• Consolidated Adjusted EBITDA: $144.3 million in the first quarter.
• Water Solutions Adjusted EBITDA: $125.6 million in the first quarter, up from $123.2 million in the prior year.
• Crude Oil Logistics Adjusted EBITDA: $18.6 million in the first quarter, down from $23.8 million in the prior year.
• Liquids Logistics Adjusted EBITDA: $11.5 million in the first quarter, up from $4.7 million in the prior year.
• Water Disposal Volumes: 2.47 million barrels per day in the first quarter, up from 2.4 million barrels per day in the prior year.
• Operating Expenses in Water Solutions: $0.24 per unit in Q1, down from $0.25 in the prior year.
• Interest Expense Reduction: $5.25 million per year due to repricing and amending the SOFR margin.
• Common Unit Repurchase Program: Authorized up to $50 million, no purchases made yet.
• Preferred Class B, C, and D Payments: Last arrears payment made, current on all preferred classes.
• Quarterly Distribution for Preferred Classes: Declared and paid on July 15.

• Warning! GuruFocus has detected 4 Warning Signs with NGL.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NGL Energy Partners LP (NYSE:NGL) reported strong quarterly results across all three business units, with consolidated adjusted EBITDA reaching $144.3 million.
• The Water Solutions segment performed well, with physical disposal volumes averaging approximately 2.7 million barrels per day in July.
• NGL Energy Partners LP (NYSE:NGL) successfully completed the sale of two ranches for approximately $70 million, enhancing their financial position.
• The company reduced its interest expense by $5.25 million annually through repricing and amending the SOFR margin on its Term Loan B.
• The Liquids Logistics segment saw a significant increase in adjusted EBITDA, rising to $11.5 million from $4.7 million in the prior year, driven by strong butane lending margins and volumes.

Negative Points

• Crude Oil Logistics adjusted EBITDA decreased to $18.6 million from $23.8 million in the prior year's first quarter, primarily due to lower volumes from production in the DJ Basin.
• NGL Energy Partners LP (NYSE:NGL) has not yet repurchased any common units under its authorized $50 million repurchase program.
• The company faces challenges in the Liquids Logistics segment, which is highly volatile and dependent on winter weather conditions.
• NGL Energy Partners LP (NYSE:NGL) continues to manage high costs associated with preferred stock, which are considered expensive financial instruments.
• The company anticipates lumpiness in water disposal volumes due to producers' completion schedules, impacting short-term performance.

Q & A Highlights

Q: Could you discuss the fluctuations in the fee per barrel for the water side of the business and how it might look going forward? A: Brad Cooper, CFO: The revenue per barrel increased slightly from the previous year. We focus on contracting with minimum volume commitments (MVCs) and acreage dedication, sometimes adjusting rates for longer-term contracts. The Poker Lake contract, which stepped up in January 2024, has a slightly lower rate. Volumes are strong for the second quarter, despite some recycling impacts in Q1.

Q: What is the average remaining length of the contracts with MVCs? A: David Sullivan, VP Finance: The average contract life is approximately nine years. Once the LEX II project is operational, MVC-related volumes will constitute about 40% to 45% of our total water disposal volumes.

Q: What are your plans for dealing with the expensive preferred instruments, particularly the Class D? A: Brad Cooper, CFO: Our free cash flow is back-end loaded, with most coming in Q3 and Q4. We plan to use this cash flow to make redemption payments on the Class Ds. Over the next few years, our free cash flow should comfortably address the Class Ds, potentially supplemented by asset sales.

Q: Why did the water disposal volumes step up significantly in July, and what were the paid volumes in Q1? A: Brad Cooper, CFO: The first quarter was impacted by recycling, with producers using water on-site for fracking. The flush water production is now coming to us, leading to strong volumes at the start of Q2. In Q1, we were paid for approximately 2.59 million barrels per day.

Q: Why do you believe the crude logistics segment in the DJ Basin is at the bottom of the cycle? A: H. Michael Krimbill, CEO: We anticipate an increase in volume as producers add rigs, indicating potential growth in the segment.

Q: Are there any updates on exploring strategic alternatives for the Liquids business? A: Brad Cooper, CFO: There are no updates at this time. We will continue to evaluate opportunities as they arise, but no decisions have been made regarding asset sales or the entire business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.