• Consolidated Adjusted EBITDA: $147.7 million in Q3, down from $151.7 million in the prior year.
• Water Solutions Adjusted EBITDA: $132.7 million in Q3, up from $121.3 million in the prior year.
• Physical Water Disposal Volumes: 2.62 million barrels per day in Q3, up from 2.38 million barrels per day in the prior year.
• Crude Oil Logistics Adjusted EBITDA: $17.4 million in Q3, up from $17 million in the prior year.
• Liquid Logistics Adjusted EBITDA: $8.2 million in Q3, down from $26.3 million in the prior year.
• Biodiesel Negative Adjusted EBITDA: $12.1 million in Q3.
• Operating Expense per Produced Barrel: $0.21 in Q3, down from $0.25 in the prior year.
• Projected Full Year EBITDA: $620 million.
• Proceeds from Asset Sales: Approximately $95 million from terminal sales and $20 million from railcar sales.

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

Release Date: February 10, 2025

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

Positive Points

• NGL Energy Partners LP (NYSE:NGL) secured new long-term contracts with Prairie operating and another producer, potentially increasing crude oil volumes on the Grand Mesa pipeline to 100,000 barrels per day.
• The company signed agreements to sell 18 natural gas liquids terminals, expected to generate approximately $95 million in proceeds, which will be used to reduce debt.
• The Lex 2 project commenced operations in October and is performing as expected, contributing positively to the company's operations.
• NGL Energy Partners LP (NYSE:NGL) successfully reduced working capital needs by $60 to $70 million annually through the sale of non-core assets and winding down the biodiesel marketing business.
• Water solutions adjusted EBITDA increased to $132.7 million in the third quarter, up from $121.3 million in the prior year, with disposal volumes rising by 12% year-over-year.

Negative Points

• The winding down of the biodiesel business negatively impacted the quarter's adjusted EBITDA by $12.1 million.
• Consolidated adjusted EBITDA for the quarter decreased to $147.7 million from $151.7 million in the prior year, reflecting challenges in certain business segments.
• Crude oil logistics volumes on the Grand Mesa pipeline decreased to 61,000 barrels per day from 70,000 barrels per day in the previous year.
• Liquid logistics adjusted EBITDA fell significantly to $8.2 million from $26.3 million in the prior third quarter, primarily due to the biodiesel business wind-down.
• The company is experiencing performance volatility and seasonality in its liquids logistics businesses, complicating earnings predictability.

Q & A Highlights

Q: With the announced NGL terminal and rail car transactions, how should we think about the annual run rate EBITDA of your remaining assets in liquid logistics following these transactions? A: Historically, that segment has four main components: wholesale propane, biodiesel, marketing, and Centennial business. The wind down of biodiesel and the wholesale transaction represents about 15% to 20% of our EBITDA for that business unit historically. However, it's too early to provide specific numbers as we are still exploring additional opportunities.

Q: Regarding the crude oil logistics segment, how should we think about the growth trajectory to achieve the 100,000 barrel mark you referenced? A: We suggest waiting for our fiscal '26 guidance to quantify that. The volume increase is expected to be 50%, so you could potentially add 50% of this year's EBITDA to our numbers.

Q: It sounds like the majority of your asset sale proceeds and free cash flow are going to pay down the ABL balance. What metrics are you looking for before addressing the principal on the Series D preferreds? A: Yes, proceeds will go straight to the ABL. We are focusing on continued deleveraging. Assuming a repeatable transaction like this year, we might consider Class D redemption in the back half of fiscal '26, but this is not signaling another deal is lined up.

Q: What assets are left in the liquid logistics business post these divestitures, and which are the primary sources of cash flow? A: Remaining assets include Ambassador (a propane pipeline in Michigan), Chesapeake (a butane export facility), and terminals in Port Hudson and West Point, Virginia. Wholesale propane was the only unit with hard assets.

Q: Could you comment on the relative profitability of the volumes related to Lex 2 compared to existing assets? A: Lex 2 is performing as expected, but there are no additional contracts signed as a result of Lex 2 at this time.

Q: Regarding water logistics volumes, should we consider the decline as seasonal? A: We observed a slowdown over the holidays, which was more pronounced in 2024 compared to 2023. This could be due to operational factors rather than strictly seasonal ones. However, volumes are already rebounding in the first calendar quarter of the year.

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