| Basis of Presentation | Note 2. Basis of Presentation Basis of Presentation and Consolidation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying consolidated financial statements at March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and partners’ equity for such periods. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 . We have no items of other comprehensive income; therefore, our net income is identical to our comprehensive income. Variable Interest Entities Our consolidated financial statements include our accounts and the accounts of the DevCos, each of which we control as general partner. All intercompany balances and transactions have been eliminated upon consolidation. We have determined that the partners with equity at risk in each of the DevCos lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance; therefore, each DevCo is considered a variable interest entity, or VIE. Through our 100% ownership interest in Noble Midstream Services, LLC, a Delaware limited liability company which owns controlling interests in each of the DevCos, we have the authority to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate each of the DevCos in our financial statements. A substantial portion of the financial statement activity associated with our DevCos is captured within the Gathering Systems and Fresh Water Delivery reportable segments. Although our investment in the Advantage Joint Venture is owned through Trinity River DevCo LLC, all financial statement activity associated with our investment is captured within the Investments and Other reportable segment. See Note 9. Segment Information . On January 31, 2018, Black Diamond, an entity formed by Black Diamond Gathering Holdings LLC (the Noble Member), a wholly-owned subsidiary of Noble Midstream Partners LP, and Greenfield Midstream, LLC (the Greenfield Member), completed the acquisition of all of the issued and outstanding limited liability company interests in Saddle Butte Rockies Midstream, LLC and certain affiliates (collectively, Saddle Butte) from Saddle Butte Pipeline II, LLC (Seller). The acquisition of Saddle Butte will be referred to as the Black Diamond Acquisition. See Note 3. Acquisition . Our consolidated financial statements include the accounts of Black Diamond, which we control. We have determined that the partners with equity at risk in Black Diamond lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact their economic performance. Therefore, Black Diamond is considered a VIE. Through our majority representation on the Black Diamond company board of directors as well as our responsibility as operator of the acquired system, we have the authority to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to us. Therefore, we are considered the primary beneficiary and consolidate Black Diamond in our financial statements. Accounting for Investments We use the equity method of accounting for our investment in the Advantage Joint Venture, as we do not control, but do exert significant influence over its operations. We use the cost method of accounting for our White Cliffs Interest as we have virtually no influence over its operations and financial policies. Noncontrolling Interests We present our consolidated financial statements with a noncontrolling interest section representing Noble’s retained ownership of our DevCos as well as Greenfield Member’s ownership of Black Diamond. Black Diamond Equity Ownership Promote Vesting In accordance with the limited liability company agreement of Black Diamond, Noble Member received an equity ownership promote. The capital accounts for Noble Member and Greenfield Member at March 31, 2018 do not equal their agreed equity ownership interests due to the funding structure of the total Black Diamond Acquisition purchase price. See Note 3. Acquisition . The limited liability company agreement of Black Diamond requires special allocations of gross income to balance the ratio of each member’s capital account to their agreed equity ownership interest over time. The special allocations are accounted for as equity transactions between the Partnership and a subsidiary with no gain or loss recognized. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. Intangible Assets Our intangible assets are comprised of customer contracts and related relationships acquired in the Black Diamond Acquisition and recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. Amortization is calculated using the straight-line method, which reflects the pattern in which the estimated economic benefit is expected to be received over the estimated useful life of the intangible asset. The amortization of intangibles is included in depreciation and amortization expense in our consolidated statements of operations. Intangible assets with finite useful lives are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. See Note 3. Acquisition and Note 6. Intangible Assets . Goodwill As of March 31, 2018, our consolidated balance sheet includes goodwill of $111.1 million . This goodwill resulted from the Black Diamond Acquisition and represents the excess of the consideration paid over fair value of the net identifiable assets of the acquired business. All of our goodwill is assigned to the Gathering Systems reportable segment. Our reportable segments represent our reporting units. See Note 3. Acquisition and Note 9. Segment Information . Goodwill is not amortized to earnings but is qualitatively assessed for impairment. We will assess goodwill for impairment annually during the third quarter, or more frequently as circumstances require, at the reporting unit level. If, based on our qualitative procedures, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we perform the two-step goodwill impairment test. The two-step goodwill impairment test is also performed whenever events or changes in circumstances indicate that the carrying value may not be recoverable. See Recently Issued Accounting Standards – Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment, below, for newly issued accounting guidance regarding future goodwill impairment testing. Fair Value Measurements We measure assets and liabilities requiring fair value presentation and disclose such amounts according to the quality of valuation inputs under the fair value hierarchy. The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature and maturity of the instruments and use Level 1 inputs. Income Taxes We are not a taxable entity for U.S. federal income tax purposes or for the majority of states that impose an income tax. As taxes are generally borne by our partners through the allocation of taxable income, we do not record deferred taxes related to the aggregate difference in the basis of our assets for financial and tax reporting purposes. During third quarter 2017, we commenced operations in the Delaware Basin and are subject to a Texas margin tax. The tax due is based on an entity’s apportioned taxable margin. We recorded a de minimis state tax provision for the three months ended March 31, 2018. Supplemental Cash Flow Information We accrued $186.3 million and $48.5 million related to midstream capital expenditures for projects in progress as of March 31, 2018 and March 31, 2017 , respectively. Concentration of Credit Risk For the three months ended March 31, 2018 , 66% of our revenues are from Noble and its affiliates. For all other periods presented, 100% of our revenues are from Noble and its affiliates. Recently Adopted Accounting Standards Clarifying the Definition of a Business In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2017-01 (ASU 2017-01): Business Combinations - Clarifying the Definition of a Business. ASU 2017-01 assists in determining whether certain transactions should be accounted for as acquisitions or dispositions of assets or businesses. The amendment provides a screen to be applied to the fair value of an acquisition or disposal to evaluate whether the assets in question are simply assets or if they meet the definition of a business. If the screen is not met, no further evaluation is needed. If the screen is met, certain steps are subsequently taken to make the determination. We adopted ASU 2017-01 in the first quarter of 2018 and have applied the guidance to the Black Diamond Acquisition. Statement of Cash Flows – Restricted Cash In November 2016, the FASB issued Accounting Standards Update No. 2016-18 (ASU 2016-18): Statement of Cash Flows - Restricted Cash. We adopted ASU 2016-18 in the first quarter of 2018, using the retrospective method. ASU 2016-18 requires that restricted cash and cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows, but has no other impacts on our results of operations, financial condition or cash flows. Topic 606, Revenue from Contracts with Customers In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers (ASC 606). We adopted ASC 606 on January 1, 2018, using the modified retrospective method. See our Revenue Recognition discussion below. Recently Issued Accounting Standards Leases In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02): Leases. The guidance requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by leases with terms of more than 12 months. ASU 2016-02 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. In January 2018, the FASB issued Accounting Standards Update No. 2018-01 (ASU 2018-01): Land Easement Practical Expedient for Transition to Topic 842 , to provide an optional practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases under Topic 840. The standard will be effective for annual and interim periods beginning after December 15, 2018, with earlier application permitted. In the normal course of business, we enter into lease agreements and land easements to support our operations and may lease water-related, field-related and other assets. At this time, we cannot reasonably estimate the financial impact ASU 2016-02 will have on our financial statements; however, we believe adoption and implementation of ASU 2016-02 will likely materially impact our balance sheet resulting from an increase in both assets and liabilities relating to our leasing activities. As part of our assessment to date, we have formed an implementation work team, prepared educational and training materials pertinent to ASU 2016-02 and have begun contract review and documentation. Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04): Intangibles – Goodwill and Other – Simplifying the Test for Goodwill Impairment, to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the new guidance, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, with an impairment charge being recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 will be effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the provisions of ASU 2017-04 and have not yet determined if we will early adopt. Reconciliation of Total Cash We define total cash as cash, cash equivalents and restricted cash. The following table provides a reconciliation of total cash: Three Months Ended March 31, (in thousands) 2018 2017 Cash and Cash Equivalents at Beginning of Period $ 18,026 $ 57,421 Restricted Cash at Beginning of Period (1) 37,505 — Cash, Cash Equivalents, and Restricted Cash at Beginning of Period $ 55,531 $ 57,421 Cash and Cash Equivalents at End of Period $ 24,924 $ 38,859 Restricted Cash at End of Period — — Cash, Cash Equivalents, and Restricted Cash at End of Period $ 24,924 $ 38,859 (1) Restricted cash represents the amount held in escrow at December 31, 2017 for the Black Diamond Acquisition. Revenue Recognition We generate revenues by charging fees on a per unit basis for gathering crude oil and natural gas, delivering and storing fresh water, and collecting, cleaning and disposing of produced water. Also, we purchase and sell crude oil to customers at various delivery points on our gathering systems. We adopted ASC 606 on January 1, 2018, using the modified retrospective method. Under ASC 606, performance obligations are the unit of account and generally represent distinct goods or services that are promised to customers. The adoption of ASC 606 did not have an impact on the recognition, measurement and presentation of our revenues and expenses. Performance Obligations For gathering crude oil and natural gas, treating crude oil, delivering and storing fresh water, and collecting, cleaning and disposing of produced water, our performance obligations are satisfied over time using volumes delivered to measure progress. We record revenue related to the volumes delivered at the contract price at the time of delivery. We began generating revenue from crude oil sales during first quarter 2018 upon closing of the Black Diamond Acquisition. Black Diamond engages in the purchase and sale of crude oil. For our crude oil sales, each unit sold is generally considered a distinct good and the related performance obligation is generally satisfied at a point in time (i.e. at the time control of the crude oil is transferred to the customer). We recognize revenue from the sale of crude oil when our contracted performance obligation to deliver crude oil is satisfied and control of the crude oil is transferred to the customer. This usually occurs when the crude oil is delivered to the location specified in the contract and the title and risks of rewards and ownership are transferred to the customer. Transaction Price Allocated to Remaining Performance Obligations The majority of our revenue agreements have a term greater than one year, and as such we have utilized the practical expedient in ASC 606, which states that we are not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under our revenue agreements, each delivery generally represents a separate performance obligation; therefore, future volumes delivered are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. The remainder of our revenue agreements, which relate to agreements with third parties, are short-term in nature with a term of one year or less. We have utilized an additional practical expedient in ASC 606 which exempts us from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of an agreement that has an original expected duration of one year or less. Contract Balances Under our revenue agreements, we invoice customers after our performance obligations have been satisfied, at which point payment is unconditional. As such, our revenue agreements do not give rise to contract assets or liabilities under ASC 606. The following is a summary of our types of revenue agreements: Crude Oil Gathering Under our crude oil gathering agreements, we receive a volumetric fee per barrel (Bbl) for the crude oil gathering services we provide. Natural Gas Gathering Under our natural gas gathering agreements, we receive a volumetric fee per million British Thermal Unit (MMBtu) for the natural gas gathering services we provide. Produced Water Services Under our produced water services agreements, we receive a fee for collecting, cleaning or otherwise disposing of water produced from operating crude oil and natural gas wells in the dedication area. The fee is comprised of a volumetric component for services we provide directly and a pass through component for services we provide through contracts with third parties. Fresh Water Services Under our fresh water services agreements, we receive a fee for delivering fresh water. The fee is comprised of a volumetric component for services we provide directly and a pass through component for services we provide through contracts with third parties. The cost of storing the fresh water is included in the delivery fee. Crude Oil Treating Under our crude oil treating agreements, we receive a monthly fee for the crude oil treating services we provide based on each well operated by Noble that is producing in paying quantities that is not connected to our crude oil gathering systems during such month. Crude Oil Purchase and Sale Under our commodity purchase and sale agreements, we purchase and sell crude oil to customers at various delivery points on our gathering systems. For purchase and sale transactions with the same counterparty, the purchase and sale is settled at the same contractually fixed price on a net basis. We account for these transactions on a net basis, in accordance with ASC 845, Non-Monetary Exchanges |
