4. Acquisitions and Divestitures

2017 Asset Transactions

During the first six months of 2017, we engaged in the following asset transactions.

Marcellus Shale Upstream Divestiture On June 28, 2017, we closed the sale of all of our Marcellus Shale upstream assets, which are primarily natural gas properties. The purchase price totaled $1.2 billion, and we received $1.0 billion of net cash proceeds, after consideration of customary adjustments, at closing. The purchase price includes additional contingent consideration of up to $100 million structured as three separate payments of $33.3 million each. The contingent payments are in effect should the average annual price of the Appalachia Dominion, South Point index exceed $3.30 per MMBtu in the individual annual periods from 2018 through 2020. No amounts have been accrued related to the contingent consideration. Proceeds from the transaction were used to repay borrowings resulting from the Clayton Williams Energy Acquisition. See Note 6. Debt.

In second quarter 2017, we recognized a total loss of $2.3 billion, or $1.5 billion after-tax, on this transaction. The aggregate net book value of the properties prior to the sale was approximately $3.4 billion, which included approximately $883 million of undeveloped leasehold cost.

As part of the total loss, we recorded a charge of $41 million, discounted, relating to a retained transportation contract where the pipeline project is currently in service. We no longer have production to satisfy this commitment and do not plan to utilize this capacity in the future. As such, we recorded a charge in accordance with accounting for exit or disposal activities under ASC 420 - Exit or Disposal Cost Obligations. In addition, we have retained other Marcellus Shale firm transportation contracts, relating to pipeline projects which are not yet commercially available to us. These projects are either under construction or have not yet been approved by the Federal Energy Regulatory Commission (FERC). As these projects become commercially available to us, we will assess, based upon the facts and circumstances, the recognition of any potential exit cost liabilities. We expect to incur additional firm transportation, as well as other restructuring or personnel costs, associated with this exit activity in the future. See Note 2. Basis of Presentation and Note 12. Commitments and Contingencies.

For the three and six months ended June 30, 2017, our consolidated statements of operations include a pre-tax loss of $2.3 billion for the respective periods associated with the divested Marcellus Shale upstream assets, driven by the loss on sale. For the three and six months ended June 30, 2016, our consolidated statements of operations include a pre-tax loss of $91 million and $167 million, respectively.

During second quarter 2017, production from the Marcellus Shale upstream assets totaled 393 MMcfe/d. With the closing of the sale, we recorded a decrease in net proved reserves of approximately 241 MMBoe, of which approximately 190 MMBoe were proved developed reserves and 51 MMBoe were proved undeveloped reserves.

Marcellus Shale CONE Gathering Divestiture On May 18, 2017, we announced the signing of a definitive agreement to divest an affiliate that holds the 50% interest in CONE Gathering, LLC (CONE Gathering) and 21.7 million common and subordinated limited partnership units in CONE Midstream Partners LP (NYSE:CNNX) (CONE Midstream), for total cash consideration of $765 million. CONE Gathering owns the general partner of CONE Midstream, and the limited partnership units represent a 33.5% ownership interest in CONE Midstream. CONE Midstream constructs, owns and operates natural gas gathering and other midstream energy assets in support of Marcellus Shale activities.

We expect closing to occur in second half 2017, subject to customary closing conditions and adjustments, and have classified these assets as held for sale at June 30, 2017. The other 50% owner of CONE Gathering is pursuing litigation in response to our sale. At this time, we expect this matter to be resolved prior to closing. Going forward, our midstream efforts are focused on Noble Midstream Partners, supporting our DJ Basin and Delaware Basin growth areas.

Assets Held for Sale At June 30, 2017, assets held for sale included $173 million related to our investment in CONE Gathering and $18 million related to other onshore properties.

Delaware Basin Acquisition In first quarter 2017, we closed a bolt-on acquisition in the Delaware Basin for $301 million, approximately $246 million of which was allocated to undeveloped leasehold cost. The acquisition included seven producing wells, of which four are operated by us.

Noble Midstream Partners

Asset Contribution On June 26, 2017, Noble Midstream Partners acquired an additional 15% limited partner interest in Blanco River DevCo LP (Blanco River DevCo), increasing its ownership to 40% of the Blanco River DevCo LP, and acquired the remaining 20% limited partner interest in Colorado River DevCo LP (Colorado River DevCo) from Noble Energy for $270 million.

Blanco River DevCo holds Noble Midstream Partners’ Delaware Basin in-field gathering dedications for crude oil and produced water gathering services on approximately 111,000 net acres, with substantially all of the acreage also dedicated for natural gas gathering. Colorado River DevCo consists of gathering systems across Noble Energy’s Wells Ranch and East Pony development areas in the DJ Basin.

The $270 million consideration consisted of $245 million in cash and 562,430 common units representing limited partner interests in Noble Midstream Partners. Noble Midstream Partners funded the cash consideration with approximately $138 million of net proceeds from a concurrent private placement of common units and $90 million of borrowings under the Noble Midstream Services Revolving Credit Facility (defined below) and the remainder from cash on hand.

Advantage Acquisition On April 3, 2017, Noble Midstream Partners and Plains Pipeline, L.P., a wholly owned subsidiary of Plains All American Pipeline, L.P., acquired Advantage Pipeline, L.L.C. (Advantage Pipeline) for $133 million through a newly formed 50/50 joint venture (Advantage Joint Venture). Noble Midstream Partners contributed $66.5 million of cash to the joint venture, funded by available cash on hand and the Noble Midstream Services Revolving Credit Facility. The Advantage Joint Venture is accounted for under the equity method and is included within our Midstream segment.

Noble Midstream Partners serves as the operator of the Advantage Pipeline system, which includes a 70-mile crude oil pipeline in the Delaware Basin from Reeves County, Texas to Crane County, Texas with 150,000 barrels per day of shipping capacity (expandable to over 200,000 barrels per day) and 490,000 barrels of storage capacity.

2016 Asset Transactions

During the first six months of 2016, we engaged in the following asset transactions.

US Onshore Properties We entered into the following transactions for which we:


•	closed the divestiture of our Bowdoin property in northern Montana, generating proceeds of $43 million, and recognized a $23 million loss on sale;


•	sold certain other US onshore properties, generating net proceeds of $20 million, which were primarily applied to the DJ Basin depletable field, with no recognition of gain or loss;

•

entered into a purchase and sale agreement for the divestiture of certain producing and undeveloped interests covering approximately 33,100 net acres in the DJ Basin for $505 million, subject to customary closing adjustments. We received proceeds of $486 million during second quarter 2016, which were primarily applied to the DJ Basin depletable field, with no recognition of gain or loss. We expect to close the sale of the remaining properties, which are classified as held for sale, in the second half of 2017; and


•	entered into an acreage exchange agreement receiving approximately 11,700 net acres within our Wells Ranch development area in exchange for approximately 13,500 net acres primarily from our Bronco area, located southwest of Wells Ranch, with no recognition of gain or loss.

Cyprus Project (Offshore Cyprus) In first quarter 2017, we received the remaining $40 million consideration for the farm-out of a 35% interest in Block 12, which includes the Aphrodite natural gas discovery. Proceeds received, including $131 million in first quarter 2016, were applied to the Cyprus project asset with no gain or loss recognized.

Offshore Israel Assets In first quarter 2016, we closed the divestment of our 47% interest in the Alon A and Alon C licenses, which include the Karish and Tanin fields, for a total sales price of $73 million ($67 million for asset consideration and $6 million for cost adjustments). Proceeds were applied to reduce field basis with no recognition of gain or loss.