Quarterly / Earnings Reports | Fourth Quarter (4Q) Update | Financial Results | Capital Markets | Capital Expenditure - 2021

Noble Midstream Fourth Quarter, Full Year 2020 Results; 2021 Plan

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   |    Friday,February 12,2021

Noble Midstream Partners LP reported fourth-quarter and full-year 2020 financial and operational results.

Note: The Partnership's results are consolidated to include Noble Midstream's 54.4% ownership of Black Diamond Gathering, LLC. References to Equity Method Investments pertain to Noble Midstream's equity interests in joint ventures that are not wholly-owned by the Partnership.

Certain results are shown as "attributable to the Partnership," which exclude the noncontrolling interests in Black Diamond Gathering retained by 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.

Q4 2020 and Recent Highlights

• Generated $40 million Net Income Attributable to the Partnership, $85 million Net Cash Provided by Operating Activities, and $95 million in Adjusted Net EBITDA^1,2
• Self-funded $7 million in net organic capital expenditures and $23 million in equity method investments
• Gathered 286,000 gross barrels of oil and gas equivalent per day (Boe/d) and 146,000 barrels of produced water per day (Bw/d)
• Delivered 89,000 Bw/d fresh water as producer activity resumes across the Partnership's dedication areas
• Transported 768,000 gross (170,000 net) barrels of oil per day (Bbl/d) across intermediate and long-haul pipeline equity interests
• Reduced flaring intensity in the Delaware Basin 53% and overall volume of unintentional releases by 90+% year-over-year

2021 Operational Guidance

• $155 to $185 million in Net Income, $360 to $395 million in Adjusted Net EBITDA^1,2 and $185 to $220 million in Free Cash Flow¹
• Total capital investments of $80 to $110 million, including net organic capital expenditures of $65 to $85 million
• 275,000 to 305,000 Boe/d of oil and gas gathering volumes and 120,000 to 140,000 Bw/d of produced water gathering volumes
• Leverage of 3.6x to 4.0x Net Debt to Trailing Twelve Months (TTM) EBITDA¹

Robin Fielder, Chief Executive Officer of the Partnership stated, "Noble Midstream exited 2020 with five additional liquids transmission projects in-service while achieving material operating and capital cost savings during the year. These accomplishments, coupled with the resumption of completion activity late in 2020, position the Partnership for enhanced capital efficiency and returns. Our 2021 capital program is focused primarily on short-cycle investments, and we expect to generate material free cash flow and reduce leverage."

Ops Update

Fourth-quarter 2020 revenues totaled $207 million, up 11% sequentially, due to an increase in fresh water delivery revenue and third-party crude oil sales. Affiliate oil and gas gathering revenue of $76 million and third-party oil and gas gathering revenue of $18 million both decreased 5% sequentially due to natural field declines.

Operating expenses for the fourth quarter totaled $149 million with $26 million in direct operating expenses. Direct operating expenses increased sequentially due to higher fresh water delivery volumes and one-time maintenance costs. The Partnership achieved more than $20 million in annual, overall direct operating cost savings, with roughly half sustainable at current activity levels. Investment income losses were $9 million, related to costs associated with the continued ramp in the EPIC and Delaware Crossing Pipelines.

The Partnership reported fourth-quarter 2020 Net Cash Provided by Operating Activities of $85 million and Adjusted Net EBITDA^1,2 of $95 million. For the year, the Partnership generated $377 million in Net Cash Provided by Operating Activities and $393 million in Adjusted Net EBITDA^1,2, above the midpoint of 2020 updated annual guidance range.

For the fourth-quarter 2020, maintenance capital expenditures and cash interest expense attributable to the Partnership totaled $7 million and $6 million, respectively, leading to $74 million Distributable Cash Flow¹ attributable to the Partnership.

Noble Midstream invested $7 million in fourth-quarter net organic capital expenditures with full year 2020 net capital of $63 million, below the lower end of the updated annual guidance range. Net equity method investments during the quarter totaled $23 million, including $17 million for EPIC Y-Grade and $5 million for EPIC Crude. For the year, net equity investment capital equaled $239 million.

Completion Activity Returned to Both Basins

In the Partnership's wholly-owned DJ Basin assets, oil and gas gathering volumes averaged 154,000 Boe/d, down 10% sequentially, and produced water volumes averaged 29,000 Bw/d, flat sequentially. Noble Midstream connected 9 affiliate wells and 12 third-party wells in the DJ Basin. Fresh water delivery volumes averaged 89,000 Bw/d, and the Partnership delivered fresh water to 19 affiliate wells in the quarter. DJ Basin net capital expenditures totaled $0.9 million.

Black Diamond oil gathering throughput volumes averaged 66,000 Bo/d, excluding marketing volumes of 19,000 Bbl/d. Black Diamond connected 22 wells across 3 customers, totaling $1.6 million in fourth-quarter net capital expenditures.

In the Delaware Basin, quarterly oil and gas gathering throughput was 66,000 Boe/d, down 8% sequentially, and produced water gathering volumes were 117,000 Bw/d, down 7% from the third quarter. The Partnership connected 8 affiliate wells and had Delaware Basin net capital expenditures of $4.5 million.

Equity Method Investment Pipelines In Service

The Partnership averaged gross throughput of 768,000 Bbl/d (170,000 net) across its intermediate and long-haul transmission systems. Fourth-quarter equity method investment volumes and cash flows decreased sequentially due to an operational closure at the EPIC marine terminal.

Fourth-quarter 2020 Saddlehorn throughput averaged approximately 164,000 Bo/d. The 100,000 Bbl/d expansion has been completed in the first-quarter 2021. Volumes on the Advantage Pipeline system averaged 65,000 Bo/d, sequentially flat compared to the third-quarter 2020. Delaware Crossing averaged 18,000 Bbl/d in gathering and transportation volumes.

Q4 Debt and Quarterly Distribution

As of December 31, 2020, the Partnership had $456 million in liquidity and $1.6 billion in total debt. During the quarter, Noble Midstream reduced its total debt balance by $35 million.

Noble Midstream's current debt obligation of $500 million matures July 31, 2021. The Partnership is evaluating refinancing options with Chevron to address this obligation.

On January 22, 2021, the Board of Directors of Noble Midstream's general partner, Noble Midstream GP LLC, declared a fourth-quarter cash distribution of $0.1875 per unit, flat versus third-quarter 2020.

2021 Outlook

Noble Midstream is reinstating oil, gas, and produced water volume guidance and estimates 2021 gross oil and gas gathering and sales volumes of 275,000 to 305,000 Boe/d and produced water volumes of 120,000 to 140,000 Bw/d.

In 2021, Noble Midstream anticipates 250 to 300 affiliate and third-party well connections in the DJ and Delaware basins. The Partnership anticipates 50 to 60 Chevron-affiliate well connections, including 45 to 55 connections in the Mustang Integrated Development Plan Area in the DJ Basin.

Third-party connection activity is anticipated to ramp up in 2021 with more than 175 well connections in the DJ Basin and 10 to 15 connections across multiple operators in the Delaware Basin. The Partnership anticipates connection activity to be first-half weighted in 2021 with more than 30 connections on wholly-owned dedication areas and more than 60 connections on Black Diamond dedication areas in the first-quarter 2021.

Noble Midstream is anticipating 2021 total capital expenditures of $80 to $110 million, including the EPIC Crude marine terminal construction and EPIC Y-Grade raw NGL line to Sweeny, Texas, associated with the BANGL joint venture.

The Partnership anticipates the midpoint of its Net Income Attributable to the Partnership to be $170 million with 2021 Adjusted Net EBITDA^1,2 of $360 to $395 million. At current activity levels, the Partnership estimates a range of $185 to $220 million in Free Cash Flow¹ generation in 2021.

Net Debt to TTM Adjusted Net EBITDA¹ expectations are anticipated to be 3.6x to 4.0x.

Chevron Offer

On February 5, 2021, Noble Midstream Partners received a non-binding proposal (the "Proposal") from Chevron Corporation ("Chevron") to acquire all of the publicly held common units representing limited partner interests in the Partnership not already owned by Chevron and its affiliates.

The Board of Directors of Noble Midstream GP LLC (the "General Partner"), the General Partner of Noble Midstream, has delegated authority to its conflicts committee to negotiate the terms of the proposed transaction on behalf of the unaffiliated Noble Midstream unitholders, as is customary in similar transactions. The Proposal is subject to the negotiation and execution of a definitive agreement, as well as approval by the Board of Directors of the General Partner. There is no assurance that any such approvals will be forthcoming, that such definitive agreement will be executed, or that any transaction will be consummated.