Noble Midstream Partners LP (NYSE: NBLX) (“Noble
Midstream” or the “Partnership”) today announced it has entered
into a definitive agreement (the “Contribution and Simplification
Agreement” or “the Transactions”) to acquire the Partnership’s
incentive distribution rights (IDRs) and substantially all of Noble
Energy’s (NYSE: NBL) (“Noble Energy”) remaining midstream interests
for $1.6 billion. The total consideration will consist of both cash
and common units of limited partner interests in the Partnership
(“common units”).
Highlights Include:
- The Transactions are expected to be approximately 5% accretive
to Noble Midstream’s estimated distributable cash flow1 per unit in
2020.
- The acquired interests include $160 million in anticipated 2020
Adjusted EBITDA1 and $40 million in IDR distributions, implying an
aggregate 8x 2020 transaction multiple.
- Concurrent with the transaction, NBLX has reset the long-term
distribution growth rate target to 10 percent annually, resulting
in an estimated distribution coverage ratio1 of 1.3x in 2020.
- The Transactions reduce pro-forma 2019 Last Quarter Annualized
(LQA) EBITDA1 leverage to ~3.8x and 2020 LQA EBITDA leverage to
3.1x.
- The Transactions fully align Noble Midstream with Noble Energy
through the Partnership’s now 100% ownership in Noble Energy’s
current U.S. onshore focus areas.
- Acquired assets include NBLX’s first gas processing complex in
the DJ Basin and incremental 3-stream gathering in the southern
Delaware Basin.
- Private unit offering of $250 million increases common unit
float by ~55%, which is expected to enhance trading liquidity.
Commenting on the acquisition, Brent J. Smolik, Chief Executive
Officer of Noble Midstream, said “Noble Energy has completed its
midstream strategic review. We are excited to announce the
resulting simplification and drop transaction. This
financially-attractive acquisition of essentially all of Noble
Energy’s remaining midstream assets will enhance operational
synergies and increase economic alignment in Noble’s growth basins.
The acquisition is expected to be accretive to distributable cash
flow per unit.
With a significant amount of the backbone infrastructure
complete and Noble Energy’s deep drilling inventory in both the DJ
and Delaware basins, these assets are expected to further drive our
capital efficiency beyond our successful 2019 levels. The long-term
strategic alignment with Noble Energy will enhance the growth in
Noble Midstream LP unit distributions to NBL’s ownership
interest.”
Tom Christensen, Chief Financial Officer added, “The elimination
of the IDRs and the acquisition simplifies our structure and
enhances alignment with the sponsor, immediately lowering our cost
of capital and supporting strategic long-term growth and value
creation. Pro-forma for the acquisition, NBLX maintains
peer-leading leverage, and with the added scale, commands a high
return opportunity set to deliver top tier returns to its
unitholders. This transaction results in a self-funding midstream
entity with increased exposure to two high return onshore basins as
well as promising equity barrel value opportunities. By
recalibrating our distribution, we retain a leading distribution
growth rate relative to peers while better aligning the
distribution with midstream investor expectations.”
Acquisition Simplifies Story and Fully Aligns to Noble Energy
Focus Areas
Noble Midstream Partners has
acquired the Noble Energy L.P. interests in the Green River, Blanco
River and San Juan River DevCos. Included in the transaction, Noble
Midstream will acquire the following:
- The remaining 60% interest in
Blanco River DevCo LP in the Delaware Basin, including oil, gas and
produced water in-field gathering
- The remaining 75% interest in
Green River DevCo LP, including oil, gas and produced water
in-field gathering as well as fresh water delivery
- The remaining 75% interest in
the San Juan River DevCo LP, which provides fresh water delivery in
Noble Energy’s East Pony IDP
At close of the Transactions,
Noble Midstream will own 100% of these aforementioned DevCos and
will service substantially all of Noble Energy’s U.S. onshore
activity in the DJ and Delaware Basins. This increases NBLX and
NBL’s strategic alignment. 90% of NBL 2019 U.S. onshore capital is
expected to be invested in these two basins, which reduces the
volatility in activity mix for NBLX.
New Assets Provide Third Party Expansion Opportunity
In addition to the DevCo interests, Noble Midstream has acquired
NBL Holdings, which owns Noble Energy’s East Pony gas gathering
complex in the DJ Basin and the Clayton Williams gathering system
in the Delaware Basin.
The East Pony gas gathering system includes the Keota and Lilli
gas processing plants and associated gas gathering pipelines. The
two gas processing plants have a combined capacity of approximately
45 MMcf/d and are currently ~80% utilized. The plants can be
expanded to a capacity of 60 MMcf/d through additional compression
with minimal capital. This asset marks NBLX’s first entry into DJ
Basin gas processing. With the need for incremental gas processing
capacity in the DJ Basin, the Keota and Lilli plants provide an
additional opportunity for NBLX to grow its third-party
business.
In addition, NBL Holdings owns the legacy Clayton Williams
pipeline system, which includes more than 300 miles of oil, gas,
and produced water gathering pipelines. These pipelines service
Noble Energy’s central and southern Delaware Basin positions and
will provide additional opportunities to drive capital efficiency
through new well connections and secure third-party
dedications.
Accretive Transaction Improves Distribution Coverage and
Leverage
As consideration for the acquisition, the Partnership will issue
to Noble Energy approximately $930 million in NBLX common units2.
Noble Midstream expects to fund the remaining $670 million in cash
consideration with approximately $420 million from its revolving
credit facility and approximately $250 million in proceeds from a
private placement of common units.
In the first year, the transaction is expected to be 5%
accretive to DCF/unit1 and the transaction is expected to be
accretive long term. Upon closing of the acquisition and the
private placement, Noble Energy is expected to own a 63% limited
partner interest in NBLX. The acquisition closed on November 14,
2019.
2020 Guidance Highlighted by Strong Core Business
Growth
Pro-forma for the Transactions, Noble Midstream anticipates 2020
Adjusted EBITDA attributable to the Partnership to be between $500
million and $560 million. This is underpinned by approximately 11%
estimated midpoint growth in combined oil and gas throughput as
well as anticipated 20% midpoint growth in produced water gathering
volumes. Included in these estimates, Noble Midstream has assumed
the exercise of its option to acquire a 20% ownership in the
Saddlehorn Pipeline in the DJ Basin via Black Diamond.
The Partnership estimates 2020 Distributable Cash Flow (“DCF”)
to range between $325 million and $370 million. Noble Midstream is
targeting a sustainable Distribution per Unit (“DPU”) annual growth
rate of 10% on an organic basis, resulting in expected pro-forma
DCF coverage in a range of 1.2x to 1.4x.
The Partnership anticipates capital expenditures attributable to
the Partnership in 2020 between $260 million and $300 million.
Additionally, expected capital investments in our equity method
assets and joint ventures of $130 million to $150 million are
expected to be down 75% compared to 2019 as the partnership
completes investment in long-haul pipelines. At the end of 2020,
NBLX’s LQA EBITDA leverage ratio is expected to be 3.1x; beyond
2020, the Partnership is targeting a long-term leverage ratio of
below 3.5x.
Q4 2019 Guidance
Full Year
Previously Reported
Pro Forma5
2020E
Oil Gathered (MBbl/d)
248 – 258
251 – 261
250 – 275
Gas Gathered (MMcf/d)
482 – 502
525 – 545
530 – 590
Oil and Gas Gathered (MBoe/d)
328 – 342
338 – 352
338 – 373
Produced Water Gathered (MBw/d)
195 - 205
206 - 216
210 – 235
Fresh Water Delivered (MBw/d)
110 - 145
110 - 145
180 – 235
($MM)
Adjusted Net EBITDA 1,2
64 – 69
81 – 86
500 – 560
Distributable Cash Flow 1,6
53 – 58
67 – 72
325 – 370
Distribution Coverage Ratio 1,3
1.5x – 1.7x
1.1x – 1.2x
1.2x – 1.4x
Net Capex 4
40 – 50
60 – 70
260 – 300
Equity Investments, net 2
104 – 134
104 – 134
130 – 150
(1)
Please see the Non-GAAP disclaimer herein
for additional information.
(2)
Assumes the exercise of NBLX’s 20% option
in Saddlehorn
(3)
Pro forma estimates include forecasted DPU
growth of 10% annually
(4)
Excludes equity investments
(5)
Gross pro forma adjustments reflect full
quarter / year adjustments for previously non-consolidating assets
(East Pony gas gathering and processing and Clayton Williams
pipeline). Net pro forma adjustments reflect results following the
assumed effective date of 11/15/2019 for previously consolidating
assets (additional ownership interests in Green River DevCo, San
Juan River DevCo, and Blanco River DevCo) and previously
non-consolidating assets (East Pony gas gathering and processing
and Clayton Williams pipeline).
(6)
Guidance for Distributable Cash Flow will
not include any new pipeline project cash flow distributions until
the projects are online and making consistent distributions
Q4 2019E
FY 2020E
($ thousands)
Low
High
Low
High
Reconciliation from Net Income
Net Income
50,500
58,000
230,000
290,000
Add:
Depreciation and Amortization
25,500
25,500
105,000
105,000
Interest Expense, Net of Amount
Capitalized
5,250
5,050
54,000
54,000
Income Tax Provision
100
100
400
400
Transaction and Integration Expenses
7,500
5,000
-
-
Unit-Based Compensation and Other
450
450
1,600
1,600
Proportionate Share of Equity Method
Investment EBITDA Adjustments
7,500
7,500
79,000
69,000
Adjusted EBITDA
96,800
101,600
470,000
520,000
Less:
Adjusted EBITDA Attributable to
Noncontrolling Interests
15,800
15,600
30,000
40,000
Adjusted EBITDA Attributable to Noble
Midstream Partners LP
81,000
86,000
500,000
560,000
Plus:
Distributions from Equity Method
Investments
1,500
1,500
15,000
25,000
Less:
Proportionate Share of Equity Method
Investment Adjusted EBITDA
(5,000)
(3,500)
75,000
85,000
Cash Interest Paid
13,000
11,000
65,000
67,000
Maintenance Capital Expenditures
7,500
8,000
50,000
63,000
Distributable Cash Flow of Noble
Midstream Partners LP
67,000
72,000
325,000
370,000
Financial and Legal Advisors
The terms of the Transactions 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 Board of Directors of Noble
Midstream GP LLC was advised by BofA Securities on financial
matters and Mayer Brown L.L.P. on legal matters, the conflicts
committee was advised by Baird on financial matters and Baker Botts
L.L.P. on legal matters, and Noble Energy was advised by Citi on
financial matters and Vinson & Elkins L.L.P. on legal
matters.
Presentation Available
A presentation summarizing the acquisition has been made
available on the ‘Investors’ page on the Partnership’s website at
www.nblmidstream.com.
About Noble Midstream
Noble Midstream is a growth-oriented master limited partnership
formed by Noble Energy 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 targeted leverage and distribution
growth, its 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.
Non-GAAP Measures
This news release also
contains certain forward-looking non-GAAP measures of financial
performance that management believes are good tools for internal
use and the investment community in evaluating the Partnership’s
overall financial performance. We 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. We 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. We define Last Quarter
Annualized Leverage Ratio as total debt divided by the last quarter
of the fiscal year adjusted EBITDA attributable to the Partnership,
annualized for four quarters. Annualized Leverage Ratio is used by
management to assess our ability to incur and service debt and fund
capital expenditures. We define Distribution Coverage Ratio as
Distributable Cash Flow divided by total distributions
declared.
Noble Midstream does not
provide guidance on forecasted Net Income or 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.
1 Adjusted EBITDA, LQA EBITDA, DCF and
Distribution Coverage Ratio are not Generally Accepted Accounting
Principles (GAAP) measures. Please see the Non-GAAP disclaimer
herein for additional information.
2 Units issued to NBL will be issued at the 30-day VWAP through
close of business November 6, at $24.18/sh.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191115005077/en/
Tom Christensen Chief Financial Officer (832) 639-7524
tom.christensen@nblmidstream.com
Park Carrere Investor Relations (281) 872-3208
park.carrere@nblenergy.com
Noble Energy (NYSE:NBL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Noble Energy (NYSE:NBL)
Historical Stock Chart
From Jul 2023 to Jul 2024