CONE Midstream Partners LP (NYSE:CNNX) Files An 8-K Entry into a Material Definitive Agreement

CONE Midstream Partners LP (NYSE:CNNX) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01

Entry into a Material Definitive Agreement.
Contribution Agreement
On November 15, 2016, CONE Midstream Partners LP, a Delaware
limited partnership (the Partnership), entered into a
Contribution Agreement (the Contribution Agreement), by and among
CONE Gathering LLC, a Delaware limited liability company (CONE
Gathering) and a midstream joint venture formed by CONSOL Energy
Inc., a Delaware corporation (CONSOL), and Noble Energy, Inc., a
Delaware corporation (Noble), CONE Midstream GP LLC, a Delaware
limited liability company and the general partner of the
Partnership (the General Partner), the Partnership, CONE
Midstream Operating Company LLC, a Delaware limited liability
company (the Operating Company), and the other parties thereto,
to which the Partnership will acquire the remaining 25% limited
partner interest (the Acquisition) in CONE Midstream DevCo I LP,
a Delaware limited partnership (DevCo I LP), from CONE Gathering
in exchange for (i) cash consideration in the amount of $140
million, (ii) the Partnerships issuance of 5,183,154 common units
(the Unit Consideration) representing limited partner interests
in the Partnership (Common Units) at an issue price of $20.42 per
Common Unit (the Common Unit Issue Price) and (iii) the
Partnerships issuance to the General Partner of an additional
general partner interest in the Partnership in an amount
necessary for the General Partner to maintain its two percent
general partner interest in the Partnership. The Common Unit
Issue Price was calculated as the volume-weighted average trading
price of the Common Units over the trailing 20-day trading period
ending on November 11, 2016. The Partnership expects to fund the
cash consideration with borrowings under its revolving credit
facility. The Acquisition is expected to close on or about
November 16, 2016, subject to customary closing conditions (the
Closing). CONE Gathering will distribute the cash consideration
and will have the Unit Consideration issued 50% to CNX Gas
Company LLC, a Virginia limited liability company (CNX) and a
wholly owned subsidiary of CONSOL, and 50% to Noble or one or
more of its wholly owned subsidiaries.
Consummation of the Acquisition is subject to customary closing
conditions. There can be no assurance that all of the closing
conditions will be satisfied or that anticipated benefits of the
Acquisition will be realized. Under the Contribution Agreement,
it is a condition to the Closing that the Partnership obtain
sufficient proceeds from financing arrangements that will be used
by the Partnership exclusively to pay the cash consideration and
other expenses or disbursements directly related to the Closing.
The Contribution Agreement and the above descriptions have been
included to provide investors and security holders with
information regarding the terms of the Contribution Agreement.
They are not intended to provide any other factual information
about the Partnership, the General Partner, CONE Gathering or the
Operating Company, or each of their respective subsidiaries,
affiliates or equity holders. The representations, warranties and
covenants contained in the Contribution Agreement were made only
for purposes of that agreement and as of specific dates; were
solely for the benefit of the parties to the Contribution
Agreement; and may be subject to limitations agreed upon by the
parties, including being qualified by confidential disclosures
made by each contracting party to the other as a way of
allocating contractual risk between them that differ from those
applicable to investors. Moreover, the subject matter of the
representations and warranties are subject to more recent
developments. Accordingly, investors should be aware that these
representations, warranties and covenants or any description
thereof alone may not describe the actual state of affairs of the
Partnership, the General Partner, CONE Gathering or the Operating
Company, or each of their respective subsidiaries, affiliates or
equity holders as of the date they were made or at any other
time.
The foregoing description of the Contribution Agreement is not
complete and is qualified in its entirety by reference to the
full text of the Contribution Agreement, which is filed as
Exhibit 2.1 to this Current Report on Form 8-K and incorporated
in this Item 1.01 by reference.
Amended and Restated Operational Services Agreement
to the Contribution Agreement, the Partnership and CNX have
agreed to amend and restate the Operational Services Agreement,
dated September 30, 2014, by and between the Partnership and CNX
(the Original Operational Services Agreement, and, as amended and
restated, the AR Operational Services Agreement) in order to
reflect the transactions contemplated by the recently announced
exchange agreement under which CNX and Noble agreed to separate
their Marcellus Shale joint venture by creating two separate
operating areas (the Exchange Agreement). The form of the AR
Operational Services Agreement has been agreed to in the
Contribution Agreement and will be executed and become effective
in connection with the closing of the Exchange Agreement.
Consistent with the Original Operational Services Agreement, the
AR Operational Services Agreement requires CNX to provide certain
operational services to the Partnership and its subsidiaries in
support of the Partnerships and its
subsidiaries business, including (i) routine and emergency
maintenance and repair services with respect to the Partnerships
midstream assets, (ii) subject to certain limitations, the
management of acquisitions by, and the operations of, the
Partnership and its subsidiaries and (iii) such other services
that the Partnership and CNX may mutually agree upon from time to
time. CNX will prepare and submit for the Partnerships approval
an annual operating and capital expenditure budget for each of
DevCo I, CONE Midstream DevCo II LP, a Delaware limited
partnership (DevCo II LP), and CONE Midstream DevCo III LP, a
Delaware limited partnership (DevCo III LP). CNX will submit
actual expenditures for reimbursement on a monthly basis, and the
Partnership will reimburse CNX for any direct third-party costs
actually incurred by CNX in providing these services.
The AR Operational Services Agreement will remain in full force
and effect after effectiveness unless terminated by either party.
CNX may terminate the AR Operational Services Agreement at any
time upon 180 days prior notice or immediately if the Partnership
becomes insolvent, declares bankruptcy or takes any action in
furtherance of, or indicated the Partnerships consent to,
approval of, or acquiescence in, a similar proceeding . The
Partnership may terminate the AR Operational Services Agreement
at any time following September 30, 2034 upon 180 days prior
notice or immediately (i) if CNX becomes insolvent, declares
bankruptcy or takes any action in furtherance of, or indicated
CNXs consent to, approval of, or acquiescence in, a similar
proceeding, (ii) upon a finding of CNXs willful misconduct or
gross negligence that has had a material adverse effect on the
Partnerships business and/or (iii) in the event of certain
defaults by CNX in the performance of its covenants or
obligations under the AR Operational Services Agreement.
Under the AR Operational Services Agreement, CNX will indemnify
the Partnership from any claims, losses or liabilities incurred
by the Partnership, including third-party claims, arising from
CNXs performance of the agreement to the extent caused by CNXs
gross negligence or willful misconduct up to a specified amount.
The Partnership will indemnify CNX from any claims, losses or
liabilities incurred by CNX, including any third-party claims,
arising from CNXs performance of the agreement, except to the
extent such claims, losses or liabilities are caused by CNXs
gross negligence or willful misconduct.
Amended and Restated Gathering Agreements
to the Contribution Agreement, the Partnership, Noble, CNX and
other parties thereto have agreed to amend and restate their
existing gathering agreements (as amended and restated, the AR
Gathering Agreements) in order to reflect the transactions
contemplated by the Exchange Agreement. The form of the AR
Gathering Agreements has been agreed to in the Contribution
Agreement and will be executed and become effective in connection
with the closing of the Exchange Agreement. As the AR Gathering
Agreements are merely intended to reflect the change in ownership
of the properties underlying the Marcellus Shale joint venture as
between CONSOL and Noble, the entry into the AR Gathering
Agreements is not expected to have a material impact on the
Partnership.
to the 20-year, fixed-fee AR Gathering Agreements, Noble and CNX
have agreed to dedicate all of their existing acres in the
dedication area from the Marcellus Shale formation to the
Partnership for natural gas midstream services and to dedicate
their existing acreage in the Moundsville area (Marshall County,
West Virginia) and the Majorsville area (Marshall County, West
Virginia and Greene and Washington Counties, Pennsylvania) from
the Marcellus Shale formation to the Partnership for condensate
gathering and handling services. The Partnership has the right of
first offer to provide midstream services to Noble and CNX on
certain acreage adjacent to the dedication area (the ROFO Area).
The Partnership also has an option to provide natural gas
midstream services to Noble and CNX on their existing acres in
the ROFO Area and on any future acreage in the ROFO Area covering
the Marcellus Shale formation that is acquired by Noble or CNX
and that is not subject to a pre-existing third-party commitment.
Under the AR Gathering Agreements, the Partnership receives a fee
based on the type and scope of the midstream services the
Partnership provides. For the services the Partnership provides
with respect to natural gas from the Marcellus Shale formation
that does not require downstream processing, or dry gas, the
Partnership receives a fee of $0.41 per MMBtu. For the services
the Partnership provides with respect to the natural gas that
requires downstream processing, or wet gas, and with respect to
condensate, the Partnership receives a fee based on the scope of
services the Partnership provides. The Partnerships fee for wet
gas is $0.282 per MMBtu in the Moundsville area (Marshall County,
West Virginia) with respect to Noble and in the Pittsburgh
International Airport area with respect to CNX, and $0.564 per
MMBtu for all other areas in the dedication area. The
Partnerships fee for condensate services is $5.125 per Bbl in the
Majorsville area and, with respect to Noble, $2.563 per Bbl in
the Moundsville area.
The Partnership has agreed to gather, compress and redeliver all
of Noble and CNXs owned and controlled dedicated natural gas
produced from the Marcellus Shale on a firm commitment,
first-priority basis. The Partnership has agreed to gather,
stabilize and store all of Noble and CNXs dedicated condensate
produced from the Marcellus Shale on a firm commitment,
first priority basis. Each quarter, Noble and CNX will provide
the Partnership an update on their drilling and development
operations, which will include a detailed description of the
drilling plans and well locations for the following 24 months and
a long-term plan that will include drilling plans and production
forecasts. The Partnership will meet monthly with Noble and CNX
to discuss the Partnerships current plans to timely construct the
necessary facilities to be able to provide midstream services to
Noble and CNX on the Partnerships dedicated acreage. In the event
that the Partnership does not perform its obligations under the
AR Gathering Agreements, Noble and CNX will be entitled to
certain rights and procedural remedies thereunder, including the
temporary and/or permanent release from dedication discussed
below and indemnification from the Partnership.
In addition to the owned and controlled natural gas and
condensate that is produced from the dedicated acreage in the
Marcellus Shale, each of Noble and CNX may elect to dedicate
other properties located in the dedication area to us in which
either Noble or CNX has an interest. If Noble or CNX elects to
dedicate any such property then Noble or CNX will propose a fee
for the associated midstream services the Partnership would
provide. The Partnership has agreed that if the fee proposed by
Noble or CNX for midstream services for such property will
provide the Partnership a certain return on its operating
expenses and any incremental capital expenses required to provide
such midstream services, then the Partnership will provide such
midstream services on a second priority basis, second only to the
first priority basis afforded Noble and CNXs dedicated production
produced from the Marcellus Shale.
The AR Gathering Agreements also provide that in certain
situations, such as an uncured default of any of the Partnerships
material obligations during the period the Partnership is in
default of a material obligation under the AR Gathering
Agreements for more than 45 days but less than 90 days, the
Partnerships dedicated acreage can be temporarily released from
its dedication. If the Partnership interrupts or curtails the
receipt of Noble or CNXs gas for a period of five consecutive
days or more than seven days within any consecutive two week
period, then Noble or CNX can temporarily release from the
dedication under the AR Gathering Agreements the affected volumes
for a period lasting until the first day of the month following
30 days after the Partnerships notice to Noble and CNX that the
interruption or curtailment has ended. Any temporary releases of
acreage from the Partnerships dedication could materially
adversely affect its business, financial condition, results of
operations, cash flows and ability to make cash distributions.
The AR Gathering Agreements will run with the land and be binding
on a transferee of any of the Partnerships dedicated acreage;
however, each of Noble or CNX may transfer a portion of the
dedicated acreage free of the dedication to the Partnership. The
amount of acreage that may be transferred free of the dedication
will be increased (or decreased) by the adjusted net acreage
acquired (or divested) by Noble or CNX in the dedication area,
such adjustment to be based on the geographic location of the
acreage within the dedicated area. There are no restrictions
under the AR Gathering Agreements on Noble or CNXs ability to
transfer acreage in the ROFO Area, and any transferee of Noble or
CNXs acreage in the ROFO Area will not be subject to the
Partnerships right of first offer.
Upon completion of its initial 20-year term on September 30,
2034, each of the AR Gathering Agreements will continue in effect
from year to year until such time as the respective agreement is
terminated by either the Partnership or Noble or CNX,
respectively, to such agreement on or before 180 days prior
written notice.
Relationships
Each of the General Partner, the Partnership, Operating Company,
DevCo I LP, DevCo II LP and DevCo III LP is a direct or indirect
subsidiary, as applicable, of CONE Gathering, which is owned 50%
by CONSOL and 50% by Noble. As a result, certain individuals,
including directors of the General Partner, serve as officers
and/or directors of CONSOL or Noble. The General Partner, as the
general partner of the Partnership, owns a two percent general
partner interest in the Partnership and all of the Partnerships
incentive distribution rights. CNX owns 4,519,060 Common Units
and14,581,561 subordinated units representing limited partner
interests in the Partnership (Subordinated Units), which
represents an approximate 32.1% aggregate limited partner
interest in the Partnership, and NBL Midstream, LLC, a Delaware
limited liability company, owns 4,519,061 Common Units and
14,581,560 Subordinated Units, which represents an approximate
32.1% aggregate limited partner interest in the Partnership.
Item 3.02 Unregistered Sales of Equity Securities.
In conjunction with the Closing of the transactions contemplated
by the Contribution Agreement, the Partnership will issue the
Unit Consideration as partial consideration for the Acquisition
as described in Item 1.01 above. The Unit Consideration will be
issued in a private transaction exempt from registration under
Section 4(a)(2) of the Securities Act of 1933, as amended. The
description of the Contribution Agreement under Item 1.01 is
incorporated by reference into this Item 3.02.
Item 7.01 Regulation FD Disclosure.
On November 16, 2016, the Partnership issued a press release
announcing the Contribution Agreement and the Acquisition. A copy
of the press release is attached to this Form 8-K as Exhibit
99.1.
The information in this Item 7.01 of this Form 8-K and Exhibit
99.1 attached hereto is being furnished and shall not be deemed
filed for the purpose of Section 18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject to the liabilities
of that section.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number
Description
2.1*
Contribution Agreement, dated November 15, 2016, by and
among CONE Gathering LLC, CONE Midstream GP LLC, CONE
Midstream Partners LP, CONE Midstream Operating Company
LLC and the other parties thereto.
99.1
Press Release dated November 16, 2016.
* The registrant has omitted the schedules to this exhibit to the
provisions of Regulation S-K, Item 601(b)(2). The registrant
shall supplementary furnish a copy of the omitted schedules to
the Securities and Exchange Commission upon request.
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CONE Midstream Partners LP
By:
/s/ David M. Khani
David M. Khani
Chief Financial Officer and Director
Dated: November 16, 2016
Exhibit Index
Exhibit Number
Description
2.1*
Contribution Agreement, dated November 15, 2016, by and
among CONE Gathering LLC, CONE Midstream GP LLC, CONE
Midstream Partners LP, CONE Midstream Operating Company
LLC and the other parties thereto.
99.1
Press Release dated November 16, 2016.
* The registrant has omitted the schedules to this exhibit


About CONE Midstream Partners LP (NYSE:CNNX)

CONE Midstream Partners LP is a master limited partnership formed between CONSOL Energy Inc. (CONSOL) and Noble Energy, Inc. (Noble Energy). The Company owns, operates, develops and acquires natural gas gathering and other midstream energy assets to service CONSOL’s and Noble Energy’s production in the Marcellus Shale in Pennsylvania and West Virginia. Its segments include anchor systems, growth systems and additional systems. Its anchor systems comprise over three primary midstream systems, which are the McQuay System, the Majorsville System and the Mamont System, and related assets. Its growth systems comprise over three midstream systems, which are the Fink System, the Tygart Valley system and the Tygart Valley West System, and related assets. Its additional systems comprise various midstream systems and related assets located in the wet gas regions of its acreage. Its assets include natural gas gathering pipelines, and compression and dehydration facilities.

CONE Midstream Partners LP (NYSE:CNNX) Recent Trading Information

CONE Midstream Partners LP (NYSE:CNNX) closed its last trading session up +0.95 at 22.31 with 251,602 shares trading hands.

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