Noble Midstream Partners LP (NYSE:NBLX) (“Noble
Midstream” or the “Partnership”) today announced it has entered
into a definitive agreement to acquire additional interests in
Colorado River DevCo LP (“Colorado River DevCo”) and Blanco River
DevCo LP (“Blanco River DevCo”) for $270 million from Noble Energy,
Inc. (NYSE:NBL) (“Noble Energy”). The acquisition will increase
Noble Midstream’s interest in Colorado River DevCo to 100% from
80%, and in Blanco River DevCo to 40% from 25%. Noble Energy will
retain the remaining 60% interest in Blanco River DevCo.
Commenting on the acquisition, Terry R. Gerhart, Chief Executive
Officer of the general partner of Noble Midstream, said, “We are
very pleased to further the Partnership’s exposure to the Delaware
Basin through this accretive acquisition of additional interests in
Blanco River DevCo, ahead of the significant growth anticipated
from Noble Energy in the Delaware Basin. Additionally, acquiring
the remaining interest in Colorado River DevCo adds immediate scale
to the Partnership and complements our growth outlook as we
continue to gather an increasing share of Noble Energy’s DJ Basin
production.”
Blanco River DevCo
Blanco River DevCo holds Noble Midstream’s Delaware Basin in
field gathering dedications on approximately 111,000 acres for oil
and produced water gathering, with substantially all of the acreage
also dedicated for gas gathering.
The Partnership estimates approximately 40% to 50% of its 2017
gross capital budget will be allocated to Blanco River DevCo as it
constructs four central gathering facilities and backbone pipeline
infrastructure to support Noble Energy’s Delaware Basin activity.
The first facility is estimated to be complete mid-year 2017, the
second in the fourth quarter 2017, and the following two in the
first half of 2018.
The four central gathering facilities are expected to provide
oil capacity expandable up to 120 thousand barrels per day by the
end of 2018, and the oil, gas and produced water gathering systems
are expected to consist of approximately 180 miles of pipelines by
the end of 2018.
Colorado River DevCo
Colorado River DevCo consists of gathering systems across Noble
Energy’s Wells Ranch and East Pony development areas and generated
all of the Partnership’s first quarter 2017 gathering revenue.
Noble Midstream provides oil, natural gas and produced water
gathering, as well as fresh water delivery services in Wells Ranch,
and oil gathering in East Pony through Colorado River DevCo.
Colorado River DevCo is expected to generate greater than 15%
oil and gas throughput growth in the second quarter 2017 as
compared to the first quarter of 2017. Assets held by Colorado
River DevCo include the Wells Ranch central gathering facility,
with approximately 45 thousand barrels of daily oil capacity, and
approximately 125 miles of oil, gas and produced water gathering
pipelines combined in Wells Ranch and East Pony.
Accretive Acquisition
The acquisition is expected to be immediately accretive to
distributable cash flow per unit of the Partnership, based on a
transaction value representing 8.2 – 9.2 times the next twelve
months estimated earnings before interest, taxes, depreciation and
amortization (“EBITDA”) of the acquired interests.
Noble Midstream’s management has recommended to the board of
directors of Noble Midstream GP LLC, the Partnership’s general
partner (the “Board of Directors”), a second quarter distribution
per unit increase of 8.5% above the first quarter distribution per
unit of $0.4108, as compared to the previously announced 4.7%
quarterly growth target. In addition, Noble Midstream’s management
has also recommended to the Board of Directors that the Partnership
re-confirm its 20% distribution per unit annual growth target
following the proposed second quarter distribution.
Financing and Liquidity
As consideration for the acquisition, the Partnership has agreed
to pay Noble Energy $270 million, consisting of $245 million in
cash and 562,430 common units representing limited partner
interests in the Partnership (“common units”). Noble Midstream
expects to fund the cash consideration with approximately $143
million of net proceeds from a concurrent private placement of
common units and $102 million of borrowing under the Partnership’s
credit facility.
Total borrowing under the Partnership’s credit facility is
expected to be $192 million as of the end of the second quarter of
2017, including the expected borrowing for the acquisition. Pro
forma for the acquisition and the consummation of the concurrent
private placement of common units, the Partnership’s liquidity
position is expected to be $178 million as of June 30, 2017,
consisting of approximately $158 million available under its credit
facility and approximately $20 million of cash on hand.
Upon closing of the acquisition and the private placement, Noble
Energy is expected to own a 50.1% limited partner interest in Noble
Midstream. The acquisition is expected to close prior to the end of
the second quarter, subject to the satisfaction of customary
closing conditions.
The terms of the transaction were approved by the Board of
Directors following a unanimous recommendation for approval from
the conflicts committee of the Board of Directors, which consists
entirely of independent directors. The conflicts committee was
advised by Evercore on financial matters and Baker Botts L.L.P. on
legal matters.
Updated 2017 Guidance
Noble Midstream has updated its full year 2017 capital budget
and guidance to reflect the acquisition and an improved operational
outlook. The 2017 gross capital budget is unchanged; however total
capital attributable to the Partnership is expected to increase by
$30 million due to the additional interest acquired, and is now
estimated to total $215 million – $235 million.
Noble Midstream now anticipates 2017 net income between $145
million and $152 million and EBITDA1 between $155 million and $168
million, which represents a 5% increase above the prior midpoint
EBITDA1 guidance. EBITDA1 attributable to the Partnership is now
estimated to range between $130 million and $145 million, which
represents a 19% increase to the prior guidance midpoint and
reflects performance updates from the previously announced second
quarter 2017 volume expectations as well as the impact from the
acquired interests in the remainder of 2017. The Partnership
estimates 2017 Distributable Cash Flow (“DCF”)1 to range between
$112 million and $125 million for the year ending December 31,
2017, resulting in DCF1 coverage between 1.8x and 2.0x.
Noble Midstream will provide additional guidance information
with the second quarter 2017 earnings materials.
Full Year 2017 (E)
Mid-Point% Change
Updated
Prior(May 1, 2017)
Financial
Guidance ($MM)
Net Income $145 - $152 $134 - $145 6% EBITDA1
$155 - $168 $146 - $162 5% Net EBITDA1
$130
- $145 $110 - $122 19% DCF1 $112 - $125 $96 - $107 17% DCF1
Coverage 1.8x - 2.0x 1.7x - 1.9x 6% Gross Capital $365 - $405 $365
- $405 - Net Capital $215 - $235 $185 - $205 15%
Presentation Available
A presentation summarizing the acquisition and updated guidance
has been made available on the ‘Investors’ page on the
Partnership’s website at www.nblmidstream.com.
About Noble Midstream
Noble Midstream Partners LP 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 Statement
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, Noble Energy’s ability to meet its 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 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 that are discussed in its most recent annual
report on Form 10-K and in other reports on 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 or management’s
estimates or opinions change.
Non-GAAP Financial Measures
This news release includes EBITDA and Distributable Cash Flow,
both of which are non-GAAP measures which may be used periodically
by management when discussing our financial results with investors
and analysts. The following presents a reconciliation of each of
these non-GAAP financial measures to its nearest comparable GAAP
measure.
We define EBITDA as net income before income taxes, net interest
expense, depreciation and amortization. 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.
We define Distributable Cash Flow as EBITDA less estimated
maintenance capital expenditures. 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 to help determine the amount of
available cash that is available to our unitholders for a given
period.
We believe that the presentation of EBITDA and Distributable
Cash Flow provide information useful to investors in assessing our
financial condition and results of operations. The GAAP measure
most directly comparable to EBITDA and Distributable Cash Flow is
net income. EBITDA and Distributable Cash Flow should not be
considered alternatives to net income or any other measure of
financial performance or liquidity presented in accordance with
GAAP. EBITDA and Distributable Cash Flow exclude some, but not all,
items that affect net income or net cash, and these measures may
vary from those of other companies. As a result, EBITDA and
Distributable Cash Flow as presented below may not be comparable to
similarly titled measures of other companies.
EBITDA and Distributable Cash Flow should not be considered as
alternatives to GAAP measures, such as net income, operating
income, cash flow from operating activities, or any other GAAP
measure of financial performance.
Financial Guidance GAAP Reconciliation
($ in millions)
FY 2017 (E) Prior Updated
(May 1, 2017) Net Income $145 - $152 $135 -
$147 Add: Depreciation and Amortization 10 - 14 10 - 14 Add:
Interest Expense, Net of Amount Capitalized 0 - 2 1 Add: Income Tax
Provision - -
EBITDA $155 - $168 $146 - $162
Less: EBITDA Attributable to Noncontrolling Interests 25 - 23 36 -
40
EBITDA Attributable to NBLX $130 - $145 $110 -
$122 Less: Maintenance Capital Expenditures & Cash Interest
18 - 20 14 - 15
Distributable Cash Flow of NBLX $112 -
$125 $96 - $107 Distribution Coverage
1.8x - 2.0x 1.7x - 1.9x Acquisition
Valuation Metrics Reconciliation
($ in millions, attributable to the
Partnership)
Next Twelve Months
July 2017 - June 2018
Net Income
$27.5 - $29.9
Add: Depreciation and Amortization 2 - 3 Add: Interest Expense, Net
of Amount Capitalized 0 Add: Income Tax Provision -
EBITDA
$29.5 - $32.9
1 EBITDA and DCF are not Generally Accepted Accounting
Principles (“GAAP”). For definitions of these non-GAAP measures and
reconciliations to the nearest GAAP measures, see “Non-GAAP
Financial Measures” below.
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version on businesswire.com: http://www.businesswire.com/news/home/20170621005681/en/
Noble MidstreamChris HickmanVP, Investor Relations(281)
943-1622chris.hickman@nblmidstream.com
Noble Energy (NYSE:NBL)
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