| 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 United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying consolidated financial statements at September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and 2018 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and equity for such periods. In Note 8. Segment Information , we report a new Investments in Midstream Entities reportable segment and present prior period amounts on a comparable basis. Prior period segment information has been reclassified to conform to the current period presentation. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 . 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 unconsolidated investments are owned through certain DevCos, all financial statement activity associated with our unconsolidated investments are captured within the Investments in Midstream Entities reportable segment. See Note 7. Investments and Note 8. Segment Information . 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. 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 limited liability company agreement of Black Diamond required special allocations of gross income to balance the ratio of each member’s capital account to its agreed equity ownership interest over time. The special allocations were accounted for as equity transactions between the Partnership and a subsidiary with no gain or loss recognized. As of September 30, 2019 , each member’s capital account agreed to its equity ownership interest and no further special allocations are required. See Note 3. Acquisition . 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. Redeemable Noncontrolling Interest On March 25, 2019, we, through Dos Rios Crude Intermediate LLC, a wholly-owned subsidiary of Dos Rios DevCo LLC, secured a $200 million equity commitment from GIP CAPS Dos Rios Holding Partnership, L.P. (GIP). Upon securing the equity commitment, we issued 100,000 preferred units, with a face value of $1,000 per preferred unit (Preferred Equity). Proceeds from the Preferred Equity totaled $100 million and we incurred offering costs of $3.4 million . The remaining $100 million equity commitment is available for a one-year period, subject to certain conditions precedent. Proceeds from the Preferred Equity were utilized to repay a portion of outstanding borrowings under our revolving credit facility. See Note 6. Debt . We can redeem the Preferred Equity in whole or in part at any time for cash at a predetermined redemption price. The predetermined redemption price is based on the greater of a defined internal rate of return or the multiple on invested capital. GIP can request redemption of the Preferred Equity following the later of the sixth anniversary of the Preferred Equity closing or the fifth anniversary of the EPIC Crude pipeline completion date at a pre-determined base return. As GIP’s redemption right is outside of our control, the Preferred Equity is not considered to be a component of equity on the consolidated balance sheet, and such Preferred Equity is reported as mezzanine equity on the consolidated balance sheet. In addition, because the Preferred Equity was issued by a subsidiary of the Partnership and is held by a third party, it is considered a redeemable noncontrolling interest. The Preferred Equity was recorded initially at fair value on the issuance date. Subsequent to issuance, we accrete changes in the redemption value of the Preferred Equity from the date of issuance to GIP’s earliest redemption date of the Preferred Equity. The Preferred Equity is perpetual and has a 6.5% annual dividend rate, payable quarterly in cash, with the ability to accrue unpaid dividends during the first two years following the closing. During any quarter in which a dividend is accrued, the accreted value of the Preferred Equity will be increased by the accrued but unpaid dividend (i.e., a paid-in-kind dividend). The dividends for the first three quarters of 2019 were paid-in-kind. Accretion during the three and nine months ended September 30, 2019 was approximately $3.1 million and $6.3 million , respectively. Accounting for Investments We use the equity method of accounting for our investments in the Advantage Joint Venture, the Delaware Crossing Joint Venture, EPIC Y-Grade and EPIC Crude, as we do not control, but do exert significant influence over their operations. We use the cost method of accounting for our investment in White Cliffs Pipeline L.L.C. (White Cliffs) as we have virtually no influence over its operations and financial policies. See Note 7. Investments . Leases We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains a lease, at the commencement date, we record a right-of-use (ROU) asset and a corresponding lease liability based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate to determine the present value of lease payments, we use our hypothetical secured borrowing rate based on information available at lease commencement. The weighted average discount rate is 3.69% for operating leases and 2.80% for our finance lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, it is reasonably likely that we will exercise the option. Additionally, we have lease agreements that include lease and non-lease components, which are generally accounted for as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. See Note 9. Leases Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. Intangible Assets Our intangible asset accumulated amortization totaled approximately $53.7 million and $29.6 million as of September 30, 2019 and December 31, 2018, respectively. Intangible asset amortization expense totaled approximately $8.1 million for the three months ended September 30, 2019 and 2018 and $24.2 million and $21.4 million for the nine months ended September 30, 2019 and 2018, respectively. The weighted average amortization period for our intangible assets is approximately 11 years . Recently Adopted Accounting Standards Leases In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 (ASU 2016-02), which creates Topic 842 – Leases (ASC 842). The standard requires lessees to recognize a ROU asset and lease liability on the balance sheet for the rights and obligations created by leases. ASC 842 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. The new standard provided a number of optional practical expedients. We elected: • the package of ‘practical expedients’, permitting us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs; • the practical expedient pertaining to land easements, allowing us to account for existing land easements under previous accounting policy; and • the practical expedient to not separate lease and non-lease components for the majority of our leases. We adopted ASC 842 on January 1, 2019 using the modified retrospective approach. The standard did not materially impact our consolidated balance sheet or consolidated statement of operations and had no impact on our consolidated statement of cash flows. Prior period financial statements were not adjusted. See Note 9. Leases . Recently Issued Accounting Standards Financial Instruments: Credit Losses In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13): Financial Instruments – Credit Losses , which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses. The standard applies to a broad scope of financial instruments, including financial assets measured at amortized cost and off-balance sheet credit exposures not accounted for as insurance, such as financial guarantees and other unfunded loan commitments. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. We are executing an implementation plan, which includes data collection, contract review and assessment, and determination of necessary systems, processes and internal controls. We continue to evaluate ASU 2016-03; based on our current credit portfolio we do not believe adoption of the standard will have a material impact on our financial statements. Reconciliation of Total Cash We define total cash as cash, cash equivalents and restricted cash. Our restricted cash is included in other current assets in our consolidated balance sheets. The following table provides a reconciliation of total cash: Nine Months Ended September 30, (in thousands) 2019 2018 Cash and Cash Equivalents at Beginning of Period $ 10,740 $ 18,026 Restricted Cash at Beginning of Period (1) (2) 951 37,505 Cash, Cash Equivalents, and Restricted Cash at Beginning of Period $ 11,691 $ 55,531 Cash and Cash Equivalents at End of Period $ 17,571 $ 18,201 Restricted Cash at End of Period (1) 50 951 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 17,621 $ 19,152 (1) Restricted cash represents the amount held as collateral at December 31, 2018 and September 30, 2019 for certain of our letters of credit. (2) Restricted cash represents the amount held in escrow at December 31, 2017 for the Black Diamond Acquisition. Revenue Recognition We recognize revenue at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer, using a five-step process, in accordance with ASC 606 – Revenue from Contracts with Customers (ASC 606). Under ASC 606, remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied as of September 30, 2019 . A certain fresh water delivery affiliate revenue agreement contains a minimum volume commitment for the delivery of fresh water for a fixed fee per barrel with annual percentage escalations. The following table includes estimated revenues, as of September 30, 2019 , for the agreement. Our actual volumes delivered may exceed the future minimum volume commitment. (in thousands) Midstream Services — Affiliate Remainder of 2019 $ 7,616 2020 36,817 2021 37,635 Total $ 82,068 |
