Transactions with Affiliates

12 Months Ended

Dec. 31, 2019

Note 3. Transactions with Affiliates

Common Control Transactions

Drop-Down and Simplification Transaction On November 14, 2019, we entered into a Contribution, Conveyance, Assumption and Simplification Agreement with Noble in which we acquired (i) the remaining 60% limited partner interest in Blanco River DevCo LP, (ii) the remaining 75% limited partner interest in Green River DevCo LP, (iii) the remaining 75% limited partner interest in San Juan River DevCo LP and (iv) all of the issued and outstanding limited liability company interests of NBL Holdings, which owns a natural gas processing complex in the DJ Basin and an incremental three-stream gathering system in the Delaware Basin. Additionally, all of Noble’s IDRs were converted into Common Units. The total consideration paid by the Partnership for the Drop-Down and Simplification Transaction was $1.6 billion, which consisted of $670 million in cash and 38,455,018 Common Units issued to Noble. The cash portion of the consideration was funded by the 2019 Private Placement and borrowings under our revolving credit facility. The transaction closed on November 21, 2019. See Note 4. Offerings and Acquisition.

2017 Contribution Agreement On June 20, 2017, we entered into a Contribution Agreement with Noble. Pursuant to the terms of the Contribution Agreement, we acquired (i) the remaining 20% limited partner interest in Colorado River DevCo LP and (ii) an additional 15% limited partner interest in Blanco River DevCo LP (collectively, the “Contributed Assets” and the “2017 Contributed Asset Transaction”). The total consideration paid by the Partnership for the Contributed Assets was $270 million, which consisted of $245 million in cash and 562,430 Common Units issued to Noble. The transaction closed on June 26, 2017.

Revenue and Expense Transactions with Affiliates

Revenues We derive a substantial portion of our revenues from commercial agreements with Noble. Revenues generated from commercial agreements with Noble and its affiliates consist of the following:



	Year Ended December 31,
(in thousands)	2019		2018		2017
Gathering and Processing	$	337,086	$	265,505	$	189,732
Fresh Water Delivery	77,566		69,266		75,860
Other	3,183		3,976		5,677
Total Midstream Services — Affiliate	$	417,835	$	338,747	$	271,269

Expenses General and administrative expense consists of the following:



	Year Ended December 31,
(in thousands)	2019		2018		2017
General and Administrative Expense — Affiliate	$	8,523	$	8,846	$	8,677
General and Administrative Expense — Third Party	17,254		17,064		6,115
Total General and Administrative Expense	$	25,777	$	25,910	$	14,792

Agreements with Noble

We have entered into various agreements with Noble, as summarized below:

Commercial Agreements Our commercial agreements with Noble provide for fees based on the type and scope of the midstream services we provide and the midstream system we use to provide our services, as follows:


•	Crude Oil Gathering Agreement - Under the applicable crude oil gathering agreement, we receive a volumetric fee per barrel (“Bbl”) for the crude oil gathering services we provide.


•	Natural Gas Gathering Agreement - Under the natural gas gathering agreement, we receive a volumetric fee per contracted unit of measure for the natural gas gathering services we provide.

•

Produced Water Services Agreement - Under the applicable produced water services agreement, we receive a fee for collecting, cleaning or otherwise disposing of water produced from operating crude oil and natural gas wells in the dedication area. The fee is comprised of a volumetric component for services we provide directly and a pass through component for services we provide through contracts with third parties.


•	Fresh Water Services Agreement - Under the applicable fresh water services agreement, we receive a fee for delivering fresh water. The fee is comprised of a volumetric component for services we provide directly and a pass through

component for services we provide through contracts with third parties. The cost of storing the fresh water is included in the delivery fee.


•	Crude Oil Treating Agreement - Under the crude oil treating agreement, we receive a monthly fee for the crude oil treating services we provide based on each well operated by Noble that is producing in paying quantities that is not connected to our crude oil gathering systems during such month.


•	Natural Gas Processing Agreement - Under the natural gas processing agreement, we receive a volumetric fee per MMBtu for the natural gas processing services we provide.


•	Natural Gas Compression Agreement - Under the applicable natural gas compression agreement, we receive a volumetric fee per thousand cubic feet (“Mcf”) for the natural gas compression services we provide.

Our commercial agreements with Noble include a provision to escalate volumetric fees annually, subject to specific limitations within each agreement. In addition, we can propose a redetermination of the fees charged under our various systems on an annual basis, taking into account, among other things, expected capital expenditures necessary to provide our services under the applicable development plan. However, if we and Noble are unable to agree on a fee redetermination (other than the automatic annual adjustment), the prior fee will remain in effect.

In accordance with our commercial agreements with Noble, we provide midstream services through the use of our midstream assets. We have determined that the structure of our commercial agreements conveys to Noble the right to use our midstream assets. Revenues generated from the commercial agreements are recorded within Midstream Services - Affiliate in our consolidated statement of operations. We believe recording within Midstream Services - Affiliate reflects the nature of the commercial agreement, is representative of the revenues generated by the midstream industry and provides our investors with the information necessary to evaluate our operations.

Omnibus Agreement Our omnibus agreement with Noble provides for:

•

our payment of an annual general and administrative fee, initially in the amount of $6.9 million for the provision of certain services by Noble and its affiliates, which fee could not be increased until after the third anniversary of our initial public offering (“IPO”) with annual redetermination thereafter. The cap on the initial rate expired in September 2019 and we have commenced the annual redetermination process;


•	our right of first refusal on existing Noble and future Noble acquired assets and the right to provide certain services, including the right to provide crude oil gathering, natural gas gathering and processing, and water services on certain acreage owned, or to be acquired, by Noble;


•	our right of first offer to acquire Noble’s retained interest in Gunnison River DevCo LP; and


•	an indemnity by Noble for certain environmental and other liabilities, and our obligation to indemnify Noble for events and conditions associated with the operations of its assets that occur after the closing of the IPO and for environmental liabilities related to our assets to the extent Noble is not required to indemnify us.

Operational Services Agreement Our Operational Services and Secondment Agreement (“Operational Services Agreement”) with Noble provides for:

•

secondment by Noble of certain operational, construction, design and management employees and contractors to our General Partner, us and our subsidiaries to provide management, maintenance and operational functions with respect to our assets. These functions include performing the activities and day-to-day management of the business pursuant to certain commercial agreements listed in the Operational Services Agreement, and designing, building, constructing and otherwise installing the infrastructure required by such agreements;


•	reimbursement by us to Noble of the cost of the seconded employees and contractors, including their wages and benefits, based on the percentage of the employee’s or contractor’s time spent working for us; and

•

an initial term of 15 years and automatic extensions for successive renewal terms of one year each, unless terminated by either party.