CNX Midstream Partners (CNXM) 10-Q 2019 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 __________________________________________________

FORM 10-Q

  __________________________________________________ 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission file number: 001-36635

__________________________________________________

 

CNX MIDSTREAM PARTNERS LP

(Exact name of registrant as specified in its charter)

Delaware	47-1054194
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1000 CONSOL Energy Drive

Canonsburg, PA 15317-6506

(724) 485-4000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Units Representing Limited Partner Interests	CNXM	New York Stock Exchange

__________________________________________________

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

Large accelerated filer  ☒    Accelerated filer  ☐   Non-accelerated filer ☐ Smaller Reporting Company  ☐ Emerging Growth Company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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 July 30, 2019, CNX Midstream Partners LP had 63,735,464 common units outstanding.

TABLE OF CONTENTS
		Page
PART I FINANCIAL INFORMATION
ITEM 1.	Unaudited Consolidated Financial Statements
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018	3
	Consolidated Balance Sheets at June 30, 2019 and December 31, 2018	4
	Consolidated Statements of Partners’ Capital and Noncontrolling Interest for the Three and Six Months Ended June 30, 2019 and 2018	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	7
	Notes to Unaudited Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	35
ITEM 4.	Controls and Procedures	35
PART II OTHER INFORMATION
ITEM 1.	Legal Proceedings	36
ITEM 1A.	Risk Factors	36
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
ITEM 3.	Defaults Upon Senior Securities	36
ITEM 4.	Mine Safety Disclosures	36
ITEM 5.	Other Information	36
ITEM 6.	Exhibits	37

PART I: FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CNX MIDSTREAM PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per unit data)

(unaudited)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Revenue
Gathering revenue — related party	$	59,205		$	37,576		$	112,981		$	75,306
Gathering revenue — third party	18,896			23,438			37,339			49,577
Total Revenue	78,101			61,014			150,320			124,883
Expenses
Operating expense — related party (Note 4)	6,514			5,079			12,062			9,514
Operating expense — third party	6,188			7,406			12,162			15,874
General and administrative expense — related party (Note 4)	4,027			3,620			7,994			7,232
General and administrative expense — third party	1,364			2,319			2,900			4,868
(Gain) loss on asset sales and abandonments	—			(254		)	7,229			2,501
Depreciation expense	5,860			5,443			11,510			11,299
Interest expense	7,685			7,119			15,024			9,608
Total Expense	31,638			30,732			68,881			60,896
Net Income	46,463			30,282			81,439			63,987
Less: Net (loss) income attributable to noncontrolling interest	(282		)	277			(413		)	6,135
Net Income Attributable to General and Limited Partner Ownership Interest in CNX Midstream Partners LP	$	46,745		$	30,005		$	81,852		$	57,852
Calculation of Limited Partner Interest in Net Income:
Net Income Attributable to General and Limited Partner Ownership Interest in CNX Midstream Partners LP	$	46,745		$	30,005		$	81,852		$	57,852
Less: General partner interest in net income, including incentive distribution rights	6,325			2,903			11,604			5,055
Limited partner interest in net income	$	40,420		$	27,102		$	70,248		$	52,797
Earnings per limited partner unit:
Basic	$	0.63		$	0.43		$	1.10		$	0.83
Diluted	$	0.63		$	0.43		$	1.10		$	0.83
Weighted average number of limited partner units outstanding:
Basic	63,732			63,638			63,715			63,630
Diluted	63,755			63,677			63,759			63,670
Cash distributions declared per unit (*)	$	0.3865		$	0.3361		$	0.7597		$	0.6606

(*) Represents the cash distributions declared during the month following the end of each respective quarterly period. See Note 11.

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

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CNX MIDSTREAM PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except number of limited partner units)

(unaudited)

	June 30, 2019		December 31, 2018
ASSETS
Current Assets:
Cash	$	11,677	$	3,966
Receivables — related party	19,028		17,073
Receivables — third party	6,681		7,028
Other current assets	1,648		2,383
Total Current Assets	39,034		30,450
Property and Equipment (Note 5):
Property and equipment	1,171,084		974,394
Less — accumulated depreciation	94,107		82,619
Property and Equipment — Net	1,076,977		891,775
Other Assets:
Operating lease right of use asset (Note 8)	7,875		—
Other assets	3,731		3,203
Total Other Assets	11,606		3,203
TOTAL ASSETS	$	1,127,617	$	925,428
LIABILITIES AND EQUITY
Current Liabilities:
Trade accounts payable	$	33,299	$	9,401
Accrued interest payable	7,901		7,761
Accrued liabilities	55,095		26,757
Due to related party (Note 4)	3,425		4,980
Total Current Liabilities	99,720		48,899
Other Liabilities:
Revolving credit facility (Note 6)	208,000		84,000
Long-term debt (Note 7)	393,688		393,215
Long-term operating lease liabilities (Note 8)	1,171		—
Total Other Liabilities	602,859		477,215
Total Liabilities	702,579		526,114
Partners’ Capital and Noncontrolling Interest:
Limited partner units (63,735,464 issued and outstanding at June 30, 2019 and 63,639,676 issued and outstanding at December 31, 2018)	344,530		320,543
General partner interest	13,050		10,900
Partners’ capital attributable to CNX Midstream Partners LP	357,580		331,443
Noncontrolling interest	67,458		67,871
Total Partners’ Capital and Noncontrolling Interest	425,038		399,314
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	1,127,617	$	925,428

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

4

CNX MIDSTREAM PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL AND NONCONTROLLING INTEREST

(Dollars in thousands)

(Unaudited)

	Three Months Ended June 30, 2019
	Partners’ Capital						Total
							Capital
	Limited			General			Attributable			Noncontrolling
	Partners			Partner			to Partners			Interest			Total
Balance at April 1, 2019	$	327,380		$	11,880		$	339,260		$	67,740		$	407,000
Net income (loss)	40,420			6,325			46,745			(282		)	46,463
Quarterly distributions to unitholders	(23,785		)	(5,155		)	(28,940		)	—			(28,940		)
Unit-based compensation	541			—			541			—			541
Vested units withheld for taxes	(26		)	—			(26		)	—			(26		)
Balance at June 30, 2019	$	344,530		$	13,050		$	357,580		$	67,458		$	425,038

	Three Months Ended June 30, 2018
	Partners’ Capital						Total
							Capital
	Limited			General			Attributable			Noncontrolling
	Partners			Partner			to Partners			Interest			Total
Balance at April 1, 2018	$	241,844		$	4,930		$	246,774		$	246,276		$	493,050
Net income	27,102			2,903			30,005			277			30,282
Contributions from general partner and noncontrolling interest holders, net	—			4			4			2,000			2,004
Quarterly distributions to unitholders	(20,651		)	(2,049		)	(22,700		)	—			(22,700		)
HG Energy Transaction	46,420			—			46,420			(179,500		)	(133,080		)
Noncash contribution of assets held by general partner	—			3,105			3,105			—			3,105
Unit-based compensation	690			—			690			—			690
Balance at June 30, 2018	$	295,405		$	8,893		$	304,298		$	69,053		$	373,351

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

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CNX MIDSTREAM PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL AND NONCONTROLLING INTEREST

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30, 2019
	Partners’ Capital						Total
							Capital
	Limited			General			Attributable			Noncontrolling
	Partners			Partner			to Partners			Interest			Total
Balance at December 31, 2018	$	320,543		$	10,900		$	331,443		$	67,871		$	399,314
Net income (loss)	70,248			11,604			81,852			(413		)	81,439
Contributions from general partner and noncontrolling interest holders, net	—			30			30			—			30
Quarterly distributions to unitholders	(46,724		)	(9,484		)	(56,208		)	—			(56,208		)
Unit-based compensation	1,153			—			1,153			—			1,153
Vested units withheld for taxes	(690		)	—			(690		)	—			(690		)
Balance at June 30, 2019	$	344,530		$	13,050		$	357,580		$	67,458		$	425,038

	Six Months Ended June 30, 2018
	Partners’ Capital						Total
							Capital
	Limited			General			Attributable			Noncontrolling
	Partners			Partner			to Partners			Interest			Total
Balance at December 31, 2017	$	389,427		$	4,328		$	393,755		$	357,356		$	751,111
Net income	52,797			5,055			57,852			6,135			63,987
Contributions from (distributions to) general partner and noncontrolling interest holders, net	—			20			20			(3,525		)	(3,505		)
Quarterly distributions to unitholders	(40,574		)	(3,615		)	(44,189		)	—			(44,189		)
Acquisition of Shirley-Penns System	(153,587		)	—			(153,587		)	(111,413		)	(265,000		)
HG Energy Transaction	46,420			—			46,420			(179,500		)	(133,080		)
Noncash contribution of assets held by general partner	—			3,105			3,105			—			3,105
Unit-based compensation	1,269			—			1,269			—			1,269
Vested units withheld for taxes	(347		)	—			(347		)	—			(347		)
Balance at June 30, 2018	$	295,405		$	8,893		$	304,298		$	69,053		$	373,351

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

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CNX MIDSTREAM PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

	Six Months Ended   June 30,
	2019			2018
Cash Flows from Operating Activities:
Net income	$	81,439		$	63,987
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense and amortization of debt issuance costs	12,449			11,872
Unit-based compensation	1,153			1,269
Loss on asset sales and abandonments	7,229			2,501
Other	41			387
Changes in assets and liabilities:
Due to/from affiliate	(3,269		)	1,888
Receivables — third party	347			705
Other current and non-current assets	(7,039		)	108
Accounts payable and other accrued liabilities	32,316			12,824
Net Cash Provided by Operating Activities	124,666			95,541
Cash Flows from Investing Activities:
Capital expenditures	(182,867		)	(41,587		)
Proceeds from sale of assets	—			6,462
Net Cash Used in Investing Activities	(182,867		)	(35,125		)
Cash Flows from Financing Activities:
Contributions from (distributions to) general partner and noncontrolling interest holders, net	30			(3,505		)
Vested units withheld for unitholder taxes	(690		)	(347		)
Quarterly distributions to unitholders	(56,208		)	(44,189		)
Net payments on unsecured $250.0 million credit facility	—			(149,500		)
Net borrowings on secured $600.0 million credit facility	124,000			11,000
Proceeds from issuance of long-term debt, net of discount	—			394,000
Debt issuance costs	(1,220		)	(5,362		)
Acquisition of Shirley-Penns System	—			(265,000		)
Net Cash Provided by (Used in) Financing Activities	65,912			(62,903		)
Net Increase (Decrease) in Cash	7,711			(2,487		)
Cash at Beginning of Period	3,966			3,194
Cash at End of Period	$	11,677		$	707
Cash paid during the period for:
Interest	$	15,892		$	1,367
Noncash investing activities:
Accrued capital expenditures	$	36,266		$	12,472

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

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CNX MIDSTREAM PARTNERS LP

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

CNX Midstream Partners LP (the “Partnership”, or “we”, “us”, or “our”) is a growth-oriented master limited partnership focused on the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets to service our customers’ production in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Our assets include natural gas gathering pipelines and compression and dehydration facilities, as well as condensate gathering, collection, separation and stabilization facilities. We are managed by our general partner, CNX Midstream GP LLC (the “general partner”), a wholly owned subsidiary of CNX Gathering LLC (“CNX Gathering”). CNX Gathering is a wholly owned subsidiary of CNX Gas Company LLC (“CNX Gas”), which is a wholly owned subsidiary of CNX Resources Corporation (NYSE: CNX) (“CNX Resources”). Accordingly, CNX Resources is the sole sponsor of the Partnership, and we may refer to CNX Resources as the “Sponsor” throughout this Quarterly Report on Form 10-Q.

Description of Business

Our midstream assets consist of two operating segments that we refer to as our “Anchor Systems” and “Additional Systems” based on their relative current cash flows, growth profiles, capital expenditure requirements and the timing of their development.

• Our Anchor Systems, in which the Partnership owns a 100% controlling interest, include our most developed midstream systems that generate the largest portion of our current cash flows, including our four primary midstream systems (the McQuay, Majorsville, Mamont and Shirley-Penns Systems), a 20” high-pressure pipeline contributed to us in the CNX Transaction (discussed below) and related assets.

• Our Additional Systems, in which the Partnership owns a 5% controlling interest, include several gathering systems throughout our dedicated acreage. Revenues from our Additional Systems are currently derived primarily from the Pittsburgh Airport area, which is within the wet gas region of our dedicated acreage. Currently, the substantial majority of capital investment in these systems would be funded by CNX Resources in proportion to CNX Gathering’s 95% retained ownership interest.

As a result of the CNX Transaction and HG Energy Transaction (described below), the Partnership distributed its ownership interests in (i) our “Growth Systems,” which were primarily located in the dry gas regions of our dedicated acreage in central West Virginia, and (ii) the Moundsville area assets formerly within the Additional Systems, to CNX Gathering. CNX Gathering subsequently transferred these assets to HG Energy II Appalachia, LLC (“HG Energy”).

In order to maintain operational flexibility, our operations are conducted through, and our operating assets are owned by, our operating subsidiaries. However, neither we nor our operating subsidiaries have any employees. Our general partner has the sole responsibility for providing the personnel necessary to conduct our operations, whether through directly hiring employees or by obtaining the services of others, which may include personnel of CNX Resources as provided through contractual relationships with the Partnership. All of the personnel who conduct our business are employed or contracted by our general partner and its affiliates, including our Sponsor, but we sometimes refer to these individuals as our employees because they provide services directly to us. See Note 4–Related Party Transactions for additional information.

Transactions with our Sponsor and HG Energy

On May 3, 2018, we announced a strategic transaction with our Sponsor, pursuant to which we amended our gas gathering agreement (“GGA”) with CNX Resources to provide for the following (collectively, the “CNX Transaction”):

• Dedication to the Partnership of approximately 16,100 additional Utica acres in our Anchor Systems;

• Commitment to develop 40 additional wells in the Anchor Systems by 2023, subject to the terms of the GGA;

• Contribution to the Anchor Systems of a 20” high pressure pipeline in addition to a one-time payment to us of approximately $2.0 million in cash; and

• Distribution of our 5% interest in the Growth Systems and related assets, as well as our 5% interest in the Moundsville midstream assets that were a part of the Additional Systems, to CNX Gathering, which subsequently transferred these assets to HG Energy.

On May 3, 2018, we also announced a strategic transaction with HG Energy, pursuant to which we amended our GGA with HG Energy to provide for the following (collectively, the “HG Energy Transaction”):

• Release from dedication of approximately 18,000 acres, net to the Partnership, which was comprised of approximately 275,000 acres (or approximately 14,000 acres, net to the Partnership) within the Growth and Additional Systems and approximately 4,200 scattered acres located in the Anchor Systems;

8

• Removal of our obligation to provide gathering services or make capital investments in the Growth Systems or in the Moundsville area of the Additional Systems; and

• Commitment by HG Energy to develop 12 additional wells in the Anchor Systems by 2021, subject to the terms of the HG Energy GGA.

Following the CNX Transaction and HG Energy Transaction, the aggregate number of Anchor Systems well commitments to the Partnership increased from 140 wells to 192 wells over the course of the next five years.

The Partnership has no remaining interests in the Growth Systems or the Moundsville area assets that were historically included within the Additional Systems.

Acquisition of Shirley-Penns System

Prior to March 16, 2018, CNX Gathering owned a 95% noncontrolling interest and the Partnership owned the remaining 5% controlling interest in the Additional Systems, which owned the gathering system and related assets commonly referred to as the Shirley-Penns System (the “Shirley-Penns System”).

On March 16, 2018, the Partnership acquired the remaining 95% interest in the Shirley-Penns System, pursuant to which the Additional Systems transferred its interest in the Shirley-Penns System on a pro rata basis to CNX Gathering and the Partnership in accordance with each transferee’s respective ownership interest in the Additional Systems. Following such transfer, CNX Gathering sold the Partnership its aggregate interest in the Shirley-Penns System, which now resides in the Anchor Systems, in exchange for cash consideration in the amount of $265.0 million (the “Shirley-Penns Acquisition”). The Partnership funded the Shirley-Penns Acquisition with a portion of the proceeds from the issuance of 6.5% senior notes due 2026 (the “Senior Notes”). See Note 7–Long-Term Debt for additional information.

Following the Shirley-Penns Acquisition, the Partnership owned a 100% controlling interest in the Shirley-Penns System. The Additional Systems continue to include several other gathering systems in which the Partnership owns a 5% controlling interest.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and various disclosures. Actual results could differ from those estimates, which are evaluated on an ongoing basis, utilizing historical experience and other methods considered reasonable under the particular circumstances. Although these estimates are based on management’s best available knowledge at the time, changes in facts and circumstances or discovery of new facts or circumstances may result in revised estimates and actual results may differ from these estimates. Effects on the Partnership’s business, financial position and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revision become known. In the opinion of management, all adjustments considered necessary for a fair presentation of the accompanying consolidated financial statements have been included.

The balance sheet at December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of the Partnership and all of its controlled subsidiaries, including 100% of each of the Anchor Systems, Growth and Additional Systems in the applicable periods presented within this Quarterly Report on Form 10-Q. Although the Partnership has less than a 100% economic interest in the Additional Systems and, for the period prior to May 3, 2018, had less than a 100% economic interest in the Growth Systems, each has been consolidated fully with the results of the Partnership in the applicable periods. After adjusting for noncontrolling interests, net income attributable to general and limited partner ownership interests in the Partnership reflect only that portion of net income that is attributable to the Partnership’s unitholders. For example, net income attributable to general and limited partner ownership interests in the Partnership includes 100% of the results of the Shirley-Penns Systems for the period subsequent to the closing date of the Shirley-Penns Acquisition.

Transactions between the Partnership and CNX Resources have been identified in the consolidated financial statements as transactions between related parties and are disclosed in Note 4–Related Party Transactions.

9

Revenue Recognition

On January 1, 2018, the Partnership adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method. We did not have a transition adjustment as a result of the adoption of the new revenue standard.

Revenues from contracts with customers

We record revenue when obligations under the terms of the contracts with our shippers are satisfied; generally, this occurs on a daily basis as we gather gas at the wellhead. Revenue is measured as the amount of consideration we expect to receive in exchange for providing the natural gas gathering services.

Nature of performance obligations

At contract inception, we assess the services promised in our contracts with customers and identify a performance obligation for each promised service that is distinct. To identify the performance obligations, we consider all of the services promised in the contract, regardless of whether they are explicitly stated or are implied by customary business practices.

Our revenue is generated from natural gas gathering activities. The gas gathering services are interruptible in nature and include charges for the volume of gas actually gathered and do not guarantee access to the system. Volumetric-based fees relate to actual volumes gathered. In general, the interruptible gathering of each unit (MMBtu) of natural gas represents a separate performance obligation. Payment terms for these contracts require payment within 25 days of the end of the calendar month in which the hydrocarbons are gathered.

Transaction price allocated to remaining performance obligations

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied. However, the guidance provides certain practical expedients that limit this requirement. Substantially all of our revenues are derived from contracts that have terms of greater than one year. Under these contracts, the interruptible gathering of each unit of natural gas represents a separate performance obligation.

For revenue associated with the Shirley-Penns System, for which we have remaining contractual performance obligations, the aggregate amount of the transaction price allocated to those remaining performance obligations was $383.2 million at June 30, 2019. We expect to recognize, at a minimum, revenue of $3.9 million and $34.7 million, respectively, during the remainder of the year ending December 31, 2019 and for the year ending December 31, 2020, respectively. The amount of revenue associated with this contract up to the minimum volume commitment (“MVC”) is fixed in nature, and volumes that we may gather above the MVC will be variable in nature. As of June 30, 2019, no future performance obligations exist relative to volumes to be gathered in excess of the MVC as the related volumes have not yet been nominated for gathering. Therefore, we have not disclosed the value of unsatisfied performance obligations for the variable aspect of this agreement, nor have we disclosed the value of other unsatisfied performance obligations that are variable in nature.

Prior-period performance obligations

We record revenue when obligations under the terms of the contracts with our shippers are satisfied; generally this occurs on a daily basis when we gather gas at the wellhead. In some cases, we are required to estimate the amount of natural gas that we have gathered during an accounting period and record any differences between our estimates and the actual units of natural gas that we gathered in the following month. We have existing internal controls for our revenue estimation process and related accruals; historically, any identified differences between our revenue estimates and actual revenue received have not been significant. For the quarters ended June 30, 2019 and 2018, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

Disaggregation of revenue

See Note 9–Segment Information for additional information.

Contract balances

We invoice customers once our performance obligations have been satisfied, at which point payment becomes unconditional. Accordingly, our contracts with customers do not give rise to contract assets or liabilities under the new revenue standard. We also have no contract assets recognized from the costs.

Classification

The fees we charge our affiliates, including our Sponsor, are recorded in gathering revenue — related party in our consolidated statements of operations. Fees from midstream services we perform for third party shippers are recorded in gathering revenue — third party in our consolidated statements of operations.

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Cash

Cash includes cash on hand and on deposit at banking institutions.

Receivables

Receivables are recorded at the invoiced amount and do not bear interest. When applicable, we reserve for specific accounts receivable when it is probable that all or a part of an outstanding balance will not be collected, such as customer bankruptcies. Collectability is determined based on terms of sale, credit status of customers and various other circumstances. We regularly review collectability and establish or adjust the reserve as necessary using the specific identification method. Account balances are charged off against the reserve after all means of collection have been exhausted and the potential for recovery is considered remote.

There were no reserves for uncollectable amounts at June 30, 2019 or December 31, 2018.

Fair Value Measurement

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance also relates to all nonfinancial assets and liabilities that are not recognized or disclosed on a recurring basis (e.g., the initial recognition of asset retirement obligations and impairments of long‑lived assets). The fair value is the price that we estimate we would receive upon selling an asset or that we would pay to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to prioritize input to valuation techniques used to estimate fair value. An asset or liability subject to the fair value requirements is categorized within the hierarchy based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The highest priority (Level 1) is given to unadjusted quoted market prices in active markets for identical assets or liabilities, and the lowest priority (Level 3) is given to unobservable inputs. Level 2 inputs are data, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

The carrying values on our balance sheets of our current assets, current liabilities and revolving credit facility approximate fair values due to their short maturities. We estimate the fair value of our long-term debt, which is not actively traded, using an income approach model that utilizes a discount rate based on market rates for other debt with similar remaining time to maturity and credit risk (Level 2). The estimated fair value of our long-term debt was approximately $381.0 million on June 30, 2019.

Property and Equipment

Property and equipment is recorded at cost upon acquisition and is depreciated on a straight-line basis over the assets’ estimated useful lives or over their lease terms of the assets. Expenditures which extend the useful lives of existing property and equipment are capitalized. When properties are retired or otherwise disposed, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposition is recognized as a gain or loss.

The Partnership evaluates whether long-lived assets have been impaired during any given quarter and have processes in place to ensure that we become aware of such indicators. Impairment indicators may include, but are not limited to, sustained decreases in commodity prices, a decline in customer well results and lower throughput forecasts, and increases in construction or operating costs. For such long-lived assets, impairment exists when the carrying amount of an asset or group of assets exceeds our estimates of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or group of assets. If the carrying amount of the long-lived asset(s) is not recoverable, based on the estimated future undiscounted cash flows, the impairment loss would be measured as the excess of the asset’s carrying amount over its estimated fair value. In the event that impairment indicators exist, we conduct an impairment test.

Fair value represents the estimated price between market participants to sell an asset in the principal or most advantageous market for the asset, based on assumptions a market participant would make. When warranted, management assesses the fair value of long-lived assets using commonly accepted techniques and may use more than one source in making such assessments. Sources used to determine fair value include, but are not limited to, recent third-party comparable sales, internally developed discounted cash flow analyses and analyses from outside advisors. Significant changes, such as the condition of an asset or management’s intent to utilize the asset, generally require management to reassess the cash flows related to long-lived assets. No property and equipment impairments were identified during the periods presented in the accompanying consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02–Leases (Topic 842), which increases transparency and comparability among organizations by recognizing right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU maintains a distinction between finance leases and operating leases,

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which is substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. Retaining this distinction allows the recognition, measurement and presentation of expenses and cash flows arising from a lease to remain similar to the previous accounting treatment. A lessee is permitted to make an accounting policy election by class of underlying asset to exclude from balance sheet recognition any lease assets and lease liabilities with a term of 12 months or less, and instead to recognize lease expense on a straight-line basis over the lease term. For both financing and operating leases, the ROU asset and lease liability is initially measured at the present value of the lease payments in the consolidated balance sheet. In July 2018, the FASB issued ASU 2018-11 which provides entities with the option to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if necessary. As discussed in Note 8, we adopted ASU 2016-02–Leases (Topic 842) effective January 1, 2019 utilizing the transition option provided by ASU 2018-11.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets, accrued liabilities, and long-term operating lease liabilities on our consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date of the lease in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Environmental Matters

We are subject to various federal, state and local laws and regulations relating to the protection of the environment. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. At this time, we are unable to assess the timing and/or effect of potential liabilities related to greenhouse gas emissions or other environmental issues. As of June 30, 2019 and December 31, 2018, we had no material environmental matters that required the recognition of a separate liability or specific disclosure.

Asset Retirement Obligations

Our gathering pipelines and compressor stations have an indeterminate life. If properly maintained, they will operate for an indeterminate period as long as supply and demand for natural gas exists, which we expect for the foreseeable future. We are under no legal or contractual obligation to restore or dismantle our gathering system upon abandonment. Therefore, we have not recorded any liabilities for asset retirement obligations at June 30, 2019 or December 31, 2018.

Variable Interest Entities

Each of the Anchor and Additional Systems, and our former Growth Systems, is a limited partnership (the “Limited Partnerships”) and a variable interest entity (“VIE”). These VIEs correspond with the manner in which we report our segment information in Note 9–Segment Information, which also includes information regarding the Partnership’s involvement with each of these VIEs and their relative contributions to our financial position, operating results and cash flows.

The Partnership fully consolidates each of the Limited Partnerships through its ownership of CNX Midstream Operating Company LLC (the “Operating Company”). The Operating Company, through its general partner ownership interest in each of the Limited Partnerships during the period in which any ownership interest exists, is considered to be the primary beneficiary for accounting purposes and has the power to direct all substantive strategic and day-to-day operational decisions of the Limited Partnerships.

Income Taxes

We are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of the Partnership’s taxable income. Accordingly, no provision for federal or state income taxes has been recorded in the Partnership’s consolidated financial statements for any period presented in the accompanying consolidated financial statements.

Equity Compensation

Equity compensation expense for all unit-based compensation awards is based on the grant date fair value estimated in accordance with the provisions of ASC 718–Compensation–Stock Compensation. We recognize unit-based compensation costs on a straight-line basis over the requisite service period of an award, which is generally the same as the award’s vesting term. See Note 10–Long-Term Incentive Plan for further discussion.

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Net Income Per Limited Partner Unit and General Partner Interest

We allocate net income between our general partner and limited partners using the two-class method, under which we allocate net income to our limited partners, our general partner and the holders of our incentive distribution rights (“IDRs”) in accordance with the terms of our partnership agreement. We also allocate any earnings in excess of distributions to our limited partners, our general partner and the holders of the IDRs in accordance with the terms of our partnership agreement. We allocate any distributions in excess of earnings for the period to our general partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the IDRs, as set forth in our partnership agreement.

The Partnership calculates historical earnings per unit under the two-class method and allocates the earnings or losses of a transferred business before the date of a dropdown transaction entirely to the general partner. If applicable, the previously reported earnings per unit of the limited partners would not change as a result of a dropdown transaction.

Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or agreements to issue common units, such as awards under the long-term incentive plan, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award subject to performance or market conditions should be included in the diluted net income per limited partner unit calculation, the impact is calculated by applying the treasury stock method. There were 41,819 and 41,644 phantom units that were not included in the calculation for the three and six months ended June 30, 2019, respectively, because the effect would have been antidilutive. There were also 26,470 and 27,545 phantom units that were not included in the calculation for the three and six months ended June 30, 2018, respectively, because the effect would have been antidilutive.

NOTE 3 — CASH DISTRIBUTIONS

Our partnership agreement requires that we distribute all of our available cash from operating surplus within 45 days after the end of each quarter to unitholders of record on the applicable record date, in accordance with the terms below.

Allocations of Available Cash from Operating Surplus and Incentive Distribution Rights

The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our general partner based on the specified target distribution levels. The amounts set forth under “Marginal Percentage Interest in Distributions” are the percentage interests of our general partner, as holder of our Incentive Distribution Rights (“IDRs”) and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “Total Quarterly Distribution Per Unit Target Amount.” IDRs represent the right to receive an increasing percentage, up to a maximum of 48% (which does not include the 2% general partner interest), of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels described in the table below have been achieved. All of the IDRs are currently held by our general partner, which may transfer its IDRs separately from its general partner interest.

The information set forth below for our general partner includes its 2% general partner interest and assumes that our general partner has contributed any additional capital necessary to maintain its 2% general partner interest, our general partner has not transferred its IDRs and there are no arrearages on common units. In addition, the information below for common unitholders are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution.

			Marginal Percentage Interest in Distributions
Distribution Targets	Total Quarterly Distribution Per Unit Target Amount		Common Unitholders	General Partner (including IDRs)
Minimum Quarterly Distribution		$0.2125	98%	2%
First Target Distribution	Above $0.2125	up to $0.24438	98%	2%
Second Target Distribution	Above $0.24438	up to $0.26563	85%	15%
Third Target Distribution	Above $0.26563	up to $0.31875	75%	25%
Thereafter	Above $0.31875		50%	50%

Beginning with the distribution that was approved by the Board of Directors of the Partnership’s general partner (the “Board of Directors”) for the earnings period ended March 31, 2018, each quarterly distribution thereafter has been in excess of the maximum Third Target Distribution, or $0.31875 per common unit.

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Cash Distributions

The Board of Directors declared the following cash distributions to the Partnership’s common unitholders and to the general partner for the periods presented:

(in thousands, except per unit information)
Quarters Ended	Quarterly Distribution Per Unit		Total Cash Distribution		Date of Distribution
Year ending December 31, 2018
March 31	$	0.3245	$	22,700	May 15, 2018
June 30	$	0.3361	$	24,176	August 14, 2018
September 30	$	0.3479	$	25,678	November 13, 2018
December 31	$	0.3603	$	27,268	February 13, 2019
Year ending December 31, 2019
March 31	$	0.3732	$	28,940	May 14, 2019

See Note 11–Subsequent Events for information regarding the distribution that was approved by the Board of Directors with respect to the quarter ended June 30, 2019.

NOTE 4 — RELATED PARTY TRANSACTIONS

In the ordinary course of business, we engage in related party transactions with CNX Resources (and certain of its subsidiaries) and CNX Gathering, which include the fees we charge and revenues we receive under a fixed fee gathering agreement (including electrically-powered compression CNX Resources reimburses to us) and our reimbursement of certain expenses to CNX Resources under several agreements, discussed below. In addition, we may waive or modify certain terms under these arrangements in the ordinary course of business, including the provisions of the fixed fee gathering agreement, when we determine it is in the best interests of the Partnership to do so. Any such transactions are reviewed by the Board of Directors, with oversight, as our Board of Directors deems necessary, by our conflicts committee.

During the six months ended June 30, 2018, the Partnership closed on the Shirley-Penns Acquisition for $265.0 million in cash consideration. See Note 1–Description of Business for additional information.

Operating expense and general and administrative expense – related party consisted of the following:

	Three Months Ended   June 30,				Six Months Ended   June 30,
(in thousands)	2019		2018		2019		2018
Operational services	$	3,851	$	3,257	$	7,484	$	6,092
Electrical compression	2,663		1,822		4,578		3,422
Total Operating Expense — Related Party	$	6,514	$	5,079	$	12,062	$	9,514
Total General and Administrative Expense — Related Party	$	4,027	$	3,620	$	7,994	$	7,232

Related party payables consisted of the following:

(in thousands)	June 30, 2019		December 31, 2018
Expense reimbursements	$	1,195	$	1,143
Capital expenditures reimbursements	134		182
General and administrative services	2,096		3,655
Total Accounts Payable — Related Party	$	3,425	$	4,980

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Operational Services Agreement

On September 30, 2014, the date of the closing of the initial public offering of our common units (our “IPO”), we entered into an operational services agreement with CNX Resources, which was amended and restated on December 1, 2016. Under the amended and restated operational services agreement, CNX Resources continues to provide certain operational services to us in support of our gathering pipelines and dehydration, treating and compressor stations and facilities, including routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and such other services as we and CNX Resources may mutually agree upon from time to time. CNX Resources prepares and submits for our approval a maintenance, operating and capital budget on an annual basis. CNX Resources submits actual expenditures for reimbursement on a monthly basis, and we reimburse CNX Resources for any direct third-party costs incurred by CNX Resources in providing these services.

Omnibus Agreement

We are party to an omnibus agreement with CNX Resources, CNX Gathering and our general partner that addresses the following matters:

• our payment of an annually-determined administrative support fee (approximately $7.9 million for the year ending December 31, 2019 and $1.9 million for the year ended December 31, 2018) for the provision of certain services by CNX Resources and its affiliates, including executive costs. Such costs may not necessarily reflect the actual expenses that the Partnership would incur on a stand-alone basis, and we are unable to estimate what those expenses would be on a stand-alone basis;

• our obligation to reimburse CNX Resources for all other direct or allocated costs and expenses incurred by CNX Resources in providing general and administrative services (which reimbursement is in addition to certain expenses of our general partner and its affiliates that are reimbursed under our partnership agreement);

• our right of first offer to acquire (i) CNX Gathering’s retained interests in our Additional Systems, (ii) CNX Gathering’s other ancillary midstream assets and (iii) any additional midstream assets that CNX Gathering develops; and

• our obligation to indemnify CNX Gathering for events and conditions associated with the use, ownership or operation of our assets that occur after the closing of the IPO, including environmental liabilities.

The omnibus agreement will remain in full force and effect throughout the period in which CNX Gathering controls our general partner. If CNX Gathering ceases to control our general partner, either party may terminate the omnibus agreement, provided that the indemnification obligations will remain in full force and effect in accordance with their terms.

Gathering Agreements

On January 3, 2018, we entered into the Second Amended and Restated GGA with CNX gas, which is a 20-year, fixed-fee gathering agreement. Under the Second Amended and Restated GGA, we continue to gather, compress, dehydrate and deliver all of CNX Gas’ dedicated natural gas in the Marcellus Shale on a first-priority basis and gather, inject, stabilize and store all of CNX Gas’ dedicated condensate on a first-priority basis. Under this agreement, during the year ending December 31, 2019, we will receive a fee based on the type and scope of the midstream services we provide, summarized as follows:

• For the services we provide with respect to natural gas from the Marcellus Shale formation that does not require downstream processing, or dry gas, we will receive a fee of $0.442 per MMBtu.

• For the services we provide with respect to natural gas from the Marcellus Shale formation that requires downstream processing, or wet gas, we will receive:

◦ a fee of $0.304 per MMBtu in the Pittsburgh International Airport area; and

◦ a fee of $0.607 per MMBtu for all other areas in the dedication area.

• Our fees for condensate services will be $5.52 per Bbl in the Majorsville area and in the Shirley-Penns area.

Each of the foregoing fees escalates by 2.5% on January 1 each year through the end of the initial term. Commencing on January 1, 2035, and as of January 1 thereafter, each of the applicable fees will be adjusted pursuant to the percentage change in CPI-U, but such fees will never escalate or decrease by more than 3%.

The Second Amended and Restated GGA also dedicated an additional 63,000 acres in the Utica Shale in and around the McQuay and Wadestown areas and introduced the following gas gathering and compression rates:

• Gas Gathering:

◦ McQuay area Utica - a fee of $0.225 per MMBtu; and

◦ Wadestown Marcellus and Utica - a fee of $0.35 per MMBtu.

• Compression:

◦ For areas not benefitting from system expansion pursuant to the Second Amended and Restated GGA, compression services are included in the base fees; and

◦ In the McQuay and Wadestown areas, for wells turned in line beginning January 1, 2018 and beyond, we will receive additional fees of $0.065 per MMBtu for Tier 1 pressure services (maximum receipt point of pressure

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of 600 psi) and $0.130 per MMBtu for Tier 2 pressure services (maximum receipt point of pressure of 300 psi).

In addition, the Second Amended and Restated GGA committed CNX Gas to drill and complete 140 total wells in the McQuay area within the Anchor Systems, provided that if 125 wells have been drilled and completed in the Marcellus Shale, then the remainder of such planned wells must be drilled in the Utica Shale. To the extent the requisite number of wells are not drilled and completed by CNX Gas in a given period, we will be entitled to a deficiency payment per shortfall well as set forth below:

• January 1, 2018 to December 31, 2018 - 30 wells (CNX Gas exceeded this requirement by eight wells)

• January 1, 2019 to April 30, 2020 - 40 wells (deficiency payment of $3.5 million per well)

• May 1, 2020 to April 30, 2021 - 40 wells (deficiency payment of $2.0 million per well)

• May 1, 2021 to April 30, 2022 - 30 wells (deficiency payment of $2.0 million per well)

In the event that CNX Gas drills wells and completes a number of wells in excess of the number of wells required to be drilled and completed in such period, (i) the number of excess wells drilled and completed during such period will be applied to the minimum well requirement in the succeeding period or (ii) to the extent CNX Gas was required to make deficiency payments for shortfalls in the preceding period, CNX Gas may elect to cause the Partnership to pay a refund in an amount equal to (x) the number of excess wells drilled and completed during the period, multiplied by (y) the deficiency payment paid per well during the period in which the shortfall occurred.

On March 16, 2018, in connection with the Shirley-Penns Acquisition, we entered into the First Amendment to the Second Amended and Restated GGA, which added an MVC on volumes associated with the Shirley-Penns System through December 31, 2031. The MVC commits CNX Gas to pay the Partnership the wet gas fee under the GGA for all natural gas we gather up to a specified amount per day through December 31, 2031. We will recognize a minimum of revenue throughout the term of the MVC, as set forth below:

(in millions)	Minimum Revenue per MVC
Remainder of year ending December 31, 2019	$	3.9
Year ending December 31, 2020	34.7
Year ending December 31, 2021	40.7
Year ending December 31, 2022	47.7
Year ending December 31, 2023	42.8
Remainder of term	213.4
Total minimum revenue to be recognized pursuant to Shirley-Penns MVC	$	383.2

For all natural gas the Partnership gathers in excess of the MVC, the Partnership will receive a fee of $0.3588 per MMBtu in 2019, which escalates by 2.5% on January 1 of each year. Since the Shirley-Penns Acquisition, CNX Gas has exceeded the required MVC each quarter.

On May 2, 2018, we completed the CNX Transaction, pursuant to which we entered into the Second Amendment to the Second Amended and Restated GGA, which committed CNX Gas to drill and complete an additional 40 wells in the Majorsville/Mamont area within the Anchor Systems by the end of 2023. To the extent the requisite number of wells are not drilled and completed by CNX Gas in a given period, we will be entitled to a deficiency payment per shortfall well as set forth below:

•July 1, 2018 to December 31, 2020 - 15 wells (deficiency payment of $2.8 million per well)

•January 1, 2021 to December 31, 2023 - 25 wells (deficiency payment of $2.8 million per well)

CNX Gas provides us with quarterly updates on its drilling and development operations, which include detailed descriptions of the drilling plans, production details and well locations for periods that range from up to 24-48 months, as well as more general development plans that may extend as far as ten years. In addition, we regularly meet with CNX Gas to discuss our current plans to timely construct the necessary facilities to be able to provide midstream services to them on our dedicated acreage. In the event that we do not perform our obligations under a gathering agreement, CNX Gas will be entitled to certain rights and procedural remedies thereunder, including the temporary and/or permanent release from dedication and indemnification from us.

There are no restrictions under our gathering agreements with CNX Gas on the ability of CNX Gas to transfer acreage in the right of first offer (“ROFO”) area, and any such transfer of acreage in the ROFO area will not be subject to our right of first offer. 

Upon completion of its 20-year term in 2037, our gathering agreement with CNX Gas will continue in effect from year to year until such time as the agreement is terminated by either us or CNX Gas on or before 180 days prior written notice.

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NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

(in thousands)	June 30, 2019		December 31, 2018		Estimated Useful Lives in Years
Land	$	76,896	$	67,624	N/A
Gathering equipment	647,966		605,722		25 — 40
Compression equipment	214,219		199,728		30 — 40
Processing equipment	30,979		30,979		40
Assets under construction	201,024		70,341		N/A
Total Property and Equipment	$	1,171,084	$	974,394
Less: Accumulated depreciation
Gathering equipment	$	66,799	$	58,561
Compression equipment	20,936		18,099
Processing equipment	6,372		5,959
Total Accumulated Depreciation	$	94,107	$	82,619
Property and Equipment — Net	$	1,076,977	$	891,775

The Partnership capitalized approximately $1.3 million and $2.1 million of interest on assets under construction during the three months and six months ended June 30, 2019. No interest was capitalized in the corresponding 2018 period.

During the six months ended June 30, 2019, the Partnership abandoned the construction of a compressor station that was designed to support additional production within certain areas of the Anchor Systems, incurring a loss of $7.2 million.

NOTE 6 — REVOLVING CREDIT FACILITY

On March 8, 2018, we entered into a five-year $600.0 million secured revolving credit facility with an accordion feature that allows, subject to certain terms and conditions, the Partnership to increase the available borrowings under the revolving credit facility by up to an additional $250.0 million. The revolving credit facility includes the ability to issue letters of credit up to $100.0 million in the aggregate. The available borrowing capacity is limited by certain financial covenants pertaining to leverage and interest coverage ratios as defined in the revolving credit facility agreement.

On April 24, 2019, the Partnership amended its revolving credit facility and extended its maturity to April 2024. Among other things, we received an annual interest rate reduction of 0.25% on borrowings compared to the original agreement. Under the terms of the amended agreement, borrowings under the revolving credit facility will bear interest at our option at either:

• the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.50% to 1.50%; or

• the LIBOR rate plus a margin ranging from 1.50% to 2.50%.

Following the amendment, the revolving credit facility now includes (i) the addition of a restricted payment basket permitting cash repurchases of IDRs subject to a pro forma secured leverage ratio of 3.00 to 1.00, a pro forma total leverage ratio of 4.00 to 1.00 and pro forma availability of 20% of commitments and (ii) a restricted payment basket for the repurchase of limited partner units not to exceed Available Cash (as defined in the partnership agreement) in any quarter of up to $150.0 million per year and up to $200.0 million during the life of the facility.

Interest on base rate loans is payable on the first business day of each calendar quarter. Interest on LIBOR loans is payable on the last day of each interest period or, in the case of interest periods longer than three months, every three months. The unused portion of our revolving credit facility is subject to a commitment fee ranging from 0.375% to 0.500% per annum depending on our most recent consolidated leverage ratio.

The revolving credit facility contains a number of affirmative and negative covenants that include, among others, covenants that restrict the ability of the Partnership, its subsidiary guarantors and certain of its non-guarantor, non-wholly-owned subsidiaries, except in certain circumstances, to: (i) create, incur, assume or suffer to exist indebtedness; (ii) create or permit to exist liens on their properties; (iii) prepay certain indebtedness unless there is no default or event of default under the

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revolving credit facility; (iv) make or pay any dividends or distributions in excess of certain amounts; (v) merge with or into another person, liquidate or dissolve; or acquire all or substantially all of the assets of any going concern or going line of business or acquire all or a substantial portion of another person’s assets; (vi) make particular investments and loans; (vii) sell, transfer, convey, assign or dispose of its assets or properties other than in the ordinary course of business and other select instances; (viii) deal with any affiliate except in the ordinary course of business on terms no less favorable to the Partnership than it would otherwise receive in an arm’s length transaction; and (ix) amend in any material manner its certificate of incorporation, bylaws, or other organizational documents without giving prior notice to the lenders and, in some cases, obtaining the consent of the lenders. The agreement also contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants. The obligations under the revolving credit facility agreement are secured by substantially all of assets of the Partnership and its wholly owned subsidiaries.

In addition, the Partnership is obligated to maintain at the end of each fiscal quarter:

• for as long as at least $150.0 million of the Senior Notes are outstanding (Note 7), a maximum total leverage ratio of no greater than 5.25 to 1.00 (which increases to no greater than 5.50 to 1.00 during qualifying acquisition periods);

• if less than $150.0 million of the Senior Notes are outstanding (Note 7), a maximum total leverage ratio of no greater than 4.75 to 1.00 (which increases to no greater than 5.25 to 1.00 during qualifying acquisition periods);

• a maximum secured leverage ratio of no greater than 3.50 to 1.00; and

• a minimum interest coverage ratio of no less than 2.50 to 1.00.

The Partnership was in compliance with all financial covenants at June 30, 2019.

On June 30, 2019, the outstanding balance on the revolving credit facility was $208.0 million at an interest rate of 3.90%. The Partnership had the maximum amount of remaining revolving credit available for borrowing at June 30, 2019, or $392.0 million.

At December 31, 2018, the outstanding balance on the revolving credit facility was $84.0 million at an interest rate of 4.21%.

NOTE 7 — LONG-TERM DEBT

On March 16, 2018, the Partnership, together with its wholly owned subsidiary CNX Midstream Finance Corp (“Finance Corp”), (collectively, the “Issuers”), completed a private offering of the Senior Notes, with related guarantees (the “Guarantees”) and received net proceeds of approximately $394.0 million, after deducting the initial purchasers’ discount. In connection with the issuance of the Senior Notes, the Partnership capitalized related offering expenses, which are recorded in our consolidated balance sheet as a reduction to the principal amount. Net proceeds from the Senior Notes offering were primarily used to fund the Shirley-Penns Acquisition and repay existing indebtedness under our prior $250.0 million unsecured revolving credit facility. The Senior Notes mature on March 15, 2026 and accrue interest at a rate of 6.5% per year, which is payable semi-annually in arrears on March 15 and September 15. There are no principal payment requirements on the Senior Notes prior to maturity.

The Senior Notes and Guarantees were issued pursuant to an indenture (the “Indenture”), dated March 16, 2018, among the Partnership, Finance Corp, the guarantors party thereto (the “Guarantors”) and UMB Bank, N.A., as trustee (the “Trustee”). The Senior Notes rank equally in right of payment with all of the Issuers’ existing and future senior indebtedness and senior to any subordinated indebtedness that the Issuers’ may incur. The Guarantees rank equally in right of payment to all of the Guarantors’ existing and future senior indebtedness.

The Issuers may redeem all or part of the Senior Notes at redemption prices ranging from 104.875% beginning March 15, 2021 to 100.0% beginning March 15, 2024. Prior to March 15, 2021, the Issuers may on one or more occasions redeem up to 35.0% of the principal amount of the Senior Notes with an amount of cash not greater than the amount of the net cash proceeds from one or more equity offerings at a redemption price of 106.50%. At any time or from time to time prior to March 15, 2021, the Issuers may also redeem all or a part of the Senior Notes, at a redemption price equal to 100.0% of the principal amount thereof plus the Applicable Premium, as defined in the Indenture, plus accrued and unpaid interest.

If the Partnership experiences certain kinds of changes of control, holders of the Senior Notes will be entitled to require the Partnership to repurchase all or any part of that holder’s Senior Notes pursuant to an offer on the terms set forth in the Indenture. The Partnership will offer to make a cash payment equal to 101.0% of the aggregate principal amount of the Senior Notes repurchased plus accrued and unpaid interest on the Senior Notes repurchased to, but not including, the date of purchase, subject to the rights of holders of the Senior Notes on the relevant record date to receive interest due on the relevant interest payment date.

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The Partnership’s long-term debt consisted of the following:

(in thousands)	June 30, 2019		December 31, 2018
Senior Notes due March 2026 at 6.5%	$	400,000	$	400,000
Less: Unamortized debt issuance costs	1,312		1,410
Less: Unamortized bond discount	5,000		5,375
Total Long-Term Debt	$	393,688	$	393,215

NOTE 8 — COMMITMENTS AND CONTINGENCIES

Litigation

The Partnership may become involved in certain legal proceedings from time to time, and where appropriate, we have accrued our estimate of the probable costs for the resolution of these claims. The Partnership believes that the ultimate outcome of any matter currently pending against the Partnership will not materially affect the Partnership’s business, financial condition, results of operations, liquidity or ability to make distributions.

Leases

On January 1, 2019, we adopted ASC 2016-02, and all the related amendments, using the transition method which allows a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if applicable. In connection with the adoption, we elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. As a result, we did not reassess whether existing or expired contracts contain leases, the lease classification for any existing or expired leases, or whether lease origination costs qualified as initial direct costs. In addition, we elected the short-term practical expedient for all asset classes by establishing an accounting policy to exclude leases with a term of 12 months or less. Prospectively, we will not separate lease components from non-lease components for any asset classes. Lastly, we adopted the easement practical expedient, which allows us to apply ASC 842 prospectively to land easements after January 1, 2019. Easements that existed or expired prior to January 1, 2019 that were not previously assessed under ASC 840 will not be reassessed.

The Partnership’s non-cancelable operating leases, the longest of which run through December 31, 2020, consist primarily of compression equipment. As of June 30, 2019, ROU assets recorded under operating leases were $11.0 million (which includes $0.5 million of prepaid assets); accumulated amortization associated with those leases was $3.1 million. Corresponding lease liabilities associated with obligations on our ROU assets were $7.2 million, (comprised of $6.0 million in current liabilities and $1.2 million of long-term liabilities) which were calculated using a weighted average incremental borrowing rate of 4.8% as of June 30, 2019. Cash paid for amounts included in the measurement of lease liabilities was $4.0 million in operating cash flows from operating leases for the six months ended June 30, 2019.

Maturities of operating lease liabilities are as follows:

(in thousands)	Twelve months ended June 30,
2020	$	6,252
2021	1,170
Total lease payments	7,422
Less: imputed interest	190
Present value of operating lease liabilities	$	7,232

Total operating lease expense, which includes short-term leases, was $2.0 million for the three months ended June 30, 2019 and 2018 and $4.1 million for the six months ended June 30, 2019 and 2018, respectively. These expenses are included within operating expense - third party in our consolidated statements of operations.

NOTE 9 — SEGMENT INFORMATION

Operating segments are the revenue-producing components of a company for which separate financial information is produced internally and is subject to evaluation by the chief operating decision maker in deciding how to allocate resources. Prior to the CNX and HG Energy Transactions, the Partnership had three operating segments, which also represented its reportable segments - the Anchor Systems, Growth Systems and Additional Systems, each of which does business entirely within the United States of America. See Note 1–Description of Business for additional information.

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During the first quarter of 2018, the Partnership, through its 100% interest in the Anchor Systems, completed the Shirley-Penns Acquisition. Prior to March 16, 2018, the Partnership held a 5% controlling interest in the earnings and throughput related to the Shirley-Penns System. Accordingly, until March 16, 2018, results attributable to limited and general partners of the Partnership reflect a 5% interest in the Shirley-Penns System, and results net to the Partnership include activity related to the Shirley-Penns Acquisition beginning March 16, 2018. However, in accordance with ASC 280 - Segment Reporting, information is reported in the tables below, for comparability purposes, as if the Shirley-Penns Acquisition occurred on January 1, 2018.

In connection with the CNX Transaction and HG Energy Transaction, the Partnership distributed its 5% interest in the Growth Systems and related assets as well as its 5% interest in the Moundsville area midstream assets, which were previously a part of the Additional Systems, to CNX Gathering, which transferred these assets to HG Energy. Because the transferred assets had activity for the period from January 1, 2018 through May 2, 2018, we will continue to present historical segment information with regards to this transaction.

Segment results for the periods presented were as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2019			2018		2019			2018
Gathering Revenue:
Anchor Systems	$	76,298		$	56,584	$	146,469		$	112,774
Growth Systems	—			668		—			2,572
Additional Systems	1,803			3,762		3,851			9,537
Total Gathering Revenue	$	78,101		$	61,014	$	150,320		$	124,883
Net Income (Loss):
Anchor Systems	$	46,760		$	29,991	$	81,874		$	63,134
Growth Systems	—			186		—			379
Additional Systems	(297		)	105		(435		)	474
Total Net Income	$	46,463		$	30,282	$	81,439		$	63,987
Depreciation Expense:
Anchor Systems	$	5,444		$	4,733	$	10,680		$	9,203
Growth Systems	—			195		—			748
Additional Systems	416			515		830			1,348
Total Depreciation Expense	$	5,860		$	5,443	$	11,510		$	11,299
Capital Expenditures for Segment Assets:
Anchor Systems	$	103,322		$	24,502	$	179,121		$	38,290
Growth Systems	—			42		—			120
Additional Systems	988			1,071		3,746			3,177
Total Capital Expenditures	$	104,310		$	25,615	$	182,867		$	41,587

Segment assets as of the dates presented were as follows:

(in thousands)	June 30, 2019		December 31, 2018
Segment Assets
Anchor Systems	$	1,026,131	$	832,885
Additional Systems	101,486		92,543
Total Segment Assets	$	1,127,617	$	925,428

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NOTE 10 — LONG-TERM INCENTIVE PLAN

Under the Partnership’s 2014 Long-Term Incentive Plan (our “LTIP”), our general partner may issue long-term equity-based awards to directors, officers and employees of the general partner or its affiliates, or to any consultants, affiliates of our general partner or other individuals who perform services on behalf of the Partnership. The Partnership is responsible for the cost of awards granted under the LTIP, which limits the number of units that may be delivered pursuant to vested awards to 5.8 million common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are canceled, forfeited, withheld to satisfy tax withholding obligations or otherwise terminated without delivery of the common units will be available for delivery pursuant to other awards.

The following table presents phantom unit activity during the six month period ended June 30, 2019:

	Number of Units	Weighted Average Grant Date Fair Value
Total awarded and unvested at December 31, 2018	178,629	$	18.35
Granted	148,442	15.92
Vested	(135,570)	17.51
Total awarded and unvested at June 30, 2019	191,501	$	17.06

The Partnership accounts for phantom units as equity awards and records compensation expense on a straight-line basis over the vesting period based on the fair value of the awards on their grant dates. Awards granted to independent directors vest over a period of one year, and awards granted to certain officers and employees of the general partner vest 33% per year over a period of three years.

The Partnership recognized $0.5 million and $0.7 million of compensation expense related to phantom units for the three months ended June 30, 2019 and 2018, respectively, and $1.2 million and $1.3 million for the six months ended June 30, 2019 and 2018, respectively, which was included in general and administrative expense - related party in the consolidated statements of operations.

At June 30, 2019, the unrecognized compensation related to all outstanding awards was $2.5 million, which we expect to recognize through 2021.

NOTE 11 — SUBSEQUENT EVENTS

On July 19, 2019, the Board of Directors of the Partnership’s general partner declared a cash distribution to the Partnership’s unitholders with respect to the second quarter of 2019 of $ $0.3865 per common unit. The cash distribution will be paid on August 14, 2019 to unitholders of record at the close of business on August 6, 2019.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of the financial condition and results of operations of CNX Midstream Partners LP in conjunction with the historical and unaudited interim consolidated financial statements and notes to the consolidated financial statements. Among other things, those historical unaudited interim consolidated financial statements include more detailed information regarding the basis of presentation for the following information. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified under “forward-looking statements” below and those discussed in the section entitled “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018 and in our Quarterly Report on Form 10-Q, filed subsequent to that Annual Report on Form 10-K. In this Item 2, all references to “we,” us,” “our,” the “Partnership,” “CNXM,” or similar terms refer to CNX Midstream Partners LP and its subsidiaries.

Executive Overview

We are a growth-oriented master limited partnership focused on the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets to service our customers’ production in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Our assets include natural gas gathering pipelines and compression and dehydration facilities, as well as condensate gathering, collection, separation and stabilization facilities. We are managed by our general partner, CNX Midstream GP LLC (our “general partner”), which is a wholly owned subsidiary of CNX Gathering LLC (“CNX Gathering”). CNX Gathering is a wholly owned subsidiary of CNX Gas Company LLC (“CNX Gas”), which is a wholly owned subsidiary of CNX Resources Corporation (NYSE: CNX) (“CNX Resources”). We may refer to CNX Resources as our Sponsor throughout this Quarterly Report on Form 10-Q.

Our gas gathering agreements (“GGAs”) with CNX Gas and certain third party shippers include acreage dedications of approximately 381,000 aggregate net acres, subject to the release provisions set forth therein.

Second Quarter and Year to Date Financial Highlights

The Partnership continued its solid financial performance during the quarter and six months ended June 30, 2019. Comparative results net to the Partnership, with the exception of operating cash flows, which is presented on a gross consolidated basis, were as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
(in millions)	2019		2018		2019		2018
Net income	$	46.7	$	30.0	$	81.9	$	57.9
Net cash provided by operating activities	$	74.8	$	53.7	$	124.7	$	95.5
Adjusted EBITDA (non-GAAP)	$	59.3	$	41.3	$	113.8	$	76.2
Distributable cash flow (non-GAAP)	$	46.9	$	31.6	$	89.9	$	60.9

For a discussion of why the above non-GAAP metrics are viewed as important by management, and how the non-GAAP financial measures reconcile to their nearest comparable financial measures prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), see “Non-GAAP Financial Measures” on page 28.

Quarterly Cash Distribution

The Partnership declared a cash distribution to its unitholders of $0.3865 per unit on July 19, 2019, which represents a 3.6% increase from the first quarter 2019 distribution of $0.3732 per unit and a 15.0% increase from the second quarter 2018 distribution of $0.3361 per unit. This marks the 17th consecutive quarterly distribution increase at our targeted 15% annual growth rate.

Factors Affecting the Comparability of Our Financial Results

At December 31, 2017, CNX Gathering owned a 95% noncontrolling interest in DevCo III LP (which we refer to as the “Additional Systems”), which owned the gathering system and related assets commonly referred to as the Shirley-Penns System (the “Shirley-Penns System”), while the Partnership owned the remaining 5% controlling interest in the Additional Systems.

On March 16, 2018, the Partnership acquired the remaining 95% interest in the Shirley-Penns System, pursuant to which DevCo III LP transferred its interest in the Shirley-Penns System on a pro rata basis to CNX Gathering and the Partnership in accordance with each transferee’s respective ownership interest in DevCo III LP. Following such transfer, CNX Gathering sold its aggregate interest in the Shirley-Penns System to DevCo I LP (which we refer to as the “Anchor Systems”) in exchange for

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cash consideration in the amount of $265.0 million (the “Shirley-Penns Acquisition”). Accordingly our results of operations, net to the Partnership, include 100% of the Shirley-Penns System beginning on March 16, 2018, the date the Shirley-Penns Acquisition was consummated. However, our results of operations for the period from January 1, 2018 through March 15, 2018, net to the Partnership, include only 5% of the earnings of the Shirley-Penns System.

On May 2, 2018, we announced strategic transactions with our Sponsor and HG Energy II Appalachia, LLC (“HG Energy”), pursuant to which we amended our GGAs with each of CNX Gas and HG Energy (collectively the “CNX Transaction and HG Energy Transaction”) and among other things, distributed our 5% controlling interest in the midstream assets of the Growth Systems, which were primarily located in the dry gas regions of our dedicated acreage in central West Virginia, and the Moundsville midstream assets located within the Additional Systems, to affiliates of our Sponsor. Our Sponsor subsequently transferred these assets to HG Energy. Following the CNX Transaction and HG Energy Transaction, the Partnership has no remaining interest in the Growth Systems or in the Moundsville area of the Additional Systems. Total revenues associated with the Growth Systems and the Moundsville area were approximately $6.6 million for period January 1, 2018 through the date of the CNX Transaction and HG Energy Transaction, of which $1.6 million related to the period April 1, 2018 through the date of the CNX Transaction and HG Energy Transaction. See Item 1. Consolidated Financial Statements, Note 1–Description of Business for additional information.

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Results of Operations

Quarter Ended June 30, 2019 Compared to the Quarter Ended June 30, 2018

	Quarter Ended June 30,
	2019			2018			Change ($)			Change (%)
(in thousands)
Revenue
Gathering revenue — related party	$	59,205		$	37,576		$	21,629		57.6	%
Gathering revenue — third party	18,896			23,438			(4,542		)	(19.4	)%
Total Revenue	78,101			61,014			17,087			28.0	%
Expenses
Operating expense — related party	6,514			5,079			1,435			28.3	%
Operating expense — third party	6,188			7,406			(1,218		)	(16.4	)%
General and administrative expense — related party	4,027			3,620			407			11.2	%
General and administrative expense — third party	1,364			2,319			(955		)	(41.2	)%
Gain on asset sales and abandonments	—			(254		)	254			(100.0	)%
Depreciation expense	5,860			5,443			417			7.7	%
Interest expense	7,685			7,119			566			8.0	%
Total Expense	31,638			30,732			906			2.9	%
Net Income	$	46,463		$	30,282		$	16,181		53.4	%
Less: Net (loss) income attributable to noncontrolling interest	(282		)	277			(559		)	(201.8	)%
Net Income Attributable to General and Limited Partner Ownership Interest in CNX Midstream Partners LP	$	46,745		$	30,005		$	16,740		55.8	%

Operating Statistics - Gathered Volumes for the Quarter Ended June 30, 2019

	Anchor	Growth	Additional	TOTAL
Dry Gas (BBtu/d) 1	879	—	3	882
Wet Gas (BBtu/d) 1	670	—	61	731
Other (BBtu/d) 2	178	—	—	178
Total Gathered Volumes	1,727	—	64	1,791

Operating Statistics - Gathered Volumes for the Quarter Ended June 30, 2018

	Anchor	Growth	Additional	TOTAL
Dry Gas (BBtu/d) 1	667	15	9	691
Wet Gas (BBtu/d) 1	530	1	121	652
Other (BBtu/d)	3	—	5	8
Total Gathered Volumes	1,200	16	135	1,351

¹ Classification as dry or wet is primarily based upon system area. In certain situations, we may elect to allow customers to access alternate delivery points within our system, which would be a negotiated change addressed on a case-by-case basis.

² Includes condensate handling and third-party volumes we gather under high-pressure short-haul agreements.

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Revenue    

Our revenue typically increases or decreases as our customers’ production on our dedicated acreage increases or decreases. Because we charge a higher fee for natural gas that is shipped through our wet system than through our dry system, our revenue can also be impacted by the relative mix of gathered volumes by area, which may vary dependent upon our customers’ elections as to where to deliver their produced volumes, which may change dynamically depending on the most current commodity prices at the time of shipment.

Total revenue increased 28.0% to approximately $78.1 million for the three months ended June 30, 2019 compared to approximately $61.0 million for the three months ended June 30, 2018, which was primarily due to a 20.1% increase in gathered volumes of dry gas and wet gas in the current quarter compared to the prior year quarter. Significantly contributing to the volume increase was a 191 BBtu/d increase in dry natural gas gathered in the current quarter compared to the prior year quarter, due primarily to significant well turn-in-line activity since June 30, 2018.

In addition, there was a 170 BBtu/d increase in other volumes quarter over quarter, due primarily to activity under short-haul gathering contracts, which did not begin until after June 30, 2018. Volumes gathered under short-haul gathering contracts do not have as significant an impact on revenues as volumes gathered at our standard dry or wet gas rates.

Operating Expense    

Total operating expenses were approximately $12.7 million in the current quarter compared to approximately $12.5 million in the prior year quarter. Included in total operating expense was electrically-powered compression expense of $4.4 million for the three months ended June 30, 2019 compared to $4.2 million for the three months ended June 30, 2018, which was reimbursed by our customers pursuant to our GGAs. After adjusting for the electrically-powered compression expense reimbursement, operating expenses remained relatively consistent in the current quarter compared to the prior year quarter, despite a significant increase in volumes gathered.

General and Administrative Expense    

General and administrative expense is comprised of direct charges for the management and operation of our assets. Total general and administrative expense was approximately $5.4 million in the current quarter compared to approximately $5.9 million in the prior year quarter. The comparative decrease was primarily related to decreased employee compensation costs and legal and other professional costs, due primarily to costs that were incurred in the prior year in connection with the CNX Transaction and HG Transaction, partially offset by an increase to related party fees we incur pursuant to our Omnibus Agreement with our Sponsor.

Gain on asset sales and abandonments

During the three months ended June 30, 2018, we sold a portion of our pipe stock to an unrelated third party for $0.7 million in cash consideration, resulting in a gain of $0.3 million. The pipe stock was previously within the Growth Systems; accordingly, the net impact to earnings attributable to general and limited partners’ ownership interests in the Partnership was not significant.

Depreciation Expense    

We depreciate our property and equipment on a straight-line basis, with useful lives ranging from 25 years to 40 years. Total depreciation expense was approximately $5.9 million in the three months ended June 30, 2019 compared to approximately $5.4 million in the three months ended June 30, 2018. The increase was the result of additional assets placed into service over time.

Interest Expense 

Interest expense is comprised of interest on our 6.5% senior notes due 2026 (the “Senior Notes”) as well as on the outstanding balance of our revolving credit facility. Interest expense was approximately $7.7 million for the three months ended June 30, 2019 compared to approximately $7.1 million for the three months ended June 30, 2018. The increase in interest expense was primarily due to higher interest expense incurred on increased borrowings on our credit facility, which were necessary to support our 2019 capital program, partially offset by interest that has been capitalized on qualifying capital projects.

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Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018

	Six Months Ended June 30,
	2019			2018		Change ($)			Change (%)
	($ in thousands)
Revenue
Gathering revenue — related party	$	112,981		$	75,306	$	37,675		50.0	%
Gathering revenue — third party	37,339			49,577		(12,238		)	(24.7	)%
Total Revenue	150,320			124,883		25,437			20.4	%
Expenses
Operating expense — related party	12,062			9,514		2,548			26.8	%
Operating expense — third party	12,162			15,874		(3,712		)	(23.4	)%
General and administrative expense — related party	7,994			7,232		762			10.5	%
General and administrative expense — third party	2,900			4,868		(1,968		)	(40.4	)%
Loss on asset sales and abandonments	7,229			2,501		4,728			189.0	%
Depreciation expense	11,510			11,299		211			1.9	%
Interest expense	15,024			9,608		5,416			56.4	%
Total Expense	68,881			60,896		7,985			13.1	%
Net Income	$	81,439		$	63,987	$	17,452		27.3	%
Less: Net income attributable to noncontrolling interest	(413		)	6,135		(6,548		)	(106.7	)%
Net Income Attributable to General and Limited Partner Ownership Interest in CNX Midstream Partners LP	$	81,852		$	57,852	$	24,000		41.5	%

Operating Statistics - Gathered Volumes for the Six Months Ended June 30, 2019

	Anchor	Growth	Additional	TOTAL
Dry Gas (BBtu/d) 2	853	—	3	856
Wet Gas (BBtu/d) 2	649	—	66	715
Other (BBtu/d) 3	156	—	—	156
Total Gathered Volumes 1	1,658	—	69	1,727

Operating Statistics - Gathered Volumes for the Six Months Ended June 30, 2018

	Anchor	Growth	Additional	TOTAL
Dry Gas (BBtu/d) 2	652	29	16	697
Wet Gas (BBtu/d) 2	538	2	141	681
Other (BBtu/d)	4	—	13	17
Total Gathered Volumes 1	1,194	31	170	1,395

¹ On March 16, 2018, the Partnership, through its 100% interest in the Anchor Systems, consummated the Shirley-Penns Acquisition. Prior to March 16, 2018, the Partnership held a 5% controlling interest in the earnings and production related to the Shirley-Penns System. However, in accordance with ASC 280 - Segment Reporting, information is reported in the tables above, for comparability purposes, as if the Shirley-Penns Acquisition occurred on January 1, 2018. See “Acquisition of Shirley-Penns System” above.

² Classification as dry or wet is based upon system area. In certain situations, we may elect to allow customers to access alternate delivery points within our system, which would be a negotiated change addressed on a case-by-case basis.

³ Includes condensate handling and third-party volumes we gather under high-pressure short-haul agreements.

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Revenue    

Our revenue typically increases or decreases as our customers’ production on our dedicated acreage increases or decreases. Since we charge a higher fee for natural gas that is shipped through our wet system than through our dry system, our revenue can also be impacted by the relative mix of gathered volumes by area, which may vary dependent upon our customers’ elections as to where to deliver their produced volumes, which may change dynamically depending on the most current commodity prices at the time of shipment.

Total revenue increased approximately 20.4% to $150.3 million for the six months ended June 30, 2019 compared to $124.9 million for the six months ended June 30, 2018, which was primarily due to a 14.0% increase in gathered volumes of dry gas and wet gas in the current quarter compared to the prior year period. Significantly contributing to the volume increase was a 159 BBtu/d increase in dry natural gas gathered in the current year period compared to the prior year period, due primarily to significant well turn-in-line activity since June 30, 2018.

In addition, there was a 139 BBtu/d increase in other volumes gathered period over period, due primarily to activity under short-haul gathering contracts, which did not begin until after June 30, 2018.

Operating Expense    

Total operating expenses were approximately $24.2 million for the six months ended June 30, 2019 compared to approximately $25.4 million for the six months ended June 30, 2018. Included in total operating expense was electrically-powered compression expense of $7.7 million for the six months ended June 30, 2019 compared to $8.0 million for the six months ended June 30, 2018, which was reimbursed by our customers pursuant to our gas gathering agreements. After adjusting for the electrically-powered compression expense reimbursement, operating expenses decreased by approximately 5.0% in the current six month period compared to the prior year period, despite a significant increase in volumes gathered. This was primarily due to continued adherence to cost control measures implemented by our operations team over the past few years as well as decreased property and other taxes due primarily to the HG Energy Transaction.

General and Administrative Expense    

General and administrative expense is comprised of direct charges for the management and operation of our assets. Total general and administrative expense was approximately $10.9 million for the six months ended June 30, 2019 compared to approximately $12.1 million for the six months ended June 30, 2018. The comparative decrease was primarily related to decreased employee compensation costs and transaction costs incurred in the prior year period related to the Shirley Penns Acquisition, CNX Transaction and HG Energy Transaction, partially offset by an increase to related party fees we incur pursuant to our Omnibus Agreement with our Sponsor.

Loss on asset sales and abandonments

During the six months ended June 30, 2019, due in part to changes in customer drilling plan timing and ongoing assessments of projects that generate the highest returns on invested capital, the Partnership abandoned the construction of a compressor station that was designed to support additional production within certain areas of the Anchor Systems. After evaluating the amount of project spending that could be repurposed to other ongoing projects, management determined that the loss on abandoning the project was $7.2 million.

During the six month period ended June 30, 2018, the Partnership sold property and equipment with a carrying value of $8.6 million to an unrelated third party for $5.8 million in cash proceeds. Our sale of midstream assets resulted in a loss of $2.8 million. The assets that were sold were previously within the Additional Systems; accordingly, the net impact to earnings attributable to general and limited partners’ ownership interests in the Partnership was approximately $0.1 million.

Depreciation Expense    

Depreciation expense is recognized on gathering and other equipment on a straight-line basis, with useful lives ranging from 25 years to 40 years. Total depreciation expense was approximately $11.5 million for the six months ended June 30, 2019 compared to approximately $11.3 million for the six months ended June 30, 2018. The increase was the result of additional assets placed into service over time.

Interest Expense 

Interest expense is interest on our 6.5% senior notes due 2026 (the “Senior Notes”) as well as on the outstanding balance of our revolving credit facility. Interest expense was approximately $15.0 million in the six months ended June 30, 2019 compared to approximately $9.6 million for the six months ended June 30, 2018. The increase in interest expense was primarily due to higher interest expense incurred on increased borrowings on our credit facility, which were necessary to support our 2019 capital program, partially offset by interest that has been capitalized on qualifying capital projects.

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Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

We define EBITDA as net income (loss) before net interest expense, depreciation and amortization, and Adjusted EBITDA as EBITDA adjusted for gains or losses on asset sales and abandonments and other non-cash items which should not be included in the calculation of distributable cash flow. EBITDA and Adjusted EBITDA are used as supplemental financial measures 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 to those of other companies in the midstream energy industry, without regard to financing methods, historical cost basis or capital structure;

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

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

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

We believe that the presentation of EBITDA and Adjusted EBITDA in this Quarterly Report on Form 10-Q provides information that is useful to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA and Adjusted EBITDA are net income and net cash provided by operating activities. EBITDA and Adjusted EBITDA should not be considered alternatives to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude 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, EBITDA and Adjusted EBITDA as presented below may not be comparable to similarly titled measures of other companies.

Distributable Cash Flow

We define distributable cash flow as Adjusted EBITDA less net income attributable to noncontrolling interest, cash interest expense and maintenance capital expenditures, each net to the Partnership. Distributable cash flow does not reflect changes in working capital balances.

Distributable cash flow 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:

• the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions to our unitholders; and

• the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

We believe that the presentation of distributable cash flow in this Quarterly Report on Form 10-Q provides information that is 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 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, and these measures may vary from those of other companies. As a result, our distributable cash flow may not be comparable to similarly titled measures that other companies may use.

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The following table presents a reconciliation of the non-GAAP measures of EBITDA, Adjusted EBITDA and distributable cash flow to the most directly comparable GAAP financial measures of net income and net cash provided by operating activities.

	Three Months Ended   June 30,						Six Months Ended   June 30,
(in thousands)	2019			2018			2019			2018
Net Income	$	46,463		$	30,282		$	81,439		$	63,987
Depreciation expense	5,860			5,443			11,510			11,299
Interest expense	7,685			7,119			15,024			9,608
EBITDA	60,008			42,844			107,973			84,894
Non-cash unit-based compensation expense	541			690			1,153			1,269
(Gain) loss on asset sales and abandonments	—			(254		)	7,229			2,501
Adjusted EBITDA	60,549			43,280			116,355			88,664
Less:
Net (loss) income attributable to noncontrolling interest	(282		)	277			(413		)	6,135
Depreciation expense attributable to noncontrolling interest	395			674			789			2,339
Other expenses attributable to noncontrolling interest	1,098			1,224			2,218			1,660
(Gain) loss on asset sales attributable to noncontrolling interest	—			(242		)	—			2,375
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CNX Midstream Partners LP	$	59,338		$	41,347		$	113,761		$	76,155
Less: cash interest expense, net to the Partnership	7,282			5,573			13,886			7,588
Less: maintenance capital expenditures, net to the Partnership	5,168			4,125			10,003			7,708
Distributable Cash Flow	$	46,888		$	31,649		$	89,872		$	60,859
Net Cash Provided by Operating Activities	$	74,753		$	53,674		$	124,666		$	95,541
Interest expense	7,685			7,119			15,024			9,608
(Gain) loss on asset sales and abandonments	—			(254		)	7,229			2,501
Other, including changes in working capital	(21,889		)	(17,259		)	(30,564		)	(18,986		)
Adjusted EBITDA	60,549			43,280			116,355			88,664
Less:
Net (loss) income attributable to noncontrolling interest	(282		)	277			(413		)	6,135
Depreciation expense attributable to noncontrolling interest	395			674			789			2,339
Other expenses attributable to noncontrolling interest	1,098			1,224			2,218			1,660
(Gain) loss on asset sales attributable to noncontrolling interest	—			(242		)	—			2,375
Adjusted EBITDA Attributable to General and Limited Partner Ownership Interest in CNX Midstream Partners LP	$	59,338		$	41,347		$	113,761		$	76,155
Less: cash interest expense, net to the Partnership	7,282			5,573			13,886			7,588
Less: maintenance capital expenditures, net to the Partnership	5,168			4,125			10,003			7,708
Distributable Cash Flow	$	46,888		$	31,649		$	89,872		$	60,859

Distributable cash flow is a non-GAAP measure that is net to the Partnership. The $15.2 million and $29.0 million increases in distributable cash flow in the three and six months ended June 30, 2019, respectively, compared to the 2018 periods were primarily attributable to an increase in volumes gathered under our fixed-fee gathering agreement with our Sponsor due to significant well turn in line activity over the last 12 months, coupled with continued adherence to cost control measures implemented by our operations team over the past few years.

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Liquidity and Capital Resources

Liquidity and Financing Arrangements

We have historically satisfied our working capital requirements, funded capital expenditures, acquisitions and debt service obligations, and made cash distributions with cash generated from operations, borrowings under our revolving credit facility and issuance of debt and equity securities. If necessary, we may issue additional equity or debt securities to satisfy the expenditure requirements necessary to fund future growth. We believe that cash generated from these sources will continue to be sufficient to meet these needs in the future.

Cash Flows

Net cash provided by or used in operating activities, investing activities and financing activities were as follows for the periods presented:

	Six Months Ended June 30,
(in millions)	2019			2018			Change
Net cash provided by operating activities	$	124.7		$	95.5		$	29.2
Net cash used in investing activities	$	(182.9	)	$	(35.1	)	$	(147.8	)
Net cash provided by (used in) financing activities	$	65.9		$	(62.9	)	$	128.8

Net cash provided by operating activities increased approximately $29.2 million for the six months ended June 30, 2019 compared to the six months ended June 30, 2018, which approximates the $27.7 million increase in consolidated earnings before interest, loss on asset sales and abandonment, and depreciation in the current year period compared to the prior year period.

Net cash used in investing activities increased significantly compared to the prior year period due to an increase in capital spending requirements to support expected Sponsor drilling activity on our acreage in 2019 and beyond.

Net cash was provided by financing activities in the current year period due primarily to borrowings required to support the higher capital spending program (investing activities) compared to the prior year period. Quarterly distribution payments were $28.9 million in the current year quarter and $22.7 million in the prior year quarter.

Indebtedness

Revolving Credit Facility

We are party to a $600.0 million secured revolving credit facility, as amended in April 2019, that matures on April 24, 2024 and includes the ability to issue letters of credit up to $100.0 million in the aggregate. The revolving credit facility has an accordion feature that allows, subject to certain terms and conditions, the Partnership to increase the available borrowings under the revolving credit facility by up to an additional $250.0 million. The available borrowing capacity under the revolving credit facility is limited by certain financial covenants pertaining to leverage and interest coverage ratios as defined in the revolving credit facility agreement.

Borrowings under the new revolving credit facility bear interest at our option at either:

• the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, and (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.50% to 1.50%; or

• the LIBOR rate plus a margin ranging from 1.50% to 2.50%%.

We incurred interest expense of $3.0 million on our revolving credit facility (not including amortization of revolver fees) during the six months ended June 30, 2019. At June 30, 2019, the outstanding balance on our revolving credit facility was $208.0 million, and we had the maximum remaining amount of revolving credit, or $392.0 million, available for borrowing.

For additional information on our revolving credit facility, including details relating to an amendment that was completed in April 2019, see Item 1. Consolidated Financial Statements, Note 6–Revolving Credit Facility, which is incorporated herein by reference.

Senior Notes due 2026

On March 16, 2018, the Partnership completed a private offering of $400.0 million in 6.5% senior notes due 2026 (the “Senior Notes”), and received net proceeds of approximately $394.0 million, after deducting the initial purchasers’ discount. In connection with the issuance of the Senior Notes, the Partnership capitalized related offering expenses, which are recorded in

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our consolidated balance sheet as a reduction to the principal amount. Net proceeds from the Senior Notes offering were primarily used to fund the Shirley-Penns Acquisition and repay existing indebtedness under our revolving credit facility.

The Senior Notes mature on March 15, 2026 and accrue interest at a rate of 6.5% per year, which is payable semi-annually, in arrears, on March 15 and September 15. We incurred interest expense of $13.0 million (not including amortization of capitalized bond issue costs) on the Senior Notes during the six months ended June 30, 2019. For additional information regarding our Senior Notes, see Item 1. Consolidated Financial Statements, Note 7–Long-Term Debt, which is incorporated herein by reference.

Capital Expenditures

The midstream energy business is capital intensive and requires maintenance of existing gathering systems and other midstream assets and facilities, as well as the acquisition or construction and development of new gathering systems and other midstream assets and facilities. Our partnership agreement requires that we categorize our capital expenditures as either:

• Maintenance capital expenditures, which are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long term, our operating capacity, operating income or revenue. Examples of maintenance capital expenditures are expenditures to repair, refurbish and replace pipelines, to maintain equipment reliability, integrity and safety and to comply with environmental laws and regulations. In addition, we designate a portion of our capital expenditures to connect new wells to maintain gathering throughput as maintenance capital to the extent such capital expenditures are necessary to maintain, over the long term, our operating capacity, operating income or revenue; or

• Expansion capital expenditures, which are cash expenditures to construct new midstream infrastructure and those expenditures incurred in order to extend the useful lives of our assets, reduce costs, increase revenues or increase system throughput or capacity from current levels, including well connections that increase existing system throughput. Examples of expansion capital expenditures include the construction, development or acquisition of additional gathering pipelines and compressor stations, in each case to the extent such capital expenditures are expected to expand our operating capacity, operating income or revenue. In the future, if we make acquisitions that increase system throughput or capacity, the associated capital expenditures may also be considered expansion capital expenditures.

Capital Expenditures for the Six Months Ended June 30, 2019

	Anchor		Additional		Total
Capital Investment
Maintenance capital	$	9,974	$	570	$	10,544
Expansion capital	169,147		3,176		172,323
Total Capital Investment	$	179,121	$	3,746	$	182,867
Capital Investment Net to the Partnership
Maintenance capital	$	9,974	$	29	$	10,003
Expansion capital	169,147		159		169,306
Total Capital Investment Net to the Partnership	$	179,121	$	188	$	179,309

We anticipate that we will continue to make expansion capital expenditures in the future. Consequently, our ability to develop and maintain sources of funds to meet our capital requirements is critical to our ability to meet our growth objectives. We expect that any significant future expansion capital expenditures will be funded by borrowings under our revolving credit facility and/or the issuance of debt and equity securities.

Cash Distributions

Under our current cash distribution policy, we intend to pay a minimum quarterly distribution of $0.2125 per unit, which equates to an aggregate distribution of approximately $13.8 million per quarter, or approximately $55.3 million per year, based on the general partner interest and the number of common units outstanding as of June 30, 2019.  However, we do not have a legal or contractual obligation to pay distributions quarterly or on any other basis at our minimum quarterly distribution rate or at any other rate. Under our cash distribution policy, the decision to make a distribution as well as the amount of any distribution is determined by our general partner, taking into consideration the terms of the partnership agreement.

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On July 19, 2019, the board of directors of our general partner declared a cash distribution to our unitholders of $0.3865 per common unit with respect to quarter ended June 30, 2019. The cash distribution will be paid on August 14, 2019 to unitholders of record as of the close of business on August 6, 2019.

For additional information on our cash distribution policy, see Item 1. Consolidated Financial Statements, Note 3–Cash Distributions, which is incorporated herein by reference.

Insurance Program

We share an insurance program with our Sponsor, and we reimburse our Sponsor for the costs of the insurance program, which includes insurance policies with insurers in amounts and with coverage and deductibles that we believe are reasonable and prudent. We cannot, however, assure that this insurance will be adequate to protect us from all material expenses related to potential future claims for personal and property damage or that these levels of insurance will be available in the future at economical prices.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the notes to the unaudited consolidated financial statements of this Quarterly Report on Form 10-Q.

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Contractual Obligations

For a discussion of amounts outstanding under our revolving credit facility, see Item 1. Consolidated Financial Statements, Note 6–Revolving Credit Facility, which is incorporated herein by reference.

For a discussion of total long-term debt outstanding under our Senior Notes, see Item 1. Consolidated Financial Statements, Note 7–Long-Term Debt, which is incorporated herein by reference.

For a discussion of our operating lease obligations, see Item 1. Consolidated Financial Statements, Note 8–Commitments and Contingencies, which is incorporated herein by reference.

Critical Accounting Policies

For a description of the Partnership’s accounting policies and any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements, see Item 1. Consolidated Financial Statements, Note 2–Significant Accounting Policies, which is incorporated herein by reference.  The application of the Partnership’s accounting policies may require management to make judgments and estimates about the amounts reflected in the Consolidated Financial Statements. If applicable, management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.

As of June 30, 2019, the Partnership did not have any accounting policies that we deemed to be critical or that would require significant judgment.

Forward-Looking Statements

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

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. 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, as these statements involve risks, uncertainties and other factors that could cause our actual future outcomes to differ materially from those set forth in such 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:

• our reliance on our customers, including our Sponsor, CNX Resources;

• the effects of changes in market prices of natural gas, NGLs and crude oil on our customers’ drilling and development plans on our dedicated acreage and the volumes of natural gas and condensate that are produced on our dedicated acreage;

• changes in our customers’ drilling and development plans in the Marcellus Shale and Utica Shale;

• our customers’ ability to meet their drilling and development plans in the Marcellus Shale and Utica Shale;

• our ability to maintain or increase volumes of natural gas and condensate on our midstream systems;

• the demand for natural gas and condensate gathering services;

• changes in general economic conditions;

• competitive conditions in our industry;

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

• our ability to successfully implement our business plan;

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

• our ability to generate adequate returns on capital;

• the price and availability of debt and equity financing;

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

• competition from the same and alternative energy sources;

• energy efficiency and technology trends;

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

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

• interest rates;

• labor relations;

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• defaults by our customers under our gathering agreements;

• 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; and

• certain factors discussed elsewhere in this report.

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, including the factors described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, as supplemented by our Quarterly Reports on Form 10-Q, 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk

We generate substantially all of our revenues pursuant to fee-based gathering agreements under which we are paid based on the volumes of natural gas and condensate that we gather and compress, rather than the underlying value of the commodity. Consequently, our existing operations and cash flows do not have significant direct exposure to commodity price risk. However, we are indirectly exposed to commodity price risks through our customers, who may reduce or shut-in production during periods of depressed commodity prices. Although we intend to enter into similar fee-based gathering agreements with new customers in the future, our efforts to negotiate terms with third parties may not be successful.

In the future, we may acquire or develop additional midstream assets in a manner that increases our exposure to commodity price risk. Such exposure to the volatility of natural gas, NGL and crude oil 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

We maintain a $600.0 million secured revolving credit facility and pay interest at a variable rate. Assuming the June 30, 2019 outstanding balance on our revolving credit facility of $208.0 million was outstanding for the entire year, an increase of one percentage point in the interest rates would have resulted in an increase to interest expense of $2.1 million. Accordingly, our results of operations, cash flows and financial condition, all of which affect our ability to make cash distributions to our unitholders, could be materially adversely affected by significant increases in interest rates.

Credit Risk

We are subject to credit risk due to the concentration of receivables from our most significant customer, our Sponsor, for gas gathering services. We generally do not require our customers to post collateral. The inability or failure of our significant customers to meet their obligations to us, or their insolvency or liquidation, may adversely affect our financial results.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management of our general partner, including the principal executive officer and principal financial officer of our general partner, an evaluation of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) was conducted as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based upon this evaluation, the chief executive officer and chief financial officer of our general partner have concluded that the Partnership’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the second quarter of 2019 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Part I, Item 1. Consolidated Financial Statements, Note 8–Commitments and Contingencies, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

Information regarding risk factors is discussed in Item 1A, “Risk Factors” of the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. These risks are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition, cash flows or results of operations.

There have been no material changes from the risk factors previously disclosed by the Partnership.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.     MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.     OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	SEC File Number	Exhibit	Filing Date
10.1	Amendment No. 2 to Credit Agreement, dated as of April 24, 2019, to the Credit Agreement, dated as of March 8, 2018, among CNX Midstream Partners LP, certain of its subsidiaries, PNC Bank, National Association, as administrative agent and collateral agent, JPMorgan Chase Bank, N.A. as syndication agent and the lender parties thereto.	8-K	001-36635	10.1	4/30/2019
31.1†	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2†	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1‡	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2‡	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101.INS	XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH†	XBRL Taxonomy Extension Schema Document.
101.CAL†	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF†	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB†	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE†	XBRL Taxonomy Extension Presentation Linkbase Document.

^† Filed herewith.

^‡ Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on July 30, 2019 on its behalf by the undersigned thereunto duly authorized.

CNX MIDSTREAM PARTNERS LP
By:	CNX MIDSTREAM GP, LLC, its general partner
By:	/S/ NICHOLAS J. DEIULIIS
	Nicholas J. DeIuliis
	Chief Executive Officer and Chairman of the Board (Duly Authorized Officer and Principal Executive Officer)
By:	/S/ DONALD W. RUSH
	Donald W. Rush
	Chief Financial Officer and Director (Duly Authorized Officer and Principal Financial Officer)
By:	/S/ BRIAN R. RICH
	Brian R. Rich
	Chief Accounting Officer (Duly Authorized Officer and Principal Accounting Officer)

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