Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the US (US 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 US GAAP for complete financial statements. The accompanying consolidated financial statements at September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and 2018 contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of operations, cash flows and equity for such periods. Certain prior-period amounts have been reclassified to conform to the current period presentation. For the periods presented, net income or loss is materially consistent with comprehensive income or loss.

Consolidation Our consolidated financial statements include our accounts, the accounts of subsidiaries which Noble Energy wholly owns, and the accounts of Noble Midstream Partners LP (Noble Midstream Partners), which is considered a variable interest entity (VIE) for which Noble Energy is the primary beneficiary. In addition, we use the equity method of accounting for investments in entities that we do not control, but over which we exert significant influence. All significant intercompany balances and transactions have been eliminated upon consolidation.

Estimates The preparation of consolidated financial statements in conformity with US 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.

Leases We determine whether an arrangement contains a lease based on the conveyed rights and obligations at the inception date. If an agreement contains an operating or financing lease, at the commencement date, we record a right-of-use (ROU) asset and a corresponding lease liability based on the present value of the minimum lease payments.

As most of our leases do not provide an implicit borrowing rate, to determine the present value of lease payments, we use our hypothetical secured borrowing rate based on information available at lease commencement. Further, we make certain estimates and judgments regarding the lease term and lease payments, noted below.

Lease Term Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one month to one year or more. Additionally, some of our leases include an option for early termination. We include renewal periods and exclude termination periods from our lease term if, at commencement, it is reasonably likely that we will exercise the option.

Lease Payments Certain of our lease agreements include rental payments that are adjusted periodically for inflation or passage of time. These step payments are included within our present value calculation as they are known adjustments at commencement. Some of our lease agreements include variable payments that are excluded from our present value calculation. For example, drilling rig ROU assets and lease liabilities are recorded using the contractual standby rate, which is the fixed, minimum monthly payment, as opposed to the operating rate, which varies depending on the asset's use.

Additionally, we have lease agreements that include lease and non-lease components, such as equipment maintenance, which are generally accounted for as a single lease component. For these leases, lease payments include all fixed payments stated within the contract. For other leases, such as office space, lease and non-lease components are accounted for separately. Our lease agreements do not contain any material residual value guarantees that would impact our lease payments.

Revenue Recognition We recognize revenue at an amount that reflects the consideration we expect to be entitled to in exchange for transferring goods or services to a customer, using a five-step process, in accordance with ASC 606 – Revenue from Contracts with Customers (ASC 606).

Under ASC 606, remaining performance obligations represent the transaction price of firm sales arrangements for which volumes have not been delivered. In Israel, certain of our Tamar natural gas contracts have fixed annual sales volumes and fixed base pricing with annual index escalations. The following table includes estimated revenues, as of September 30, 2019, for those agreements. Our actual future sales volumes may exceed future minimum volume commitments.



(millions)	Remainder of 2019		2020		Total
Natural Gas Revenues ⁽¹⁾	$	36	$	199	$	235

Redeemable Noncontrolling Interest In March 2019, Noble Midstream Partners secured a $200 million equity commitment (preferred equity) from GIP CAPS Dos Rios Holding Partnership, L.P. (GIP) to fund capital contributions in connection with Noble Midstream Partners’ 30% equity investment in EPIC Crude Holdings, LP (EPIC Crude Holdings). GIP funded $100 million of the commitment, with associated offering costs of $3 million, and the remaining $100 million is available for a one year period, subject to certain conditions precedent. The preferred equity is perpetual and has a 6.5% annual dividend rate, payable quarterly in cash, with the ability to defer payment during the first two years following the closing. Noble Midstream Partners can redeem the preferred equity in whole or in part at any time for cash at a predetermined redemption price. GIP can request redemption of the preferred equity following the later of the sixth anniversary of the preferred equity closing or the fifth anniversary of the EPIC crude oil pipeline completion date at a pre-determined base return.

As GIP’s redemption right is outside of Noble Midstream Partners’ control, the preferred equity is not considered to be a component of equity on the consolidated balance sheet and, therefore, is reported as mezzanine equity. In addition, because the preferred equity was issued by a subsidiary of Noble Midstream Partners and is held by a third party, it is considered a redeemable noncontrolling interest. Subsequent to issuance, we accrete changes in the redemption value of the preferred equity from the date of issuance to the earliest redemption date of the preferred equity. The accretion is offset against additional paid in capital. See Note 4. Acquisitions and Divestitures and Note 13. Fair Value Measurements and Disclosures.

Financial Instruments: Credit Losses In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-13 (ASU 2016-13): Financial Instruments – Credit Losses, which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses. The standard applies to a broad scope of financial instruments, including financial assets measured at amortized cost and off-balance sheet credit exposures not accounted for as insurance, such as financial guarantees and other unfunded loan commitments. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

We are executing an implementation plan, which includes data collection, contract review and assessment, and determination of necessary systems, processes and internal controls. Although we continue to evaluate ASU 2016-03, based on our current credit portfolio, we do not believe adoption of the standard will have a material impact on our financial statements.

Leases In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), which created Topic 842 – Leases (ASC 842). The standard requires lessees to recognize a ROU asset and lease liability on the balance sheet for the rights and obligations created by leases. ASC 842 also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. This standard does not apply to leases to explore for or use minerals, oil, natural gas or similar nonregenerative resources, including the intangible right to explore for those resources and rights to use the land in which those natural resources are contained.

We adopted ASC 842 on January 1, 2019 using the modified retrospective method and recorded ROU assets and lease liabilities of $282 million and $287 million, respectively, primarily related to operating leases. The $5 million difference between these amounts was recorded as other operating expense. Our accounting for finance leases remains substantially unchanged. Adoption did not materially impact our consolidated statement of operations and comprehensive income and had no impact on our consolidated statement of cash flows. See Note 8. Leases.

Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (ASU 2017-12): Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities. The update is intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and makes certain targeted improvements to simplify application of hedge accounting guidance in US GAAP. Adoption of this ASU on January 1, 2019 did not have an impact on our financial statements.

Intangibles—Goodwill and Other—Internal-Use Software In August 2018, the FASB issued Accounting Standards Update No. 2018-15 (ASU 2018-15): Intangibles—Goodwill and Other—Internal-Use Software to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amended standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. We used the prospective method to early adopt this ASU in second quarter 2019, which did not have a material impact on our financial statements.

Statements of Operations Information Other statements of operations information is as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
(millions)	2019		2018			2019		2018
Other Revenue
Income from Equity Method Investments and Other	$	10	$	44		$	43	$	140
Midstream Services Revenues – Third Party	19		21			63		49
Total	$	29	$	65		$	106	$	189
Production Expense
Lease Operating Expense	$	132	$	124		$	405	$	411
Production and Ad Valorem Taxes	52		47			142		151
Gathering, Transportation and Processing Expense	108		97			306		292
Other Royalty Expense	5		5			9		32
Total	$	297	$	273		$	862	$	886
Other Operating Expense, Net
Exploration Expense	$	25	$	25		$	82	$	89
Marketing Expense	7		11			26		21
Firm Transportation Exit Cost	—		—			92		—
Other, Net	29		(9		)	57		(3		)
Total	$	61	$	27		$	257	$	107



(millions)	September 30, 2019			December 31, 2018
Accounts Receivable, Net
Commodity Sales	$	405		$	383
Joint Interest Billings	177			137
Other	103			111
Allowance for Doubtful Accounts	(8		)	(15		)
Total	$	677		$	616
Other Current Assets
Commodity Derivative Assets	$	90		$	180
Inventories, Materials and Supplies	74			55
Assets Held for Sale⁽¹⁾	—			133
Prepaid Expenses and Other Current Assets	113			50
Total	$	277		$	418
Other Noncurrent Assets
Equity Method Investments ⁽²⁾	$	959		$	286
Operating Lease Right-of-Use Assets ⁽³⁾	275			—
Customer-Related Intangible Assets, Net ⁽⁴⁾	286			310
Goodwill ⁽⁴⁾	110			110
Other Assets, Noncurrent	150			135
Total	$	1,780		$	841
Other Current Liabilities
Production and Ad Valorem Taxes	$	147		$	103
Asset Retirement Obligations	89			118
Interest Payable	87			66
Operating Lease Liabilities ⁽³⁾	97			—
Commercial Paper Borrowings	511			—
Other Liabilities, Current	259			232
Total	$	1,190		$	519
Other Noncurrent Liabilities
Deferred Compensation Liabilities	$	148		$	147
Asset Retirement Obligations	699			762
Operating Lease Liabilities ⁽³⁾	209			—
Firm Transportation Exit Cost Accrual ⁽⁵⁾	133			67
Other Liabilities, Noncurrent	149			189
Total	$	1,338		$	1,165

Reconciliation of Total Cash We define total cash as cash, cash equivalents and restricted cash. The following table provides a reconciliation of total cash:



	Nine Months Ended September 30,
(millions)	2019		2018
Cash and Cash Equivalents at Beginning of Period	$	716	$	675
Restricted Cash at Beginning of Period	3		38
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period	$	719	$	713
Cash and Cash Equivalents at End of Period	$	473	$	720
Restricted Cash at End of Period	—		1
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	473	$	721