Noble Midstream Partners LP (NYSE: NBLX) (Noble Midstream or the Partnership) today reported second quarter 2018 results. The Partnership’s results are consolidated to include the non-controlling interests in the Partnership’s development companies (DevCos) retained by Noble Energy, Inc. (Noble Energy) as well as Greenfield Midstream, LLC’s (Greenfield Midstream) 45.6% ownership of Black Diamond Gathering, LLC (Black Diamond Gathering); however, certain results are shown as “attributable to the Partnership,” which excludes the aforementioned non-controlling interests retained by Noble Energy and Greenfield Midstream. Noble Midstream believes the results “attributable to the Partnership” provide the best representation of the ongoing operations from which the Partnership’s unitholders will benefit.
Second Quarter Highlights Include:
- Net Income of $44 million, or $37 million attributable to the Partnership
- Adjusted EBITDA1 of $64 million, a 10% increase over the first quarter of 2018
- Adjusted EBITDA1 attributable to the Partnership of $49 million was in the upper half of guidance but down 9% on sequential basis due to the previously indicated fresh water activity shift from the Colorado River DevCo (100% owned by Partnership) to the Green River DevCo (25% owned by the Partnership)
- Declared a 20% annual increase in distribution per unit to $0.5348, with a distribution coverage ratio1 of 1.8x
- Combined gathering and sales volumes for oil, gas and produced water were up 30% versus the first quarter of 2018
- Increased total gathering dedicated acres in the DJ and Delaware basins by 5% to ~ 580,000 acres
“We achieved significant milestones during the quarter, including the continued build-out of our customer base and the completion of four major projects. All five Delaware Basin CGFs and the DJ Basin gathering system at Mustang are online for Noble Energy, while the Advantage Pipeline expansion is complete. This provides significant capital efficiency and a long future growth runway,” Terry R. Gerhart, Chief Executive Officer of Noble Midstream stated.
1 Adjusted EBITDA, DCF and Distribution Coverage Ratio are not Generally Accepted Accounting Principles (GAAP) measures. Definitions and reconciliations of these non-GAAP measures to their most directly comparable GAAP reporting measures appear in Schedule 4 of the financial tables which follow.
Other Recent Highlights:
- Noble Midstream entered into a $500 million three-year unsecured term loan facility. Funds were used to repay borrowings on the revolving credit facility
Recent Commercial Agreements with Noble Energy
Noble Midstream today announced the following agreements with Noble Energy:
- Establishment of full-field midstream service commercial terms with Noble Energy for the Green River DevCo, 25% owned by Noble Midstream, servicing the Mustang development area. Commercial terms include revised fees to reflect the change to a spec gathering system from a central gathering facility (CGF) as well as the use of enhanced completions for fresh water delivery
- Establishment of a minimum fresh water delivery volume threshold in Wells Ranch (Colorado River DevCo, 100% owned by NBLX). The three-year volume commitment commences in 2019 at 50 thousand barrels of water per day (MBw/d) and increases to 60 MBw/d beginning in 2020
- Noble Energy provided Noble Midstream an incremental dedication for oil transportation from the Wells Ranch CGF to Platteville following expiration of an existing third-party contract at year-end 2020. The contract term will extend 10 years following expiration of the existing arrangement
- Noble Energy has assigned Noble Midstream its option to acquire up to 15% ownership in the EPIC NGL pipeline, which will transport NGLs from the Delaware Basin to the Gulf Coast. The option expires in early February 2019
Second Quarter 2018 Results
Combined oil and gas gathering and sales, produced water gathering, and fresh water delivery volumes were consistent with or above guidance ranges for the second quarter.
In the gathering business, oil and gas gathering volumes of 192 thousand barrels of oil equivalent per day (MBoe/d) were up 15% compared to first quarter 2018 volumes and reflect a full quarter of contribution from Black Diamond. The Partnership realized sequential growth in oil and gas gathering throughput growth at the Blanco River and Laramie River DevCos. Produced water gathering throughput was up 84% from the first quarter of 2018 due to the increase in wells coming online in the Delaware Basin over the past several quarters.
Average fresh water delivered in the second quarter was 23% above the high end of guidance at 160 MBw/d but down 5% versus the first quarter of 2018. The Partnership delivered water to three completion crews on dedicated acreage in the DJ Basin, a similar level compared to the first quarter of 2018.
Second quarter investment income of $4.1 million is primarily comprised of approximately $1 million from the Partnership’s minority ownership in White Cliffs Pipeline LLC and approximately $3.1 million from the Partnership’s 50% ownership in the Advantage Pipeline, L.L.C.
Net income of $44 million in the quarter exceeded guidance. Depreciation and amortization increased compared to the first quarter due to the amortization of intangible assets related to customer contracts that were acquired during the Partnership’s acquisition of all of the outstanding limited liability company interests in Saddle Butte Rockies Midstream, LLC and certain affiliates (collectively, Saddle Butte); however, depreciation and amortization came in below guidance.
Adjusted EBITDA1 was $64 million in the second quarter, or 10% above the prior quarter, while Adjusted EBITDA1 attributable to the Partnership was down 9% from the first quarter to $49 million due to the previously announced customer activity mix shift to the Green River DevCo (25% owned by the Partnership) from the Colorado River DevCo (100% owned by the Partnership). Quarterly adjustments to earnings include approximately $1.3 million in transaction expenses associated with the Saddle Butte acquisition.
In the second quarter, cash interest expense attributable to the Partnership was $4 million and maintenance capital expenditures attributable to the Partnership totaled $4.8 million, resulting in DCF1 attributable to the Partnership of $40 million and a distribution coverage ratio1 of 1.8x.