Noble Midstream (NBLX) has a bold plan to grow its already impressive 7.4%-yielding distribution to investors by 20% per year all the way through 2022, which is one of the fastest rates in the midstream sector. Driving that growth would be the expansion of the company's oil and gas gathering system to support the anticipated increase in production from customers like its parent, Noble Energy (NBL).

That heavy reliance on the growth of Noble Energy, however, did make its strategy a bit risky, since a prolonged plunge in crude prices could cause drillers like its parent to tap the brakes. That's why Noble Midstream has been working to diversify its expansion prospects so that it's not as dependent on one company to fuel its distribution growth plan. The master limited partnership (MLP) took a big step in that direction this week when it exercised its option to participate in two major pipeline projects.

Check out the latest Noble Midstream earnings call transcript.

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An epic shift

Last year, Noble Energy signed long-term contracts to ship oil and natural gas liquids (NGLs) on two long-haul pipelines under development by Epic Midstream. As part of those deals, Noble Energy received the option to buy a 15% stake in the Epic Y-grade (NGL) pipeline and a 30% interest in the Epic crude oil pipeline. The company subsequently assigned them to its MLP, Noble Midstream, which exercised the options this week.

As a result, Noble Midstream will invest about $165 million to $180 million into the Epic Y-grade pipeline and between $330 million to $350 million into the Epic crude oil pipeline. Noble Midstream plans to fund these investments with borrowing under its revolving credit facility, though it's exploring a private co-investment in the Epic crude oil pipeline.

These new investments will do several things for the company. First, they'll enhance Noble Midstream's ability to achieve its target of generating 50% of its income from the Permian Basin by 2020. Second, since firm long-term, fee-based contracts with shippers like Noble Energy back these pipelines, Noble Midstream will generate stable income from its investments when they enter service. And these investments will not only diversify the company's business away from its core gathering operations, but they will also reduce its reliance on Noble Energy, since they'll ship oil and NGLs from a variety of producers.

The company should start seeing a return on its investment later this year as interim service for the EPIC Y-grade pipeline should begin in the third quarter, when it will initially ship crude oil due to customer demand until the Epic crude oil pipeline starts service next January.

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More diversification is on the way

In addition to those two projects, Noble Midstream expects to close a 50-50 joint venture with Salt Creek Midstream on a crude oil pipeline and gathering partnership in the Permian Basin this month. The partners would build a 95-mile, 200,000-barrel-a-day pipeline to support the anticipated production growth of six customers, including Noble Energy. This pipeline would move oil from wells in the Delaware Basin side of the Permian to a regional hub, where it can then flow to the coast via the Epic crude oil pipeline.

The diversification from these three additions will reduce the risk that a slowdown in Noble Energy's growth rate due to lower oil prices or some other issue would hurt Noble Midstream's ability to achieve its long-term plan. Further, these transactions will enable the company to build a true end-to-end solution to bring oil and NGLs from the wellhead to end users along the Gulf Coast. That enhanced operating footprint could open the door to new opportunities for the company to secure additional third-party customers for its gathering business as well as the potential to participate in future long-haul pipeline projects.

An increasingly compelling option for income-growth investors

Noble Midstream has been one of the fastest-growing midstream MLPs thanks to the rapidly expanding production of its parent Noble Energy. While Noble Energy fully expects to continue growing at a fast pace, there was an elevated level of risk that oil price volatility could have derailed those plans, which could have hurt its MLP's ability to achieve its long-term forecast.

That's why Noble Midstream's recent transactions to diversify away from its parent are crucial: They should improve the probability that the company achieves its bold distribution growth plan, making it a dream stock for income seekers.