantly impacted our financing strategy. We have taken actions to defer certain development projects to reflect updated producer forecasts in the DJ and Delaware Basins and reduce our quarterly distribution in order to preserve our financial liquidity.

Our ~~primary sources~~capital structure and financing strategy are designed to provide sufficient liquidity to meet our short-term working capital requirements, long-term capital expenditure requirements and to make quarterly cash distributions. In the current commodity price and economic environment, the duration of which could be prolonged, we have reduced our long-term capital expenditure guidance to reflect updated producer forecasts in the DJ and Delaware Basins. Additionally, we have reduced our quarterly distribution to preserve cash and support the balance sheet. We expect these actions to strengthen our financial position and flexibility.

Our liquidity ~~are cash flows generated from operations based on commercial agreements~~could also be impacted by counterparty credit risk. We closely monitor the credit worthiness of third-party counterparties with ~~Noble and our third party customers.~~ whom we do business. When considered necessary, we obtain letters of credit or other credit enhancements to mitigate risks associated with certain counterparties.

We expect our ongoing sources of liquidity to include cash generated from operations, distributions from our investments and borrowings under our revolving credit facility and may seek to opportunistically access the capital markets from time to time through debt or equity ~~or debt~~ offerings. 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~~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.

Available Liquidity

Information regarding liquidity was as follows:


(in thousands)	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Cash, Cash Equivalents, and Restricted Cash ⁽¹⁾	$	17,621	$	11,691	$	12,729	$	12,726
Amount Available to be Borrowed Under Our Revolving Credit Facility ⁽²⁾	750,000		740,000		415,000		555,000
Available Liquidity	$	767,621	$	751,691	$	427,729	$	567,726


⁽¹⁾	See Item 1. Financial Statements – Note 2. Basis of Presentation.


⁽²⁾	~~There was no available borrowing capacity under our term loan credit facilities as of September 30, 2019.~~ See Item 1. Financial Statements – Note 6.5. Debt.

Revolving Credit Facility and Term Loan Credit Facilities

~~Our~~During the first six months of 2020, we borrowed a net $140 million under our revolving credit ~~facility is available to fund working capital requirements, acquisitions and expansion capital expenditures. We utilized a large portion of~~facility. Proceeds from our revolving credit facility were utilized to fund portions of our capital ~~contributions~~and investment programs as well as for ~~the Delaware Crossing Joint Venture, EPIC Y-Grade and EPIC Crude. We repaid a portion of our revolving credit facility with the proceeds from the Preferred Equity offering.~~working capital purposes. As of ~~September~~June 30, ~~2019, $50~~2020, $735 million is outstanding under our revolving credit facility. See Item 1. Financial Statements – Note ~~6. Debt~~.

On August 23, 2019, we entered into a new term loan credit facility that permitted aggregate borrowings of up to $400 million. Upon closing, we drew $400 million under the term loan credit facility and the proceeds were primarily used to repay a portion of the outstanding borrowings under our revolving credit facility and pay fees and expenses in connection with the term loan credit facility transactions. ~~See Item 1. Financial Statements – Note~~ ~~6. Debt~~.

~~Preferred Equity~~

On March 25, 2019, we secured an equity commitment totaling $200 million from GIP. During 2019, Preferred Equity proceeds totaled $100 million and we incurred offering costs of $3.4 million. The remaining $100 million equity commitment is available for a one-year period, subject to certain conditions precedent. Proceeds from the Preferred Equity were utilized to repay a portion of outstanding borrowings under our revolving credit facility. ~~See Item 1. Financial Statements – Note~~ ~~2. Basis of Presentation~~.5. Debt.

Cash Flows

The following table summarizes our total cash provided by (used in) operating, investing and financing activities:


	Nine Months Ended September 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2020			2019
Operating Activities	$	266,121		$	167,936		$	219,451		$	188,945
Investing Activities	(689,509		)	(1,190,265		)	(345,279		)	(555,715		)
Financing Activities	429,318			985,950			125,831			362,645
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash	$	5,930		$	(36,379	)	$	3		$	(4,125	)

Operating Activities Net cash provided by operating activities increased during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The increase ~~was~~is primarily due to anincreased revenues resulting from higher throughput volumes related to the expansion of existing systems and providing services to new areas and customers, decreased direct operating expenses due to cost efficiencies and increased cash distributions from equity method investees, primarily from our new investment in Saddlehorn. The increase ~~in revenues as well as a decrease in general and administrative expenses and~~ was partially offset by anincreased general and administrative costs related to the increase in ~~direct operating expenses.~~the fixed annual fee payable under our omnibus agreement and increased interest expense related to our increased debt balance during 2020 as compared to the first six months of 2019.

Investing Activities Cash used in investing activities decreased during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The decrease ~~was~~is primarily due to ~~the Black Diamond Acquisition during 2018~~decreased capital contributions to our equity method investments as well as ~~increased additions~~decreased capital expenditures in 2020. Our decreased capital contributions to ~~property, plant~~Delaware Crossing, EPIC Crude and ~~equipment during 2018 due to the construction of the Mustang gathering system and Delaware Basin CGFs. The decrease was~~EPIC Y-Grade were partially offset by our ~~additions~~capital contribution to ~~investments during 2019 due~~Saddlehorn and the loan to ~~our capital contributions to the Delaware Crossing Joint Venture,~~ EPIC ~~Y-Grade and EPIC Crude.~~Y-Grade.

Financing Activities Cash provided by financing activities decreased during the first ~~nine~~six months of ~~2019~~2020 as compared with the first ~~nine~~six months of ~~2018.~~2019. The decrease is primarily due to the proceeds from the preferred equity issuance in first quarter 2019, as well as decreased net long-term debt borrowings ~~decreased contributions from noncontrolling interest owners, increased distributions to noncontrolling interest owners~~under the revolving credit facility and increased distributions to ~~unitholders.~~unitholders during 2020. The decrease was partially offset by ~~net proceeds~~increased contributions from ~~the Preferred Equity.~~Black Diamond.

Off-Balance Sheet Arrangements

WeAs of June 30, 2020, our material off-balance sheet arrangements that we have ~~not~~ entered into ~~any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.~~include our transportation commitments and undrawn letters of credit.

Contractual Obligations

~~With the exception of the three-year senior unsecured term loan credit facility we entered into on August 23, 2019, we~~We have had no material changes in our contractual commitments and obligations from amounts listed under Item 7. ~~Management's~~Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Liquidity and Capital Resources - Contractual Obligations in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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,				Six Months Ended June 30,
(in thousands)	2019		2018		2020		2019
Gathering System Expenditures⁽¹⁾	$	187,437	$	669,908	$	52,468	$	134,388
Fresh Water Delivery System Expenditures	6,040		18,711		—		1,394
Other	810		—		257		511
Total Capital Expenditures(1)	$	194,287	$	688,619	$	52,725	$	136,293

Additions to Investments	$	501,344	$	426
Additions to Investments ^{(1) (2)}					$	228,226	$	414,587
Loan to Equity Method Investee⁽³⁾					$	22,500	$	—


⁽¹⁾	~~Gathering system~~Total capital expenditures ~~for~~and additions to investments represent the ~~nine months ended September 30, 2018~~consolidated expenditures of the Partnership and include ~~only~~ the portion of expenditures funded by noncontrolling interest owners.


⁽²⁾	Additions to investments include $4.5 million of capitalized interest for both the ~~purchase price for the Black Diamond Acquisition allocated~~six months ended June 30, 2020 and 2019.


⁽³⁾	Amount represents our loan to ~~Property, Plant and Equipment totaling $205.8 million.~~EPIC Y-Grade. See Item 1. Financial Statements – Note 2. Basis of Presentation.

For the ~~nine~~six months ended ~~September~~June 30, 2020, our gathering system expenditures were primarily associated with the expansion of gathering infrastructure in the Wells Ranch and Mustang IDP areas, well connections in the Black Diamond dedication area and the expansion of gathering infrastructure in the Delaware Basin.

For the six months ended June 30, 2019, our gathering system expenditures were primarily associated with well connections in the Mustang IDP area, Black Diamond dedication area and the Delaware Basin as well as expansion of the Mustang gathering system. Fresh water delivery system expenditures were primarily associated with the expansion of the Greeley Crescent fresh water delivery system.

For the ~~nine~~six months ended ~~September~~June 30, ~~2018, our gathering system expenditures~~2020, additions to investments were primarily ~~associated with the construction of the Mustang gathering system and construction of central gathering facilities in the Delaware Basin. Additionally,~~related to our ~~gathering system expenditures include the Black Diamond Acquisition~~capital contributions to Saddlehorn as well as expenditures related to the connection of the acquired system to a major oil takeaway outlet in the DJ Basin. Fresh water delivery system expenditures were primarily associated with the construction of the Mustang fresh water delivery system.

our other equity method investments. See Item 1. Financial Statements – Note 6. Investments. For the ~~nine~~six months ended ~~September~~June 30, 2019, additions to investments were primarily related to our capital contributions to ~~the~~ Delaware Crossing, ~~Joint Venture,~~ EPIC Y-Grade and EPIC Crude.~~See Item 1. Financial Statements – Note~~ ~~7. Investments. For the nine months ended September 30, 2018, additions to investments were related to a capital call for our White Cliffs Interest.~~

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~~July 24, ~~2019,~~2020, the ~~board~~Board of ~~directors~~Directors of our ~~general partner declared~~General Partner approved a quarterly ~~cash~~ distribution of ~~$0.6716~~$0.1875 per unit. The distribution will be paid on ~~November 11, 2019,~~August 14, 2020, to unitholders of record as of ~~November 4, 2019. Also on November 11, 2019, a cash incentive distribution of $5.8 million will be made to Noble related to its IDRs, based upon the level of distribution paid per Common Unit.~~

Upon payment of the distribution on May 13, 2019, the requirements for the conversion of all Subordinated Units were satisfied under our partnership agreement. As a result, on May 14, 2019, all 15,902,584 Subordinated Units, which were owned entirely by Noble, converted into Common Units. ~~See Item 1. Financial Statements – Note~~ ~~10. Partnership Distributions~~. For future quarters, the minimum quarterly distribution of $0.375 per unit equates to $14.9 million per quarter, or $59.4 million per year, based on the number of Common Units outstanding as of September 30, 2019.

We expect that if we are successful in executing our business strategy, we will grow our business in a steady and sustainable manner and distribute to our unitholders a portion of any increase in our cash available for distribution resulting from such growth. We expect our general partner may cause us to establish reserves for specific purposes, such as major capital expenditures or debt service payments, or may choose to generally reserve cash in the form of excess distribution coverage from time to time for the purpose of maintaining stability or growth in our quarterly distributions. In addition, our general partner may cause us to borrow amounts to fund distributions in quarters when we generate less cash than is necessary to sustain or grow our cash distributions per unit. Our cash distribution policy reflects a judgment that our unitholders will be better served by our distributing rather than retaining our cash available for distribution. 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.August 7, 2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

We currently generate a substantial portion 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. As further described in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview and Operating Outlook, the commodity price environment is expected to remain depressed based on decreasing demand, over-supply and a potential global economic recession. We cannot predict whether or when commodity prices and economic activities will return to prior levels.

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 and 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 and term loan credit facilities, which have variable interest rates. As of ~~September~~June 30, ~~2019, $50~~2020, $735 million and $900 million were outstanding under our revolving credit facility and term loan credit facilities, respectively. A 1.0% increase in our interest rates would have resulted in an estimated ~~$6.3~~$8.3 million increase in interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. 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.

Credit Risk

We derive a substantial portion of our revenue from Noble and we expect to derive a substantial portion of our revenue from Noble for the foreseeable future. As a result, any event, whether in our area of operations or otherwise, that adversely affects Noble’s production, drilling schedule, financial condition, leverage, market reputation, liquidity, results of operations or cash flows may adversely affect our revenues and cash available for distribution.

Additionally, we are subject to the risk of non-payment or non-performance by our customers, including with respect to our commercial agreements, most of which do not contain minimum volume commitments. Furthermore, we cannot predict the extent to which our customers’ businesses would be impacted if conditions in the energy industry were to deteriorate nor can we

estimate the impact such conditions would have on our customers’ ability to execute their drilling and development plans on our dedicated acreage or to perform under our commercial agreements. Any material non-payment or non-performance by our customers under our commercial agreements would have a significant adverse impact on our business, financial condition, results of operations and cash flows and could therefore materially adversely affect our ability to make cash distributions to our ~~unitholders at the minimum quarterly distribution rate or at all.~~unitholders.

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 and our third party customers to execute their 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 “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “on ~~schedule”,~~schedule,” “strategy” and other similar 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. In addition, our forward-looking statements address the various risks and uncertainties associated with the extraordinary market environment and impacts resulting from the COVID-19 pandemic and the actions of foreign oil producers (most notably Saudi Arabia and Russia) to increase crude oil production and the expected impact on our businesses, operations, earnings and results.

Forward-looking statements are not guarantees of future performance and are based on certain assumptions and bases, and subject to certain risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, and not all of which can be disclosed in advance. 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:

uncertainty regarding the length of time it will take for the U.S. and the rest of the world to slow the spread of the COVID-19 virus to the point where applicable authorities are comfortable easing current restrictions on various commercial and economic activities; such restrictions are designed to protect public health but also have the effect of significantly reducing demand for crude oil and natural gas;

the continuation of a swift and material decline in global crude oil demand and crude oil prices for an uncertain period of time that correspondingly may lead to a significant reduction of domestic crude oil and natural gas production, which in turn could result in significant declines in the actual or expected volumes transported through our pipelines and/or the reduction of commercial opportunities that might otherwise be available to us;

uncertainty regarding the future actions of foreign oil producers such as Saudi Arabia and Russia and the risk that they take actions that will prolong or exacerbate the current over-supply of crude oil;

uncertainty regarding the timing, pace and extent of an economic recovery in the U.S. and elsewhere, which in turn will likely affect demand for crude oil and natural gas and therefore the demand for the midstream services we provide and the commercial opportunities available to us;

the effect of an overhang of significant amounts of crude oil and natural gas inventory stored in the U.S. and elsewhere and the impact that such inventory overhang ultimately has on the timing of a return to market conditions that support increased drilling and production activities in the U.S.;

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, natural gas and produced water gathering and processing services, crude oil treating and fresh water services;

our ability to successfully implement our business plan;

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

the price and availability of debt and equity financing;

the availability and price of crude oil and natural gas to the consumer compared to the price of alternative and competing fuels;

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 or bankruptcy of our customers under our agreements;

our inability to perform our obligations under our contracts, whether due to non-performance by third parties, including our customers or other counterparties, market constraints, third-party constraints, legal constraints (including governmental orders or guidance), or other factors;

changes in availability and cost of capital;

changes in our tax status;

the effect of existing and future laws and government regulations;

the effects of future litigation;

interruption of the Partnership's operations due to social, civil or political events or unrest;

terrorist attacks or cyber threats;

any future acquisitions or dispositions of assets or the delay or failure of any such transaction to close;

the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations;

the completion of the Chevron Merger; and

certain factors discussed elsewhere in this Form 10-Q.

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, ~~2018,~~2019, in our quarterly report on Form 10-Q for the quarter ended March 31, 2020, and in this quarterly report on Form 10-Q for the quarter ended June 30, 2020, 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, ~~2018 is~~2019 and quarterly report on Form 10-Q for the quarter ended March 31, 2020 are available on our website at www.nblmidstream.com.

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.

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 ~~12.~~10. 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, other than disclosed below, from the risk factors disclosed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, ~~2018 or disclosed in Item 1A. Risk Factors of~~2019 and our ~~Quarterly Report~~quarterly report on Form 10-Q for the quarter ended March 31, 2020.

Our General Partner is owned by Noble, which recently announced its entry into the Chevron Merger Agreement. If the Chevron Merger is completed, Chevron will own and control our General Partner. Chevron’s ownership of our General Partner may result in conflicts of interest.

Noble recently entered into the Chevron Merger Agreement. Following the completion of the Chevron Merger, the directors and officers of our General Partner and its affiliates will have duties to manage our General Partner in a manner that is beneficial to Chevron, who would be the owner of our General Partner. At the same time, our General Partner will have duties to manage us in a manner that is beneficial to our unitholders. Therefore, following the completion of the Chevron Merger, our General Partner’s duties to us may conflict with the duties of its officers and directors to Chevron in the future. As a result of these conflicts of interest following the Chevron Merger, our General Partner may favor its own interest or the interests of Chevron or its owners or affiliates over the interest of our unitholders.

Furthermore, we derive a substantial portion of our revenue from Noble. Following the completion of the Chevron Merger, our future prospects will depend upon Chevron’s growth strategy and drilling program, including the level of drilling and completion activity by Chevron on acreage dedicated to us. Additional conflicts may also arise in the future following the Chevron Merger associated with (1) the allocation of capital and the allocation of costs between Chevron and us, (2) the amount of time devoted by the officers and directors of Chevron to its business in relation to us and (3) future business opportunities that are pursued by Chevron and us.

We will be subject to business uncertainties while the Chevron Merger is pending, which could adversely affect our businesses.

Uncertainty about the effect of the Chevron Merger on employees and customers may have an adverse effect on us. These uncertainties may impair Noble’s ability to attract, retain and motivate key personnel involved in our operations until the Chevron Merger is completed and for a period ~~ended June 30, 2019,~~of time thereafter and could cause customers and others that deal with us to seek to change their existing business relationships with us. Employee retention at Noble may be challenging during the pendency of the Chevron Merger, as employees may experience uncertainty about their roles. In addition, the Chevron Merger Agreement restricts Noble and us from entering into certain corporate transactions, entering into certain material contracts, making certain changes to our capital budget, incurring certain indebtedness and taking other specified actions without the consent of Chevron, and generally requires us to continue our operations in the ordinary course of business during the pendency of the Chevron Merger. These restrictions may prevent us from pursuing attractive business opportunities or adjusting our capital plan prior to the completion of the Chevron Merger.

Noble may be subject to lawsuits relating to the Chevron Merger, which, because we are substantially dependent on Noble as our primary customer and the controlling party of our General Partner, could adversely affect our business, financial condition and operating results.

Noble, Chevron and/or their respective directors and officers, including certain of Noble’s officers that serve as members of the Board of Directors of our General Partner, may be subject to lawsuits relating to the Chevron Merger. Such litigation is

common in connection with acquisitions of public companies, regardless of any merits related to the underlying acquisition. While Noble will evaluate and defend against any actions vigorously, the costs of the defense of such lawsuits and other effects of such litigation could, because we are substantially dependent on Noble as our primary customer and the controlling party of our General Partner, have an adverse effect on our business, financial condition and operating results.

Completion of the Chevron Merger is subject to a number of conditions, and if these conditions are not satisfied or waived, the Chevron Merger will not be completed. Failure to complete, or significant delays in completing, the Chevron Merger could negatively affect the trading prices of our Common Units and our future business and financial results.

Completion of the Chevron Merger is subject to satisfaction or waiver of certain closing conditions, including (1) the adoption of the Chevron Merger Agreement by Noble stockholders, (2) the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, as amended, applicable to the Chevron Merger and the receipt of other applicable customary regulatory approvals, (3) the absence of any order or law prohibiting consummation of the Chevron Merger, (4) the effectiveness of the Registration Statement on Form S-4 to be filed by Chevron pursuant to which the shares of Chevron common stock to be issued in connection with the Chevron Merger will be registered with the Securities and Exchange Commission and (5) the authorization for listing on the New York Stock Exchange of the shares of Chevron common stock to be issued in connection with the Chevron Merger. There can be no assurance that the conditions to the completion of the Chevron Merger will be satisfied or waived or that the Chevron Merger will be completed.

If the Chevron Merger is not completed, or if there are significant delays in completing the Chevron Merger, the trading prices of our Common Units and our future business and financial results could be negatively affected, and we may be subject to several risks, including the following:

negative reactions from the financial markets, including declines in the prices of our Common Units due to the fact that current prices may reflect a market assumption that the Chevron Merger will be completed; and

the attention of Noble’s management, including certain of Noble’s officers that serve as members of the Board of Directors of our General Partner, will have been diverted to the Chevron Merger rather than Noble’s operations and pursuit of other opportunities that could have been beneficial to Noble and to us.

The Chevron Merger Agreement limits Noble’s ability to pursue alternatives to the Chevron Merger.

The Chevron Merger Agreement contains provisions that may discourage a third party from submitting a competing proposal that might result in greater value to Noble’s stockholders, and ultimately our unitholders, than the Chevron Merger. These provisions include a general prohibition on Noble from soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by Noble's Board of Directors, entering into discussions with any third party regarding any competing proposal or offer for a competing transaction.

We may not generate sufficient distributable cash flow to enable us to make quarterly distributions to our unitholders at our current distribution rate.

We may not generate sufficient distributable cash flow to enable us to make quarterly distributions at our current distribution rate. For example, in response to the unprecedented impact on our business from the significant decline in commodity prices and the COVID-19 outbreak, on March 25, 2020, the Board of Directors of our General Partner approved a 73% reduction of the quarterly distribution to $0.1875 per unit for the first quarter 2020. We maintained the reduced quarterly distribution for second quarter 2020.

The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

the volumes of natural gas we gather or process, the volumes of crude oil we gather and sell, the volumes of produced water we collect, clean or dispose of and the volumes of fresh water we distribute and store and the number of wells that have access to our crude oil treating facilities;

continued volatility of market prices of crude oil, natural gas and NGLs and their effect on our customers’ drilling and development plans on our dedicated acreage and the volumes of hydrocarbons that are produced on our dedicated acreage and for which we provide midstream services;

our customers’ ability to fund their drilling and development plans on our dedicated acreage;

downstream processing and transportation capacity constraints and interruptions, including the failure of our customers to have sufficient contracted processing or transportation capacity;

the levels of our operating expenses, maintenance expenses and general and administrative expenses;

regulatory action affecting: (i) the supply of, or demand for, crude oil, natural gas, NGLs and water, (ii) the rates we can charge for our midstream services, (iii) the terms upon which we are able to contract to provide our midstream

services, (iv) our existing gathering and other commercial agreements or (v) our operating costs or our operating flexibility;

the rates we charge third parties for our midstream services;

prevailing economic conditions; and

adverse weather conditions.

In addition, the actual amount of distributable cash flow that we generate will also depend on other factors, some of which are ~~incorporated~~beyond our control, including:

global or national health pandemics, epidemics or concerns, such as the recent COVID-19 outbreak, which has reduced and may further reduce demand for oil and natural gas and related products due to reduced global or national economic activity;

limited production cuts and freezes implemented by ~~reference into~~OPEC members and other large oil producers such as Russia;

the level and timing of our capital expenditures;

our debt service requirements and other liabilities;

our ability to borrow under our debt agreements to fund our capital expenditures and operating expenditures and to pay distributions;

fluctuations in our working capital needs;

restrictions on distributions contained in any of our debt agreements;

the cost of acquisitions, if any;

the fees and expenses of our General Partner and its affiliates (including Noble) that we are required to reimburse;

the amount of cash reserves established by our General Partner; and

other business risks affecting our cash levels.

Because of the natural decline in production from existing wells, our success, in part, depends on our ability to maintain or increase hydrocarbon throughput volumes on our midstream systems, which depends on our customers’ levels of development and completion activity on our dedicated acreage.

The level of crude oil and natural gas volumes handled by our midstream systems depends on the level of production from crude oil and natural gas wells dedicated to our midstream systems, which may be less than expected and which will naturally decline over time. In order to maintain or increase throughput levels on our midstream systems, we must obtain production from wells completed by Noble and any third-party customers on acreage dedicated to our midstream systems or execute agreements with other third parties in our areas of operation.

Factors that significantly affect our customers’ levels of development and completion activity on our dedicated acreage include: prices of crude oil and natural gas; the level of supply and demand for crude oil and natural gas, worldwide; governmental regulations, including the policies of governments regarding the exploration for and production and development of their crude oil and natural gas reserves. The recent announcement by Saudi Arabia of a significant reduction in its export prices as well as the expiration of previously agreed upon production cuts by Russia, coupled with the ongoing impacts of the COVID-19 pandemic have contributed to the unprecedented and significant recent decline in the price of crude oil.

The duration of the business disruption and related financial impact from COVID-19 and current commodity price environment cannot be reasonably estimated at this ~~Part II. Item~~time. If the current environment continues for an extended period of time, it could materially adversely affect the demand for our services and our ability to operate our business in the manner and on the timelines previously planned.

We have no control over Noble’s or other producers’ levels of development and completion activity in our areas of operation, the amount of reserves associated with wells connected to our systems or the rate at which production from a well declines. In addition, we have no control over Noble or other producers or their exploration and development decisions, which may also be affected by the following, among other things:

the availability and cost of capital;

limited production cuts and freezes implemented by OPEC members and other large oil producers such as Russia;

increased volatility of prevailing and projected crude oil, natural gas and NGL prices;

demand for crude oil, natural gas and NGLs, which has recently been significantly depressed due to global economic conditions;

levels of reserves;

geologic considerations;

changes in the strategic importance our customers assign to development in the DJ Basin or the Delaware Basin as opposed to their other operations, which could adversely affect the financial and operational resources our customers are willing to devote to development of our dedicated acreage;

increased levels of taxation related to the exploration and production of crude oil, natural gas and NGLs in our areas of operation;

environmental or other governmental regulations, including prorationing, the availability of permits, the regulation of hydraulic fracturing and a governmental determination that multiple facilities are to be treated as a single source for air permitting purposes; and

the costs of producing crude oil, natural gas and NGLs and the availability and costs of drilling rigs and other equipment.

Due to these and other factors, even if reserves are known to exist in areas served by our midstream assets, producers, including Noble, may choose not to develop those reserves. If producers choose not to develop their reserves, or they choose to slow their development rate, in our areas of operation, utilization of our midstream systems will be below anticipated levels. Our inability to provide increased services resulting from reductions in development activity, coupled with the natural decline in production from our current dedicated acreage, would result in our inability to maintain the then-current levels of utilization of our midstream assets, which could materially adversely affect our business, financial condition, results of operations, cash flows and ability to make cash distributions.

Our exposure to commodity price risk may change over time and we cannot guarantee our customers will be able to abide by the terms of any existing agreements or that we will be able to secure similar terms in future agreements for our midstream services with our customers.

We currently generate the majority of our revenues pursuant to fee-based agreements under which we are paid based on volumes handled, rather than the underlying value of the commodity. Consequently, our existing operations and cash flows have little direct exposure to commodity price risk. However, our customers are exposed to commodity price risk, and extended reduction in commodity prices could reduce the production volumes available for our midstream services in the future below expected levels.

Historically, crude oil, natural gas and NGLs prices have been volatile and subject to wide fluctuations. For example, during 2019, the low price for both the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate (“WTI”) oil futures and NYMEX Henry Hub gas futures was $45.41 per barrel and $2.07 per MMBtu, respectively. For the period from January 1, 2020 through July 24, 2020, however, prices for oil and natural gas declined significantly, reaching lows of -$37.63 per barrel for NYMEX WTI oil futures and $1.48 per MMBtu for NYMEX Henry Hub gas futures. Negative NYMEX WTI oil futures prices during April 2020 represented the impact of severe storage constraints as of the expiration date for front month oil purchase contracts. NYMEX WTI oil futures prices have since increased, with a closing price of $41.46 on July 28, 2020.

This recent significant decline in crude oil prices has largely been attributable to the recent actions of Saudi Arabia and Russia, which have resulted in a substantial decrease in crude oil and natural gas prices, and the global outbreak of COVID-19, which has reduced demand for crude oil and natural gas because of significantly reduced global and national economic activity. We cannot predict whether or when commodity prices and economic activities will return to normalized levels. Although we intend to maintain fee-based pricing terms on both new contracts and existing contracts for which prices have not yet been set, our efforts to negotiate such terms may not be successful, which could have a materially adverse effect on our business.

Events outside of our control, including a pandemic, epidemic or outbreak of an infectious disease, such as the recent global outbreak of COVID-19 and the potential global recession, could have a material adverse impact on our financial position, results of operations and cash flows.

The U.S. and other world economies are potentially in a recession due to the global outbreak of COVID-19, which began late in 2019. In March 2020, OPEC and non-OPEC producers failed to agree to production cuts, causing a significant drop in crude oil prices. In April 2020, members of OPEC agreed to certain production cuts. While these production cuts could

rebalance the market in the long-term, in the short-term, we do not believe they will be large enough to offset the sharp decrease in demand caused by COVID-19.These factors collectively have contributed to unprecedented negative global economic impacts, including a significant drop in hydrocarbon product demand, which could extend throughout 2020 and beyond.

A recession would likely extend the time for the current oil markets to absorb excess supplies and rebalance inventory resulting in decreased demand for our midstream services for a number of future quarters. Our profitability will likely be significantly affected by this decreased demand and could lead to material impairments of our long-lived assets, intangible assets and equity method investments. Additionally, these factors could lead to further reductions in our distributions to unitholders or may cause us to fall out of compliance with the covenants in our revolving credit facility and term loans. The global outbreak of COVID-19 and impact of lower commodity prices could lead to disruptions in our supply network, including, among other things, storage and pipeline constraints brought on by overproduction and decreased demand from refiners.

Our future access to capital, as well as that of our partners and contractors, could be limited due to tightening capital markets that could delay or inhibit our capital projects.

The outbreak of COVID-19 could potentially further impact our workforce. The infection of key personnel, or the infection of a significant amount of our workforce, could have a material adverse impact on our business, financial condition and results of operations.

The majority of our workforce is working remotely until the risks of COVID-19 are reduced. Additionally, in response to reduced development and activity levels stemming from the commodity price environment, Noble has placed a number of employees on furlough or part-time work programs. A remote workforce combined with workforce reduction programs could introduce risks to achieving business objectives and/or the ability to maintain our controls and procedures. For example, the technology required for the transition to remote work increases our vulnerability to cybersecurity threats, including threats of unauthorized access to sensitive information or to render data or systems unusable, the impact of which may have material adverse effects on our business and operations. See “Item 1A. Risk Factors-Risks Related to Our Business – A cyber incident could result in information theft, data corruption, operational disruption and/or financial loss” in our Annual Report on Form 10-K for the year ended December 31, 2019.

The impacts of COVID-19 and the significant drop in commodity prices has had an unprecedented impact on the global economy and our business. We are unable to predict all potential impacts to our business, the severity of such impacts or the duration.

Item 6. Exhibit



Exhibit Number		Exhibit

~~2.1~~2.1+		~~Member Interest Purchase~~Contribution, Conveyance, Assumption and ~~Sale~~Simplification Agreement, dated ~~December 12, 2017,~~November 14, 2019, by and ~~between Black Diamond Gathering~~among the Registrant, Noble Midstream GP LLC, Noble Midstream Services, LLC, NBL Midstream, LLC, NBL Midstream Holdings LLC, Blanco River DevCo GP LLC, Green River DevCo GP LLC and ~~Saddle Butte Pipeline II,~~San Juan River DevCo GP LLC (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K (Date of Event: ~~December 12, 2017)~~November 14, 2019) filed ~~December 12, 2017~~November 15, 2019 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~~Second Amended and Restated Agreement of Limited Partnership of ~~the Registrant~~Noble Midstream Partners LP (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (Date of Event: ~~September~~November 14, ~~2016)~~2019) filed ~~September 20, 2016~~November 15, 2019 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).

~~10.1~~4.1		~~Term Credit~~Registration Rights Agreement, dated ~~as of August 23,~~November 21, 2019, by and among ~~Noble Midstream Partners LP, as Parent, and Noble Midstream Services, LLC, as Borrower,~~ the ~~subsidiaries of the Borrower identified therein, Bank of Montreal~~Registrant and the ~~other lenders party thereto~~Purchasers named therein (filed as Exhibit ~~10.1~~4.1 to the Registrant’s Current Report on Form 8-K (Date of Event: ~~August 23,~~November 21, 2019) filed ~~August 26, 2019 and incorporated herein by reference).~~

~~10.2~~		Guarantee Agreement, dated as of August 23, 2019, by and among Noble Midstream Services, LLC, as Borrower, Noble Midstream Partners LP and the other guarantors identified therein, and Bank of Montreal, as administrative agent (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (Date of Event: August 23, 2019) filed August 26,November 22, 2019 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), filed herewith.

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), filed herewith.

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), furnished herewith.

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), furnished herewith.

101		The following materials from Noble Midstream Partners ~~LP's~~LP’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2019~~2020 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income; (ii) Consolidated Balance Sheets; (iii) Consolidated Statements of Cash Flows; (iv) Consolidated Statements of Changes in Equity; and (v) Notes to Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

+ Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be furnished to the Securities and Exchange Commission upon request.

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	~~November 7, 2019~~August 3, 2020	By: /s/ Thomas W. Christensen
		Thomas W. Christensen Chief Financial Officer

3740



	Partnership
	Common Units			Subordinated Units			General Partner			Noncontrolling Interests			Total
December 31, 2018	$	699,866		$	(130,207	)	$	2,421		$	744,153		$	1,316,233
Net Income	23,967			16,085			3,507			19,696			63,255
Contributions from Noncontrolling Interests	—			—			—			15,969			15,969
Distributions to Noncontrolling Interests	—			—			—			(4,669		)	(4,669		)
Distributions to Unitholders	(13,930		)	(9,316		)	(2,421		)	—			(25,667		)
Black Diamond Equity Ownership Promote Vesting⁽¹⁾	4,092			2,746			—			(6,838		)	—
Unit-Based Compensation and Other	470			—			—			—			470
March 31, 2019	714,465			(120,692		)	3,507			768,311			1,365,591
Net Income	25,487			6,282			4,640			16,789			53,198
Contributions from Noncontrolling Interests	—			—			—			18,141			18,141
Distributions to Noncontrolling Interests	—			—			—			(7,316		)	(7,316		)
Distributions to Unitholders	(14,534		)	(9,751		)	(3,507		)	—			(27,792		)
Black Diamond Equity Ownership Promote Vesting⁽¹⁾	8,196			—			—			(8,196		)	—
Conversion of Subordinated Units to Common Units ⁽²⁾	(124,161		)	124,161			—			—			—
Preferred Equity Accretion	(3,151		)	—			—			—			(3,151		)
Unit-Based Compensation and Other	273			—			—			—			273
June 30, 2019	606,575			—			4,640			787,729			1,398,944
Net Income	34,812			—			5,820			25,751			66,383
Contributions from Noncontrolling Interests	—			—			—			11,384			11,384
Distributions to Noncontrolling Interests	—			—			—			(5,988		)	(5,988		)
Distributions to Unitholders	(25,418		)	—			(4,640		)	—			(30,058		)
Black Diamond Equity Ownership Promote Vesting⁽¹⁾	5,357			—			—			(5,357		)	—
Preferred Equity Accretion	(3,114		)	—			—			—			(3,114		)
Unit-Based Compensation and Other	(163		)	—			—			—			(163		)
September 30, 2019	$	618,049		$	—		$	5,820		$	813,519		$	1,437,388



(in thousands)
Cash Consideration	$	638,266
PDC Energy Payment	24,120
Current Liabilities Assumed	18,259
Total Purchase Price and Liabilities Assumed	$	680,645

Cash and Restricted Cash	$	12,518
Accounts Receivable	10,661
Other Current Assets	2,206
Property, Plant and Equipment	205,766
Intangible Assets⁽¹⁾	339,760
Fair Value of Identifiable Assets	570,911
Implied Goodwill ⁽²⁾	109,734
Total Asset Value	$	680,645



(thousands)	Balance Sheet Location	September 30, 2019
Assets
Operating ⁽¹⁾	Other Noncurrent Assets	$	3,303
Finance ⁽²⁾	Total Property, Plant and Equipment, Net	3,958
Total ROU Assets		$	7,261
Liabilities
Current
Operating	Other Current Liabilities	$	2,621
Finance	Other Current Liabilities	1,743
Noncurrent
Operating	Other Noncurrent Liabilities	667
Finance ⁽³⁾	Long-Term Debt	339
Total Lease Liabilities		$	5,370