Noble Midstream Partners LP (NYSE: NBLX) (Noble Midstream
or the Partnership) today reported third quarter 2019 financial and
operational results. The Partnership’s consolidated results include
noncontrolling interests which represent equity ownership interests
that are not attributable to the Partnership; however, certain
results are shown as “attributable to the Partnership,” which
exclude the aforementioned noncontrolling interests. 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.
Third Quarter Highlights Include:
- Net Income was $66 million ($41 million to the Partnership) and
Adjusted EBITDA¹ came in at $94 million, a 35% and 31% increase
over the third quarter of 2018, driven by record gathering and
produced water volumes of 319 MBoe/d and 180 MBw/d, respectively.
Adjusted EBITDA attributable to the Partnership was $60 million.
Distributable cash flow (DCF)¹ increased sequentially to $50
million, above the top end of the guidance range.
- A 15% reduction in per well connection capital drove quarterly
organic capital below the low end of guidance. FY19 organic capital
expenditure has been reduced by 25% versus original guidance.
- Declared a 20% annual increase in distribution per unit to
$0.6716, with DCF of $50 million and a Distribution Coverage Ratio¹
of 1.6x.
- Entered into a strategic relationship in August with Saddlehorn
Pipeline, through Black Diamond Gathering, including an option for
up to 20% ownership, and expanded the Black Diamond Gathering oil
gathering dedication by 85,000 acres, or 54%.
- EPIC Y-Grade interim crude service started up on time in 3Q19
with permanent crude service on schedule for 1Q20 startup.
“Our high-quality assets in the DJ and Delaware Basins and
operational execution drove the outperformance in our year-to-date
and third quarter results through continued focus on efficiencies
and accomplishing higher throughput volumes with less capital. The
outlook for our business remains strong and increasingly resilient,
as we add high-quality cash flows from new services and customers.
Consistent customer activity in our gathering business, along with
the team’s work to deliver strong execution and drive enhanced
capital efficiency during 2019, provides a solid foundation as we
enter a transformational year in 2020 when major project capital
rolls off and the inflection in cash flow begins,” stated Brent
Smolik, Chief Executive Officer of Noble Midstream.
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.
Strong Volume Performance Versus Guidance
In the gathering business, oil and gas throughput came in above
the high end of guidance while produced water gathering volumes
came in at the midpoint of third quarter guidance. Record gross oil
and gas gathering and sales volumes were up 8% sequentially to 319
MBoe/d while produced water gathering throughput was up 10%.
Gathering throughput growth continues to be driven by the Green
River, Blanco River and Colorado River DevCos.
Fresh water delivered in the third quarter averaged 135 thousand
barrels of water per day (MBw/d), down from 179 MBw/d in the second
quarter of 2019. The sequential decline in fresh water volumes
reflects lower fluid volumes per completion as well as water
delivery to approximately 2 completion crews on dedicated acreage
in the DJ Basin during the quarter, compared to approximately 2.3
in the second quarter of 2019.
Third quarter revenue totaled $169 million, increasing 7%
compared to the second quarter of 2019. An increase in revenue from
gathering and crude oil sales was somewhat offset by lower fresh
water delivery revenue. Net income of $66 million came in at the
high end of guidance. Adjusted EBITDA of $94 million was at the
high end of guidance while Adjusted EBITDA attributable to the
Partnership was $60 million in the third quarter. A third quarter
investment loss of $5.6 million drove Adjusted EBITDA attributable
to the Partnership to the lower end of guidance due to lower than
forecasted interim service volumes and realized tariffs on the EPIC
Y-Grade pipeline for interim crude service.
Maintenance capital expenditures attributable to the Partnership
totaled $5.8 million during the third quarter of 2019. Along with
the strong operational performance, this resulted in higher DCF
attributable to the Partnership of $50 million and a Distribution
Coverage Ratio of 1.6x.
Cost Focus Driving Enhanced Capital Efficiencies
Capital expenditures in the third quarter primarily reflected
spending for customer well connections in the DJ Basin and Delaware
Basin. Third quarter gross capital expenditures of $62 million and
capital expenditures attributable to the partnership of $35 million
were below guidance due primarily to a consistent cost focus,
utilization of existing infrastructure, and to a lesser extent, the
timing of customer activity. Cost saving initiatives include
project scope and design optimization and more efficient
construction processes as well as an enhanced contracting strategy.
In addition, the Partnership had additions to equity investments
totaling $87 million during the third quarter of 2019. This
primarily included capital contributions of $53 million related to
the EPIC Crude, $17 million for the EPIC Y-Grade and $13 million
for the Delaware Crossing joint ventures. We expect capital on
equity investments to increase in the fourth quarter of 2019 before
materially decreasing early next year as joint venture projects
near completion.
3Q 2019 Capital Expenditures
(in millions)
DevCo
Basin
NBLX Ownership
Gross
Net
Colorado River
DJ
100%
$
8
$
8
Green River
DJ
25%
10
3
Laramie River *
DJ
100%
21
15
Blanco River
Delaware
40%
23
9
Total Capital Expenditures
62
35
Additions to Equity Investments
87
87
Capital Expenditures and
Investments
$
149
$
122
* Includes capital expenditures for Black
Diamond, which is 54.4% owned by Noble Midstream.
Green River and Colorado River DevCos Leading DJ Basin
Throughput Growth
Green River results during the third quarter of 2019 reflect
record oil, gas and produced water throughput for Noble Energy’s
Mustang development in the DJ Basin. The Partnership connected 15
wells in July, driving average oil and gas gathering throughput to
approximately 61 MBoe/d, up 24% from the prior quarter. Average
produced water volumes of 15 MBw/d were down from 17 MBw/d in the
second quarter of 2019. Completion activity in the Mustang
development area is expected to resume in the fourth quarter of
2019, following no completion activity in the area in 3Q19. New
well connections are planned for early 2020.
Colorado River combined oil, gas and produced water gathering
volumes were up 8% in the third quarter of 2019 compared to the
second quarter of 2019. Growth was driven by the Wells Ranch
development area, with 23 wells connected during the third quarter.
Throughput from the third quarter wells brought online continues to
increase in the fourth quarter. The Partnership delivered water to
a single crew for a partial quarter, driving a sequential decline
in fresh water delivery volumes to 39 MBw/d. In the fourth quarter,
the Partnership anticipates connecting 20 wells to production in
the Colorado River DevCo.
Laramie River Throughput Declines as Planned
Laramie River oil and gas gathering and sales volumes during the
third quarter of 2019 were down 2% compared to the second quarter
of 2019. Third quarter Black Diamond Gathering throughput averaged
86 thousand barrels of oil per day (MBbl/d), consistent with the
second quarter of 2019. The Partnership connected a combined 101
wells during the quarter on Black Diamond Gathering's system and
the Partnership’s wholly-owned third party gathering system for oil
gathering.
Inflection Point Nearing in Permian Basin
Oil and gas gathering volumes at Blanco River of 71 MBoe/d for
the third quarter of 2019 were up 20% compared to the second
quarter of 2019 while produced water gathering volumes were up 13%
on a sequential basis. The growth in gathering throughput reflects
26 new well connections during the quarter, including nine
third-party customer wells. We continue to expect consistent third
party activity and tie-ins in the fourth quarter and into 2020.
In the Trinity River DevCo, quarterly volumes on the Advantage
Pipeline system totaled 70 MBbl/d, compared to 66 MBbl/d during the
second quarter. First oil volumes were transported in 3Q19 on the
EPIC Y-Grade interim crude service through the Advantage Crane West
interconnect. Lower-than-expected tariffs and utilization rates
negatively impacted results in 3Q19 and will likely persist into
the fourth quarter of 2019. The EPIC crude line construction is
progressing as planned with an in-service date in the first quarter
of 2020. The Delaware Crossing JV construction is progressing as
planned with the Wink crude terminal significantly complete and
currently moving dedicated volumes. The Liberty Terminal is over
55% complete and the 16” mainline connecting the two terminals is
76% complete. Associated gathering projects are progressing as
planned. All core infrastructure construction is planned for
completion in early January.
Focused on Managing Prudent Liquidity and Balance Sheet While
Executing Growth Opportunities
As of September 30, 2019, the Partnership had $768 million of
liquidity with $18 million in cash on hand and $750 million
available under its unsecured revolving credit facility. During the
third quarter, Noble Midstream entered into a $400 million
three-year unsecured term loan facility resulting in expected
annual interest savings of $1.5 million per year. Proceeds from the
term loan were used to repay borrowings on the revolving credit
facility.
The balance of the preferred equity commitment for the EPIC
Crude pipeline was $102.8 million at the end of the third quarter,
up from $99.6 million in the second quarter.
Consistent Quarterly Distribution Increase
On October 24, 2019, the board of directors of Noble Midstream’s
general partner, Noble Midstream GP LLC, declared a third quarter
cash distribution of $0.6716 per unit, a 20% increase from the
third quarter 2018 and 79% above the minimum quarterly cash
distribution. The third quarter distribution is payable on November
11, 2019, to unitholders of record as of November 4, 2019.
Lowering Full Year Capital Expenditures; Increasing
Operational Guidance Items
The Partnership has lowered full-year organic net capital
expectations due to year to-date progress on sustainable costs
savings. Full-year net capital expenditures are now estimated to be
$141 million to $151 million or 47% lower than original guidance.
For the fourth quarter of 2019, organic net capital expenditures
are anticipated between $40 million and $50 million based on
project timing. Additions to equity investments in 2019 are still
anticipated within original guidance with the range tightened to
$590 million to $620 million.
Full year 2019 Adjusted EBITDA attributable to the Partnership
is anticipated to be $243 million to $248 million compared to prior
guidance of $245 million to $255 million. Guidance reflects lower
equity investment income from the EPIC Y-Grade interim crude
service. Fourth quarter Adjusted EBITDA attributable to the
Partnership is expected to increase to a range of $64 million to
$69 million. Full year 2019 Distribution Coverage Ratio remains
unchanged at 1.5x to 1.6x.
Tightened volume guidance ranges for the full-year of 2019
result in higher midpoint expectations across the board for
combined oil and gas gathering, produced water gathering and fresh
water delivery volumes.
Guidance
1Q19
2Q19
3Q19
4Q19
2019
Gross
Volumes
Oil Gathered (MBbl/d)¹
228
226
240
248
-
258
236
-
238
Gas Gathered (MMcf/d)
353
413
475
482
-
502
430
-
435
Oil and Gas Gathered (MBoe/d)¹
287
295
319
328
-
342
307
-
311
Produced Water Gathered (MBw/d)
142
164
180
195
-
205
171
-
173
Fresh Water Delivered (MBw/d)
220
179
135
110
-
145
161
-
169
Financials (in
millions)
Net Income
$63
$53
$66
$56
-
$61
$239
-
$244
Gross Adjusted EBITDA2
$91
$81
$94
$90
-
$95
$356
-
$361
Net Adjusted EBITDA2
$63
$56
$60
$64
-
$69
$243
-
$248
Distributable Cash Flow2
$54
$41
$50
$53
-
$58
$198
-
$203
Distribution Coverage Ratio2,3
1.9x
1.4x
1.6x
1.5x
-
1.7x
1.5x
-
1.6x
Gross Capital, Excluding Investments
$76
$57
$62
$70
-
$80
$265
-
$275
Net Capital, Excluding Investments
$36
$29
$35
$40
-
$50
$141
-
$151
1 Includes crude oil sales volume
2 Results “attributable to the
Partnership” exclude the non-controlling interests in the DevCos
retained by Noble Energy. Adjusted EBITDA, DCF, and Distribution
Coverage Ratio are not financial measures calculated in accordance
with Generally Accepted Accounting Principles (“GAAP”). For
definitions of these non-GAAP measures, see “Non-GAAP Financial
Measures” below.
3 Assumes 20% annualized distribution
growth
Further details with respect to the third quarter results and
guidance can be found in the supplemental presentation on the
Partnership's website, www.nblmidstream.com.
Conference Call
Noble Midstream will host a webcast and conference call today at
11:30 a.m. Central Time to discuss third quarter 2019 financial and
operational results. Conference call numbers for participation are
877-883-0383, or 412-902-6506 for international calls. The passcode
number is 1185599. The live audio webcast and related presentation
material is accessible on the ‘Investors’ page of the Partnership’s
website at www.nblmidstream.com. A replay of the conference call
will be available at the same web location following the event.
About Noble Midstream
Noble Midstream is a growth-oriented master limited partnership
formed by Noble Energy, Inc. to own, operate, develop and acquire
domestic midstream infrastructure assets. Noble Midstream currently
provides crude oil, natural gas, and water-related midstream
services in the DJ Basin in Colorado and the Delaware Basin in
Texas. For more information, please visit www.nblmidstream.com.
Forward Looking Statements
This news release contains certain “forward-looking statements”
within the meaning of federal securities law.
Words such as “anticipates”, “believes”, “expects”, “intends”,
“will”, “should”, “may”, “estimates”, and similar expressions may
be used to identify forward-looking statements. Forward-looking
statements are not statements of historical fact and reflect the
Partnership’s current views about future events. No assurances can
be given that the forward-looking statements contained in this news
release will occur as projected and actual results may differ
materially from those projected. Forward-looking statements are
based on current expectations, estimates and assumptions that
involve a number of risks and uncertainties that could cause actual
results to differ materially from those projected. These risks
include, without limitation, the Partnership's customers’ ability
to meet their drilling and development plans, changes in general
economic conditions, competitive conditions in the Partnership’s
industry, actions taken by third-party operators, gatherers,
processors and transporters, the demand for crude oil and natural
gas gathering and processing services, the Partnership’s ability to
successfully implement its business plan, the Partnership’s ability
to complete internal growth projects on time and on budget, the
ability of third parties to complete construction of pipelines in
which the Partnership holds equity interests on time and on budget,
the price and availability of debt and equity financing, the
availability and price of crude oil and natural gas to the consumer
compared to the price of alternative and competing fuels, and other
risks inherent in the Partnership’s business, including those
described under “Risk Factors” and “Forward-Looking Statements” in
the Partnership’s most recent Annual Report on Form 10-K and in
other reports we file with the Securities and Exchange Commission.
These reports are also available from the Partnership’s office or
website, www.nblmidstream.com. Forward-looking statements are based
on the estimates and opinions of management at the time the
statements are made. Noble Midstream does not assume any obligation
to update forward-looking statements should circumstances,
management’s estimates, or opinions change.
This news release also contains certain non-GAAP measures of
financial performance that management believes are useful tools for
internal use and the investment community in evaluating Noble
Midstream’s overall financial performance. Please see the attached
schedules for reconciliations of the non-GAAP financial measures
used in this news release to the most directly comparable GAAP
financial measures.
This release serves as a qualified notice to nominees and
brokers as provided for under Treasury Regulation Section
1.1446-4(b) that 100% of the Partnership’s distributions to foreign
investors are attributable to income that is effectively connected
with a United States trade or business. Accordingly, the
Partnership’s distributions to foreign investors are subject to
federal income tax withholding at the highest effective tax rate.
Nominees, and not the Partnership, are treated as withholding
agents responsible for withholding on the distributions received by
them on behalf of foreign investors.
Schedule 1
Noble Midstream Partners
LP
Revenue and Throughput Volume
Statistics
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Colorado River DevCo LP
Crude Oil Gathering Volumes (Bbl/d)
48,089
59,145
48,918
63,630
Natural Gas Gathering Volumes
(MMBtu/d)
244,069
223,354
248,862
216,191
Produced Water Gathering Volumes
(Bbl/d)
15,444
15,007
13,466
17,348
Fresh Water Delivery Volumes (Bbl/d)
38,880
72,216
44,075
58,295
Gathering and Fresh Water Delivery
Revenues — Affiliate (in thousands)
$
44,454
$
47,465
$
128,584
$
138,975
San Juan River DevCo LP
Fresh Water Delivery Volumes (Bbl/d)
68,819
—
36,456
—
Gathering and Fresh Water Delivery
Revenues — Affiliate (in thousands)
$
11,326
$
5
$
19,593
$
(327
)
Green River DevCo LP
Crude Oil Gathering Volumes (Bbl/d)
35,808
5,657
29,333
1,942
Natural Gas Gathering Volumes
(MMBtu/d)
195,544
9,062
148,160
3,111
Produced Water Gathering Volumes
(Bbl/d)
14,936
8,123
14,157
2,816
Fresh Water Delivery Volumes (Bbl/d)
—
49,672
63,223
61,450
Gathering and Fresh Water Delivery
Revenues — Affiliate (in thousands)
$
18,577
$
8,392
$
63,576
$
29,724
Blanco River DevCo LP
Crude Oil Gathering Volumes (Bbl/d)
48,722
33,689
43,147
23,272
Natural Gas Gathering Volumes
(MMBtu/d)
173,405
89,439
135,142
59,477
Produced Water Gathering Volumes
(Bbl/d)
138,765
90,162
121,995
58,845
Gathering Revenues — Affiliate and Third
Party (in thousands)
$
23,186
$
15,211
$
59,744
$
30,987
Laramie River DevCo LP
Crude Oil Gathering and Sales Volumes
(Bbl/d) (1)
107,214
85,002
109,954
79,930
Natural Gas Gathering Volumes
(MMBtu/d)
4,935
1,227
6,266
1,319
Produced Water Gathering Volumes
(Bbl/d)
11,127
8,919
12,851
6,468
Fresh Water Delivery Volumes (Bbl/d)
26,930
73,507
33,811
54,694
Gathering and Fresh Water Delivery
Revenues — Third Party (in thousands)
$
67,213
$
64,302
$
191,521
$
151,330
Total Gathering Systems
Crude Oil Gathering and Sales Volumes
(Bbl/d) (1)
239,833
183,493
231,352
168,774
Natural Gas Gathering Volumes
(MMBtu/d)
617,953
323,082
538,430
280,098
Barrels of Oil Equivalent (Boe/d)
319,058
224,914
300,381
204,684
Produced Water Gathering Volumes
(Bbl/d)
180,272
122,211
162,469
85,477
Gathering Revenues (in thousands)
$
144,274
$
113,226
$
394,396
$
283,146
Total Fresh Water Delivery
Fresh Water Delivery Volumes (Bbl/d)
134,629
195,395
177,565
174,439
Fresh Water Delivery Revenues (in
thousands)
$
22,979
$
23,345
$
75,196
$
69,706
(1)
Includes crude oil gathering volumes as
well as crude oil that is sold to customers and transported on our
gathering systems.
Schedule 2
Noble Midstream Partners
LP
Consolidated Statement of
Operations
(in thousands, except per unit
amounts, unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Revenues
Crude Oil, Natural Gas and Produced Water
Gathering — Affiliate
$
79,208
$
54,674
$
209,530
$
144,569
Crude Oil, Natural Gas and Produced Water
Gathering — Third Party
16,196
$
12,459
51,344
28,796
Fresh Water Delivery — Affiliate
20,847
17,416
66,801
56,774
Fresh Water Delivery — Third Party
2,132
5,929
8,395
12,932
Crude Oil Sales — Third Party
48,870
46,093
133,522
109,781
Other — Affiliate
791
1,046
2,393
2,980
Other — Third Party
1,279
1,546
3,559
3,035
Total Revenues
169,323
139,163
475,544
358,867
Costs and Expenses
Cost of Crude Oil Sales
46,240
44,379
125,217
105,830
Direct Operating
22,524
23,955
77,677
59,496
Depreciation and Amortization
20,851
18,376
60,487
46,076
General and Administrative
4,129
4,204
12,990
19,626
Other Operating (Income) Expense
(469
)
—
(488
)
—
Total Operating Expenses
93,275
90,914
275,883
231,028
Operating Income
76,048
48,249
199,661
127,839
Other Expense (Income)
Interest Expense, Net of Amount
Capitalized
3,952
3,506
11,507
6,220
Investment Loss (Income)
5,621
(3,866
)
5,028
(10,825
)
Total Other Expense (Income)
9,573
(360
)
16,535
(4,605
)
Income Before Income Taxes
66,475
48,609
183,126
132,444
State Income Tax Provision
92
(94
)
290
163
Net Income
66,383
48,703
182,836
132,281
Less: Net Income Attributable to
Noncontrolling Interests
25,751
4,086
62,236
11,719
Net Income Attributable to Noble
Midstream Partners LP
40,632
44,617
120,600
120,562
Less: Net Income Attributable to Incentive
Distribution Rights
5,820
1,462
13,967
3,415
Net Income Attributable to Limited
Partners
$
34,812
$
43,155
$
106,633
$
117,147
Net Income Attributable to Limited
Partners Per Limited Partner Unit — Basic
Common Units
$
0.88
$
1.09
$
2.65
$
2.96
Subordinated Units
$
—
$
1.09
$
2.89
$
2.96
Net Income Attributable to Limited
Partners Per Limited Partner Unit — Diluted
Common Units
$
0.88
$
1.09
$
2.64
$
2.96
Subordinated Units
$
—
$
1.09
$
2.89
$
2.96
Weighted Average Limited Partner Units
Outstanding — Basic
Common Units
39,604
23,688
31,855
23,686
Subordinated Units
—
15,903
7,747
15,903
Total Limited Partner Units
39,604
39,591
39,602
39,589
Weighted Average Limited Partner Units
Outstanding — Diluted
Common Units
39,624
23,704
31,879
23,701
Subordinated Units
—
15,903
7,747
15,903
Total Limited Partner Units
39,624
39,607
39,626
39,604
Schedule 3
Noble Midstream Partners
LP
Consolidated Balance
Sheet
(in thousands,
unaudited)
September 30, 2019
December 31, 2018
ASSETS
Current Assets
Cash and Cash Equivalents
$
17,571
$
10,740
Accounts Receivable — Affiliate
40,475
31,613
Accounts Receivable — Third Party
20,251
23,091
Other Current Assets
8,579
5,875
Total Current Assets
86,876
71,319
Property, Plant and Equipment
Total Property, Plant and Equipment,
Gross
1,682,820
1,500,609
Less: Accumulated Depreciation and
Amortization
(114,789
)
(79,357
)
Total Property, Plant and Equipment,
Net
1,568,031
1,421,252
Intangible Assets, Net
286,042
310,202
Goodwill
109,734
109,734
Investments
565,387
82,317
Other Noncurrent Assets
6,696
3,093
Total Assets
$
2,622,766
$
1,997,917
LIABILITIES, MEZZANINE EQUITY
AND EQUITY
Current Liabilities
Accounts Payable — Affiliate
$
2,568
$
2,778
Accounts Payable — Trade
100,157
92,756
Other Current Liabilities
10,238
9,217
Total Current Liabilities
112,963
104,751
Long-Term Liabilities
Long-Term Debt
948,907
559,021
Asset Retirement Obligations
19,268
17,330
Other Long-Term Liabilities
1,410
582
Total Liabilities
1,082,548
681,684
Mezzanine Equity
Redeemable Noncontrolling Interest,
Net
102,830
—
Equity
Limited Partner
Common Units (39,712 and 23,759 units
outstanding, respectively)
618,049
699,866
Subordinated Units (15,903 units
outstanding as of December 31, 2018)
—
(130,207
)
General Partner
5,820
2,421
Total Partners’ Equity
623,869
572,080
Noncontrolling Interests
813,519
744,153
Total Equity
1,437,388
1,316,233
Total Liabilities, Mezzanine Equity and
Equity
$
2,622,766
$
1,997,917
Schedule 4 Noble Midstream Partners
LP Reconciliations of GAAP Financial Measures to Non-GAAP
Financial Measures
Non-GAAP Financial Measures
This news release, the financial tables and other supplemental
information include Adjusted EBITDA, Distributable Cash Flow, and
Distribution Coverage Ratio, all of which are non-GAAP measures
which may be used periodically by management when discussing our
financial results with investors and analysts.
As a result of our increased investment in midstream entities
during first quarter 2019, we have refined our presentation of
Adjusted EBITDA to adjust for items with respect to our equity
method investments. We now define Adjusted EBITDA as net income
before income taxes, net interest expense, depreciation and
amortization, transaction expenses, unit-based compensation and
certain other items that we do not view as indicative of our
ongoing performance. Additionally, Adjusted EBITDA reflects the
adjusted earnings impact of our equity method investments by
adjusting our equity earnings or losses from our equity method
investments to reflect our proportionate share of the EBITDA of
such equity method investments. Prior period Adjusted EBITDA has
been reclassified to conform to the current period
presentation.
Adjusted EBITDA is used as a supplemental financial measure by
management and by external users of our financial statements, such
as investors, industry analysts, lenders and ratings agencies, to
assess:
- our operating performance as compared 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.
As a result of our increased investment in midstream entities
during first quarter 2019, we have also refined our presentation of
distributable cash flow to adjust for items with respect to our
equity method investments. We now define distributable cash flow as
Adjusted EBITDA plus distributions received from our equity method
investments less our proportionate share of Adjusted EBITDA from
such equity method investments, estimated maintenance capital
expenditures and cash interest paid. Prior period distributable
cash flow has been reclassified to conform to the current period
presentation.
Distributable Cash Flow is used by management to evaluate our
overall performance. Our partnership agreement requires us to
distribute all available cash on a quarterly basis, and
Distributable Cash Flow is one of the factors used by the board of
directors of our general partner to help determine the amount of
available cash that is available to our unitholders for a given
period. We define Distribution Coverage Ratio as Distributable Cash
Flow divided by total distributions declared. The Distribution
Coverage Ratio is used by management to illustrate our ability to
make our distributions each quarter.
We believe that the presentation of Adjusted EBITDA,
Distributable Cash Flow, and Distribution Coverage Ratio provide
information useful to investors in assessing our financial
condition and results of operations. The GAAP measure most directly
comparable to Adjusted EBITDA, Distributable Cash Flow and
Distribution Coverage Ratio is net income. Adjusted EBITDA,
Distributable Cash Flow and Distribution Coverage Ratio should not
be considered alternatives to net income or any other measure of
financial performance or liquidity presented in accordance with
GAAP. Adjusted EBITDA, Distributable Cash Flow and Distribution
Coverage Ratio exclude some, but not all, items that affect net
income, and these measures may vary from those of other companies.
As a result, Adjusted EBITDA, Distributable Cash Flow and
Distribution Coverage Ratio as presented herein may not be
comparable to similarly titled measures of other companies.
Noble Midstream does not provide guidance on the reconciling
items between forecasted Net Income, forecasted Adjusted EBITDA,
forecasted Distributable Cash Flow and forecasted Distribution
Coverage Ratio due to the uncertainty regarding timing and
estimates of these items. Noble Midstream provides a range for the
forecasts of Net Income, Adjusted EBITDA, Distributable Cash Flow
and Distribution Coverage Ratio to allow for the variability in
timing and uncertainty of estimates of reconciling items between
forecasted Net Income, forecasted Adjusted EBITDA, forecasted
Distributable Cash Flow and forecasted Distribution Coverage Ratio.
Therefore, the Partnership cannot reconcile forecasted Net Income
to forecasted Adjusted EBITDA, forecasted Distributable Cash Flow
or forecasted Distribution Coverage Ratio without unreasonable
effort.
In addition to Net Income, the GAAP measure most directly
comparable to Adjusted EBITDA and Distributable Cash Flow is net
cash provided by operating activities. Adjusted EBITDA and
Distributable Cash Flow 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. Due to the forward-looking nature of net cash
provided by operating activities, management cannot reliably
predict certain of the necessary components of the most directly
comparable forward-looking GAAP measures, such as future
impairments and future changes in working capital. Accordingly,
Noble Midstream is unable to present a quantitative reconciliation
of the aforementioned forward-looking non-GAAP financial measures
to net cash provided by operating activities. Amounts excluded from
these non-GAAP measures in future periods could be significant.
Schedule 4 (Continued)
Noble Midstream Partners
LP
Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
Reconciliation of Net Income
(GAAP) to Adjusted EBITDA and Distributable Cash Flow
(Non-GAAP)
(in thousands,
unaudited)
Three Months Ended September
30,
2019
2018
Reconciliation from Net Income
(GAAP)
Net Income (GAAP)
$
66,383
$
48,703
Add:
Depreciation and Amortization
20,851
18,376
Interest Expense, Net of Amount
Capitalized
3,952
3,506
State Income Tax Provision
92
(94
)
Transaction and Integration Expenses
106
301
Proportionate Share of Equity Method
Investment EBITDA Adjustments
3,257
579
Unit-Based Compensation and Other
(630
)
343
Adjusted EBITDA (Non-GAAP)
94,011
71,714
Less:
Adjusted EBITDA Attributable to
Noncontrolling Interests
34,507
11,784
Adjusted EBITDA Attributable to Noble
Midstream Partners LP (Non-GAAP)
59,504
59,930
Add:
Distributions from Equity Method
Investments
1,711
—
Less:
Proportionate Share of Equity Method
Investment Adjusted EBITDA
(3,518
)
3,350
Cash Interest Paid
8,662
4,728
Maintenance Capital Expenditures
5,789
5,406
Distributable Cash Flow of Noble
Midstream Partners LP (Non-GAAP)
$
50,282
$
46,446
Distributions (Declared)
$
32,418
$
23,620
Distribution Coverage Ratio
(Declared)
1.6x
2.0x
Reconciliation of Net Cash
Provided by Operating Activities (GAAP) to Adjusted EBITDA
and Distributable Cash Flow
(Non-GAAP)
(in thousands,
unaudited)
Three Months Ended September
30,
2019
2018
Reconciliation from Net Cash Provided
by Operating Activities (GAAP)
Net Cash Provided by Operating
Activities (GAAP)
$
91,075
$
62,864
Add:
Interest Expense, Net of Amount
Capitalized
3,952
3,506
Changes in Operating Assets and
Liabilities
4,254
1,981
Transaction and Integration Expenses
106
301
Equity Method Investment EBITDA
Adjustments
(5,229
)
3,350
Other Adjustments
(147
)
(288
)
Adjusted EBITDA (Non-GAAP)
94,011
71,714
Less:
Adjusted EBITDA Attributable to
Noncontrolling Interests
34,507
11,784
Adjusted EBITDA Attributable to Noble
Midstream Partners LP (Non-GAAP)
59,504
59,930
Add:
Distributions from Equity Method
Investments
1,711
—
Less:
Proportionate Share of Equity Method
Investment Adjusted EBITDA
(3,518
)
3,350
Cash Interest Paid
8,662
4,728
Maintenance Capital Expenditures
5,789
5,406
Distributable Cash Flow of Noble
Midstream Partners LP (Non-GAAP)
$
50,282
$
46,446
Distributions (Declared)
$
32,418
$
23,620
Distribution Coverage Ratio
(Declared)
1.6x
2.0x
Schedule 4 (Continued)
Noble Midstream Partners
LP
Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
Reconciliation of 2019 GAAP
Guidance to 2019 Non-GAAP Guidance
(in millions,
unaudited)
2019 Guidance
4Q19
Full Year
Reconciliation from Net Income (GAAP)
to Distributable Cash Flow (Non-GAAP)
Net Income (GAAP)
$56 - $61
$239 - $244
Add:
Depreciation and Amortization
22
83
Interest Expense, Net of Amount
Capitalized
4
16
Unit-Based Compensation and Other
0.4
0.8
Transaction Expenses
—
—
Income Tax Provision (Benefit)
0
0.3
Proportionate Share of Equity Method
Investment EBITDA Adjustments
7.5
17
Adjusted EBITDA (Non-GAAP)
$90 - $95
$356 - $361
Adjusted EBITDA Attributable to
Noncontrolling Interests
26
114
Adjusted EBITDA Attributable to Noble
Midstream Partners LP
$64 - $69
$242 - $247
Plus:
Distributions from Equity Method
Investments
1.5
10
Less:
Proportionate Share of Equity Method
Investment Adjusted EBITDA
(3.5) - (5)
(2.5) - (4)
Maintenance Capital Expenditures and Cash
Interest Paid
16 - 17.5
57 - 58
Distributable Cash Flow of Noble Midstream
Partners LP
$53 - $58
$198 - $203
Distribution Coverage Ratio
1.5x - 1.7x
1.5x - 1.6x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107005268/en/
Tom Christensen Chief Financial Officer (832) 639-7524
tom.christensen@nblmidstream.com
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