Note 2. Basis of Presentation

Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying consolidated financial statements at September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and partners' equity for such periods. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. Certain prior-period amounts have been reclassified to conform to the current-period presentation.

The accompanying consolidated financial statements for periods prior to September 20, 2016 represent the Contributed Businesses of certain of Noble's midstream assets as the accounting Predecessor to the Partnership, presented on a carve-out basis of Noble’s historical ownership of the Predecessor. The Predecessor financial statements have been prepared from the separate records maintained by Noble and may not necessarily be indicative of the actual results of operations that might have occurred if the Predecessor had been operated separately during the periods reported. Because a direct ownership relationship did not exist among the businesses comprising the Predecessor, the net investment in the Predecessor is shown as Parent Net Investment, in lieu of partners' equity, in the accompanying Consolidated Balance Sheet at December 31, 2015.

The Partnership has no items of other comprehensive income; therefore, its net income is identical to its comprehensive income.

Consolidation Our consolidated financial statements include our accounts and the accounts of the DevCos, each of which we control as general partner. All intercompany balances and transactions have been eliminated upon consolidation. In addition, we use the cost method for our White Cliffs Interest as we have virtually no influence over its operations and financial policies. Under the cost method of accounting, we recognize cash distributions from White Cliffs Pipeline L.L.C. as earnings to the extent there is net income, and record cash distributions in excess of our ratable share of earnings as return of investment.

Noncontrolling Interest The noncontrolling interest represents Noble's retained ownership interest in the following DevCos:


•	a 20% noncontrolling interest in Colorado River DevCo LP;


•	a 75% noncontrolling interest in Green River DevCo LP;


•	a 75% noncontrolling interest in Blanco River DevCo LP;


•	a 75% noncontrolling interest in San Juan River DevCo LP; and


•	a 95% noncontrolling interest in Gunnison River DevCo LP.

Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment.

Fair Value Measurements We measure assets and liabilities requiring fair value presentation and disclose such amounts according to the quality of valuation inputs under the fair value hierarchy. The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature and maturity of the instruments and use Level 1 inputs. The fair value measurements of property, plant and equipment, capital lease and asset retirement obligations are based on inputs that are not observable in the market and therefore represent Level 3 inputs.

Transactions with Affiliates Transactions between Noble, its affiliates and us have been identified in the consolidated financial statements as transactions with affiliates. See Note 3. Transactions with Affiliates.

Debt Origination Fees and Expenses Debt origination fees and expenses of $2.5 million associated with our Revolving Credit Facility are included in deferred charges and amortized on a straight line basis over the five-year term. Amortization is included in interest expense. See Note 5. Debt.

Capital Lease Obligation We entered into a capital lease for a pond to be used in our fresh water delivery system. The amount of the capital lease obligation is based on the discounted present value of future minimum lease payments, and therefore does not reflect future cash lease payments. The amount due within one year equals the amount by which the capital lease obligation is expected to be reduced during the next 12 months. The lease has a discounted present value of future minimum lease payments of $4.9 million. See Note 8. Commitments and Contingencies.

Supplemental Cash Flow Information We accrued $2.7 million and $8.9 million related to midstream capital expenditures as of September 30, 2016 and 2015, respectively. Immediately prior to closing of the Offering, the Partnership recorded an adjustment to equity of $41.4 million for the elimination of current and deferred tax liabilities which is a significant non-cash financing activity.

Concentration of Credit Risk Excluding income from our investment in White Cliffs, 100% of our revenues are from Noble and its affiliates for all periods presented.

Income Taxes For the period subsequent to the Offering, our consolidated financial statements do not include a provision for income taxes as the Partnership is generally not subject to federal or state income tax. Each partner is separately taxed on its share of taxable income.

For periods prior to the Offering date, our consolidated financial statements include a provision for tax expense on income related to the assets that Noble contributed to the Partnership at the Offering date. Deferred federal and state income taxes were provided on temporary differences between the financial statement carrying amounts of recognized assets and liabilities and their respective tax bases as if the partnership filed tax returns as a stand-alone entity.

Litigation and Other Contingencies We may become subject to legal proceedings, claims and liabilities that will arise in the ordinary course of business. We will accrue for losses associated with legal claims when such losses are considered probable and the amounts can be reasonably estimated. See Note 8. Commitments and Contingencies.

Recently Issued Accounting Standards In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 clarifies the presentation of certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 will be effective for annual and interim periods beginning after December 15, 2017, with earlier application permitted. We do not believe adoption of ASU 2016-15 will have a material impact on our statement of cash flows and related disclosures as this update pertains to classification of items and is not a change in accounting principle.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (ASU 2016-02). ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In the normal course of business, we enter into capital and operating lease agreements to support our operations and may lease water-related, field-related and other assets. We are in the process of evaluating the impact of ASU 2016-02 on our financial statements and disclosures. We believe the adoption and implementation of ASU 2016-02 may have a material impact on our balance sheet resulting from an increase in both assets and liabilities relating to leasing activities.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates Topic 606, Revenue from Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, ASU 2014-09 requires enhanced financial statement disclosures over revenue recognition as part of the new accounting guidance. The standard will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. In March 2016, the FASB released certain implementation guidance through ASU 2016-08 to clarify principal versus agent considerations. We are continuing to evaluate the provisions of ASU 2014-09 and have not yet determined the full impact it may have on our financial position and results of operations.