Item 1. Financial Statements
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in Thousands, except unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
$
|
27,501
|
|
|
$
|
18,572
|
|
|
Accounts receivable-trade, net of allowance for doubtful accounts of $4,653 and $4,366, respectively
|
911,982
|
|
|
1,162,919
|
|
|
Accounts receivable-affiliates
|
11,507
|
|
|
12,867
|
|
|
Inventories
|
519,603
|
|
|
463,143
|
|
|
Prepaid expenses and other current assets
|
178,695
|
|
|
155,172
|
|
|
Total current assets
|
1,649,288
|
|
|
1,812,673
|
|
|
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $442,868 and $420,362, respectively
|
2,015,518
|
|
|
1,844,493
|
|
|
GOODWILL
|
1,153,029
|
|
|
1,145,861
|
|
|
INTANGIBLE ASSETS, net of accumulated amortization of $555,307 and $524,257, respectively
|
931,709
|
|
|
938,335
|
|
|
INVESTMENTS IN UNCONSOLIDATED ENTITIES
|
1,585
|
|
|
1,127
|
|
|
OPERATING LEASE RIGHT-OF-USE ASSETS
|
518,035
|
|
|
—
|
|
|
OTHER NONCURRENT ASSETS
|
125,741
|
|
|
160,004
|
|
|
Total assets
|
$
|
6,394,905
|
|
|
$
|
5,902,493
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable-trade
|
$
|
814,141
|
|
|
$
|
964,665
|
|
|
Accounts payable-affiliates
|
23,071
|
|
|
28,469
|
|
|
Accrued expenses and other payables
|
214,243
|
|
|
248,450
|
|
|
Advance payments received from customers
|
28,313
|
|
|
8,921
|
|
|
Current maturities of long-term debt
|
649
|
|
|
648
|
|
|
Operating lease obligations
|
77,021
|
|
|
—
|
|
|
Total current liabilities
|
1,157,438
|
|
|
1,251,153
|
|
|
LONG-TERM DEBT, net of debt issuance costs of $19,025 and $12,008, respectively, and current maturities
|
2,586,954
|
|
|
2,160,133
|
|
|
OPERATING LEASE OBLIGATIONS
|
439,083
|
|
|
—
|
|
|
OTHER NONCURRENT LIABILITIES
|
61,165
|
|
|
63,575
|
|
|
COMMITMENTS AND CONTINGENCIES (NOTE 9)
|
|
|
|
|
|
|
|
|
|
|
|
CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 0 and 19,942,169 preferred units issued and outstanding, respectively
|
—
|
|
|
149,814
|
|
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
General partner, representing a 0.1% interest, 126,093 and 124,633 notional units, respectively
|
(50,773
|
)
|
|
(50,603
|
)
|
|
Limited partners, representing a 99.9% interest, 125,966,868 and 124,508,497 common units issued and outstanding, respectively
|
1,897,407
|
|
|
2,067,197
|
|
|
Class B preferred limited partners, 8,400,000 and 8,400,000 preferred units issued and outstanding, respectively
|
202,731
|
|
|
202,731
|
|
|
Class C preferred limited partners, 1,800,000 and 0 preferred units issued and outstanding, respectively
|
42,638
|
|
|
—
|
|
|
Accumulated other comprehensive loss
|
(218
|
)
|
|
(255
|
)
|
|
Noncontrolling interests
|
58,480
|
|
|
58,748
|
|
|
Total equity
|
2,150,265
|
|
|
2,277,818
|
|
|
Total liabilities and equity
|
$
|
6,394,905
|
|
|
$
|
5,902,493
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in Thousands, except unit and per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
REVENUES:
|
|
|
|
|
|
Crude Oil Logistics
|
|
$
|
716,160
|
|
|
$
|
783,830
|
|
|
Water Solutions
|
|
71,783
|
|
|
76,145
|
|
|
Liquids
|
|
347,647
|
|
|
459,897
|
|
|
Refined Products and Renewables
|
|
5,502,046
|
|
|
4,524,407
|
|
|
Other
|
|
255
|
|
|
155
|
|
|
Total Revenues
|
|
6,637,891
|
|
|
5,844,434
|
|
|
COST OF SALES:
|
|
|
|
|
|
Crude Oil Logistics
|
|
649,240
|
|
|
748,245
|
|
|
Water Solutions
|
|
(2,807
|
)
|
|
14,269
|
|
|
Liquids
|
|
317,352
|
|
|
440,515
|
|
|
Refined Products and Renewables
|
|
5,489,217
|
|
|
4,492,858
|
|
|
Other
|
|
465
|
|
|
269
|
|
|
Total Cost of Sales
|
|
6,453,467
|
|
|
5,696,156
|
|
|
OPERATING COSTS AND EXPENSES:
|
|
|
|
|
|
Operating
|
|
64,267
|
|
|
56,262
|
|
|
General and administrative
|
|
20,363
|
|
|
22,390
|
|
|
Depreciation and amortization
|
|
54,208
|
|
|
52,045
|
|
|
(Gain) loss on disposal or impairment of assets, net
|
|
(967
|
)
|
|
101,335
|
|
|
Revaluation of liabilities
|
|
—
|
|
|
800
|
|
|
Operating Income (Loss)
|
|
46,553
|
|
|
(84,554
|
)
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
Equity in earnings of unconsolidated entities
|
|
8
|
|
|
219
|
|
|
Interest expense
|
|
(39,908
|
)
|
|
(46,268
|
)
|
|
Loss on early extinguishment of liabilities, net
|
|
—
|
|
|
(137
|
)
|
|
Other income (expense), net
|
|
1,075
|
|
|
(33,742
|
)
|
|
Income (Loss) From Continuing Operations Before Income Taxes
|
|
7,728
|
|
|
(164,482
|
)
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
311
|
|
|
(651
|
)
|
|
Income (Loss) From Continuing Operations
|
|
8,039
|
|
|
(165,133
|
)
|
|
Loss From Discontinued Operations, net of Tax
|
|
—
|
|
|
(4,156
|
)
|
|
Net Income (Loss)
|
|
8,039
|
|
|
(169,289
|
)
|
|
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
|
|
268
|
|
|
345
|
|
|
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS
|
|
—
|
|
|
398
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
|
|
$
|
8,307
|
|
|
$
|
(168,546
|
)
|
|
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3)
|
|
$
|
(121,068
|
)
|
|
$
|
(184,794
|
)
|
|
NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3)
|
|
$
|
—
|
|
|
$
|
(3,754
|
)
|
|
NET LOSS ALLOCATED TO COMMON UNITHOLDERS
|
|
$
|
(121,068
|
)
|
|
$
|
(188,548
|
)
|
|
BASIC LOSS PER COMMON UNIT
|
|
|
|
|
|
Loss From Continuing Operations
|
|
$
|
(0.96
|
)
|
|
$
|
(1.52
|
)
|
|
Loss From Discontinued Operations, net of Tax
|
|
—
|
|
|
(0.03
|
)
|
|
Net Loss
|
|
$
|
(0.96
|
)
|
|
$
|
(1.55
|
)
|
|
DILUTED LOSS PER COMMON UNIT
|
|
|
|
|
|
Loss From Continuing Operations
|
|
$
|
(0.96
|
)
|
|
$
|
(1.52
|
)
|
|
Loss From Discontinued Operations, net of Tax
|
|
—
|
|
|
(0.03
|
)
|
|
Net Loss
|
|
$
|
(0.96
|
)
|
|
$
|
(1.55
|
)
|
|
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
|
|
125,886,738
|
|
|
121,544,421
|
|
|
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
|
|
125,886,738
|
|
|
121,544,421
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive
Income (Loss)
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
Net income (loss)
|
|
$
|
8,039
|
|
|
$
|
(169,289
|
)
|
|
Other comprehensive income (loss)
|
|
37
|
|
|
(11
|
)
|
|
Comprehensive income (loss)
|
|
$
|
8,076
|
|
|
$
|
(169,300
|
)
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Equity
Three Months Ended June 30, 2019
(in Thousands, except unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
Common
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
General
Partner
|
|
Units
|
|
Amount
|
|
Units
|
|
Amount
|
|
Comprehensive
Income (Loss)
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
BALANCES AT MARCH 31, 2019
|
|
$
|
(50,603
|
)
|
|
8,400,000
|
|
|
$
|
202,731
|
|
|
124,508,497
|
|
|
$
|
2,067,197
|
|
|
$
|
(255
|
)
|
|
$
|
58,748
|
|
|
$
|
2,277,818
|
|
|
Distributions to general and common unit partners and preferred unitholders (Note 10)
|
|
(85
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63,274
|
)
|
|
—
|
|
|
—
|
|
|
(63,359
|
)
|
|
Issuance of Class C preferred units, net of offering costs (Note 10)
|
|
—
|
|
|
1,800,000
|
|
|
42,638
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,638
|
|
|
Equity issued pursuant to incentive compensation plan (Note 10)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,752
|
|
|
—
|
|
|
—
|
|
|
2,752
|
|
|
Warrants exercised (Note 10)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,458,371
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
Accretion of beneficial conversion feature of Class A convertible preferred units (Note 10)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(36,517
|
)
|
|
—
|
|
|
—
|
|
|
(36,517
|
)
|
|
Class A convertible preferred units redemption - amount paid in excess of carrying value (Note 10)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(78,797
|
)
|
|
—
|
|
|
—
|
|
|
(78,797
|
)
|
|
Investment in NGL Energy Holdings LLC (Note 13)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,361
|
)
|
|
—
|
|
|
—
|
|
|
(2,361
|
)
|
|
Net (loss) income
|
|
(85
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,392
|
|
|
—
|
|
|
(268
|
)
|
|
8,039
|
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
37
|
|
|
BALANCES AT JUNE 30, 2019
|
|
$
|
(50,773
|
)
|
|
10,200,000
|
|
|
$
|
245,369
|
|
|
125,966,868
|
|
|
$
|
1,897,407
|
|
|
$
|
(218
|
)
|
|
$
|
58,480
|
|
|
$
|
2,150,265
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Equity
Three Months Ended June 30, 2018
(in Thousands, except unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
Common
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
General
Partner
|
|
Units
|
|
Amount
|
|
Units
|
|
Amount
|
|
Comprehensive
Income (Loss)
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
BALANCES AT MARCH 31, 2018
|
|
$
|
(50,819
|
)
|
|
8,400,000
|
|
|
$
|
202,731
|
|
|
121,472,725
|
|
|
$
|
1,852,495
|
|
|
$
|
(1,815
|
)
|
|
$
|
83,503
|
|
|
2,086,095
|
|
|
Distributions to general and common unit partners and preferred unitholders
|
|
(82
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58,548
|
)
|
|
—
|
|
|
—
|
|
|
(58,630
|
)
|
|
Contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|
169
|
|
|
Sawtooth joint venture
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63
|
)
|
|
—
|
|
|
63
|
|
|
—
|
|
|
Purchase of noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(3,927
|
)
|
|
(3,960
|
)
|
|
Redeemable noncontrolling interest valuation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,300
|
)
|
|
—
|
|
|
—
|
|
|
(3,300
|
)
|
|
Repurchase of warrants
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,988
|
)
|
|
—
|
|
|
—
|
|
|
(14,988
|
)
|
|
Equity issued pursuant to incentive compensation plan
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,992
|
|
|
4,619
|
|
|
—
|
|
|
—
|
|
|
4,619
|
|
|
Warrants exercised
|
|
—
|
|
|
—
|
|
|
—
|
|
|
228,797
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
Accretion of beneficial conversion feature of Class A convertible preferred units
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,983
|
)
|
|
—
|
|
|
—
|
|
|
(8,983
|
)
|
|
Net loss
|
|
(155
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(168,391
|
)
|
|
—
|
|
|
(345
|
)
|
|
(168,891
|
)
|
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
(11
|
)
|
|
Cumulative effect adjustment for adoption of ASC 606
|
|
139
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
139,167
|
|
|
—
|
|
|
—
|
|
|
139,306
|
|
|
Cumulative effect adjustment for adoption of ASU 2016-01
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,567
|
)
|
|
1,569
|
|
|
—
|
|
|
—
|
|
|
BALANCES AT JUNE 30, 2018
|
|
$
|
(50,919
|
)
|
|
8,400,000
|
|
|
$
|
202,731
|
|
|
121,752,514
|
|
|
$
|
1,740,410
|
|
|
$
|
(257
|
)
|
|
$
|
79,463
|
|
|
$
|
1,971,428
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net income (loss)
|
|
$
|
8,039
|
|
|
$
|
(169,289
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
4,156
|
|
|
Depreciation and amortization, including amortization of debt issuance costs
|
|
57,855
|
|
|
55,939
|
|
|
Loss on early extinguishment or revaluation of liabilities, net
|
|
—
|
|
|
937
|
|
|
Non-cash equity-based compensation expense
|
|
3,701
|
|
|
5,511
|
|
|
(Gain) loss on disposal or impairment of assets, net
|
|
(967
|
)
|
|
101,335
|
|
|
Provision for doubtful accounts
|
|
280
|
|
|
196
|
|
|
Net adjustments to fair value of commodity derivatives
|
|
(26,500
|
)
|
|
52,685
|
|
|
Equity in earnings of unconsolidated entities
|
|
(8
|
)
|
|
(219
|
)
|
|
Lower of cost or market value adjustment
|
|
2,284
|
|
|
94
|
|
|
Other
|
|
(1,061
|
)
|
|
(206
|
)
|
|
Changes in operating assets and liabilities, exclusive of acquisitions:
|
|
|
|
|
|
Accounts receivable-trade and affiliates
|
|
251,745
|
|
|
(74,930
|
)
|
|
Inventories
|
|
(61,459
|
)
|
|
(48,864
|
)
|
|
Other current and noncurrent assets
|
|
(6,995
|
)
|
|
15,967
|
|
|
Accounts payable-trade and affiliates
|
|
(156,664
|
)
|
|
(30,328
|
)
|
|
Other current and noncurrent liabilities
|
|
(356
|
)
|
|
13,830
|
|
|
Net cash provided by (used in) operating activities-continuing operations
|
|
69,894
|
|
|
(73,186
|
)
|
|
Net cash provided by operating activities-discontinued operations
|
|
—
|
|
|
32,041
|
|
|
Net cash provided by (used in) operating activities
|
|
69,894
|
|
|
(41,145
|
)
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
Capital expenditures
|
|
(155,391
|
)
|
|
(72,710
|
)
|
|
Acquisitions, net of cash acquired
|
|
(54,548
|
)
|
|
(116,592
|
)
|
|
Net settlements of commodity derivatives
|
|
6,447
|
|
|
(60,861
|
)
|
|
Proceeds from sales of assets
|
|
1,673
|
|
|
5,406
|
|
|
Proceeds from divestitures of businesses and investments, net
|
|
—
|
|
|
18,594
|
|
|
Investments in unconsolidated entities
|
|
(889
|
)
|
|
(6
|
)
|
|
Distributions of capital from unconsolidated entities
|
|
439
|
|
|
—
|
|
|
Repayments on loan for natural gas liquids facility
|
|
3,022
|
|
|
2,707
|
|
|
Loan to affiliate
|
|
—
|
|
|
(1,050
|
)
|
|
Net cash used in investing activities-continuing operations
|
|
(199,247
|
)
|
|
(224,512
|
)
|
|
Net cash used in investing activities-discontinued operations
|
|
—
|
|
|
(23,008
|
)
|
|
Net cash used in investing activities
|
|
(199,247
|
)
|
|
(247,520
|
)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
Proceeds from borrowings under Revolving Credit Facility
|
|
1,139,000
|
|
|
962,000
|
|
|
Payments on Revolving Credit Facility
|
|
(1,155,000
|
)
|
|
(605,500
|
)
|
|
Issuance of senior unsecured notes
|
|
450,000
|
|
|
—
|
|
|
Repayment and repurchase of senior unsecured notes
|
|
—
|
|
|
(5,069
|
)
|
|
Payments on other long-term debt
|
|
(163
|
)
|
|
(163
|
)
|
|
Debt issuance costs
|
|
(7,873
|
)
|
|
(771
|
)
|
|
Contributions from noncontrolling interest owners, net
|
|
—
|
|
|
169
|
|
|
Distributions to general and common unit partners and preferred unitholders
|
|
(62,288
|
)
|
|
(53,905
|
)
|
|
Proceeds from sale of preferred units, net of offering costs
|
|
42,638
|
|
|
—
|
|
|
Payments for redemption of preferred units
|
|
(265,128
|
)
|
|
—
|
|
|
Repurchase of warrants
|
|
—
|
|
|
(14,988
|
)
|
|
Payments for settlement and early extinguishment of liabilities
|
|
(543
|
)
|
|
(1,195
|
)
|
|
Investment in NGL Energy Holdings LLC
|
|
(2,361
|
)
|
|
—
|
|
|
Net cash provided by financing activities-continuing operations
|
|
138,282
|
|
|
280,578
|
|
|
Net cash used in financing activities-discontinued operations
|
|
—
|
|
|
(325
|
)
|
|
Net cash provided by financing activities
|
|
138,282
|
|
|
280,253
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
8,929
|
|
|
(8,412
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
18,572
|
|
|
22,094
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
27,501
|
|
|
$
|
13,682
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
Cash interest paid
|
|
$
|
36,538
|
|
|
$
|
51,106
|
|
|
Income taxes paid (net of income tax refunds)
|
|
$
|
2,537
|
|
|
$
|
908
|
|
|
Supplemental non-cash investing and financing activities:
|
|
|
|
|
|
Distributions declared but not paid to Class B and Class C preferred unitholders
|
|
$
|
5,796
|
|
|
$
|
4,725
|
|
|
Accrued capital expenditures
|
|
$
|
32,926
|
|
|
$
|
12,657
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1
—Organization and Operations
NGL Energy Partners LP (“we,” “us,” “our,” or the “Partnership”) is
a Delaware limited partnership
.
NGL Energy Holdings LLC serves as our general partner.
At
June 30, 2019
,
our operations included:
|
|
|
|
•
|
Our Crude Oil Logistics segment purchases crude oil from producers and marketers and transports it to refineries or for resale at pipeline injection stations, storage terminals, barge loading facilities, rail facilities, refineries, and other trade hubs, and provides storage, terminaling, trucking, marine and pipeline transportation services through its owned assets.
|
|
|
|
|
•
|
Our Water Solutions segment provides services for the treatment and disposal of wastewater generated from crude oil and natural gas production and for the disposal of solids such as tank bottoms, drilling fluids and drilling muds and performs truck and frac tank washouts. In addition, our Water Solutions segment sells the recovered hydrocarbons that result from performing these services and sells freshwater to producers for exploration and production activities.
|
|
|
|
|
•
|
Our Liquids segment supplies natural gas liquids to retailers, wholesalers, refiners, and petrochemical plants throughout the United States and in Canada using its leased underground storage and fleet of leased railcars, markets regionally through its
27
owned terminals throughout the United States, and provides terminaling and storage services at its salt dome storage facility joint venture in Utah.
|
|
|
|
|
•
|
Our Refined Products and Renewables segment conducts gasoline, diesel, ethanol, and biodiesel marketing operations, purchases refined petroleum and renewable products primarily in the Gulf Coast, Southeast and Midwest regions of the United States and schedules them for delivery at various locations throughout the country. In addition, in certain storage locations, our Refined Products and Renewables segment may also purchase unfinished gasoline blending components for subsequent blending into finished gasoline to supply our marketing business as well as third parties.
|
Recent Developments
As previously disclosed, on July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior Plus Corp. (“Superior”)
for total consideration of
$889.8 million
in cash. We retained our
50%
ownership interest in Victory Propane, LLC (“Victory Propane”), which we subsequently sold on August 14, 2018. This transaction represented a strategic shift in our operations and will have a significant effect on our operations and financial results going forward. Accordingly, the results of operations and cash flows related to our former Retail Propane segment (including equity in earnings of Victory Propane) have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows.
Note 2
—Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include our accounts and those of our controlled subsidiaries. Intercompany transactions and account balances have been eliminated in consolidation.
Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting.
We also own an undivided interest in a crude oil pipeline, and include our proportionate share of assets, liabilities, and expenses related to this pipeline in our unaudited condensed consolidated financial statements.
Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim consolidated financial information in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the unaudited condensed consolidated financial statements exclude certain information and notes required by GAAP for complete annual consolidated financial statements. However, we believe that the disclosures made are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements include all adjustments that we consider necessary for a fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. Such adjustments consist only of normal recurring items, unless otherwise disclosed in this Quarterly Report. The unaudited condensed
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
consolidated balance sheet at March 31, 2019 was derived from our audited consolidated financial statements for the fiscal
year ended March 31, 2019
included in our Annual Report on Form 10-K (“Annual Report”) filed with the SEC on May 30, 2019.
These interim unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report. Due to the seasonal nature of certain of our operations and other factors, the results of operations for interim periods are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending
March 31, 2020
.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amount of assets and liabilities reported at the date of the consolidated financial statements and the amount of revenues and expenses reported during the periods presented.
Critical estimates we make in the preparation of our unaudited condensed consolidated financial statements include, among others, determining the fair value of assets and liabilities acquired in acquisitions, the fair value of derivative instruments, the collectibility of accounts receivable, the recoverability of inventories, useful lives and recoverability of property, plant and equipment and amortizable intangible assets, the impairment of long-lived assets and goodwill, the fair value of asset retirement obligations, the value of equity-based compensation, accruals for environmental matters and estimating certain revenues. Although we believe these estimates are reasonable, actual results could differ from those estimates.
Significant Accounting Policies
Our significant accounting policies are consistent with those disclosed in Note 2 of our audited consolidated financial statements included in our Annual Report.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value is based upon assumptions that market participants would use when pricing an asset or liability. We use the following fair value hierarchy, which prioritizes valuation technique inputs used to measure fair value into three broad levels:
|
|
|
|
•
|
Level 1: Quoted prices in active markets for identical assets and liabilities that we have the ability to access at the measurement date.
|
|
|
|
|
•
|
Level 2: Inputs (other than quoted prices included within Level 1) that are either directly or indirectly observable for the asset or liability, including (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in inactive markets, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include non-exchange traded derivatives such as over-the-counter commodity price swap and option contracts and forward commodity contracts. We determine the fair value of all of our derivative financial instruments utilizing pricing models for similar instruments. Inputs to the pricing models include publicly available prices and forward curves generated from a compilation of data gathered from third parties.
|
|
|
|
|
•
|
Level 3: Unobservable inputs for the asset or liability including situations where there is little, if any, market activity for the asset or liability.
|
The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to a fair value measurement requires judgment, considering factors specific to the asset or liability.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Derivative Financial Instruments
We record all derivative financial instrument contracts at fair value in our unaudited condensed consolidated balance sheets except for certain physical contracts that qualify for the
normal purchase and normal sale election
.
Under this accounting policy election, we do not record the physical contracts at fair value at each balance sheet date; instead, we record the purchase or sale at the contracted value once the delivery occurs.
We have not designated any financial instruments as hedges for accounting purposes.
All changes in the fair value of our physical contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our unaudited condensed consolidated statements of operations, regardless of whether the contract is physically or financially settled.
We utilize various commodity derivative financial instrument contracts to attempt to reduce our exposure to price fluctuations. We do not enter into such contracts for trading purposes. Changes in assets and liabilities from commodity derivative financial instruments result primarily from changes in market prices, newly originated transactions, and the timing of settlements and are reported within cost of sales on the unaudited condensed consolidated statements of operations, along with related settlements. We attempt to balance our contractual portfolio in terms of notional amounts and timing of performance and delivery obligations. However, net unbalanced positions can exist or are established based on our assessment of anticipated market movements. Inherent in the resulting contractual portfolio are certain business risks, including commodity price risk and credit risk.
Commodity price risk is the risk that the market value of crude oil, natural gas liquids, or refined and renewables products will change, either favorably or unfavorably, in response to changing market conditions.
Credit risk is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract.
Procedures and limits for managing commodity price risks and credit risks are specified in our market risk policy and credit policy, respectively.
Open commodity positions and market price changes are monitored daily and are reported to senior management and to marketing operations personnel.
Credit risk is monitored daily and exposure is minimized through customer deposits, restrictions on product liftings, letters of credit, and entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions.
Income Taxes
We qualify as a partnership for income tax purposes. As such, we generally do not pay United States federal income tax. Rather, each owner reports his or her share of our income or loss on his or her individual tax return. The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined, as we do not have access to information regarding each partner’s basis in the Partnership.
We have certain taxable corporate subsidiaries in the United States and Canada, and our operations in Texas are subject to a state franchise tax that is calculated based on revenues net of cost of sales.
We have a deferred tax liability of
$13.4 million
at
June 30, 2019
as a result of acquiring a corporation in connection with one of our acquisitions, which is included within other noncurrent liabilities in our unaudited condensed consolidated balance sheet. The deferred tax liability is the tax effected cumulative temporary difference between the GAAP basis and tax basis of the acquired assets within the corporation. For GAAP purposes, certain of the acquired assets will be depreciated and amortized over time which will lower the GAAP basis. The deferred tax benefit recorded for the
three months ended
June 30, 2019
was
$1.0 million
with an effective tax rate of
24.6%
.
We evaluate uncertain tax positions for recognition and measurement in the unaudited condensed consolidated financial statements. To recognize a tax position, we determine whether it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the unaudited condensed consolidated financial statements. We had no material uncertain tax positions that required recognition in our unaudited condensed consolidated financial statements at
June 30, 2019
or
March 31, 2019
.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Inventories
Our inventories are valued at the lower of cost or net realizable value, with cost determined using either the weighted-average cost or the first in, first out (FIFO) methods, including the cost of transportation and storage, and with net realizable value defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In performing this analysis, we consider fixed-price forward commitments.
Inventories consist of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Crude oil
|
|
$
|
65,618
|
|
|
$
|
51,359
|
|
|
Natural gas liquids:
|
|
|
|
|
|
Propane
|
|
38,436
|
|
|
33,478
|
|
|
Butane
|
|
25,099
|
|
|
15,294
|
|
|
Other
|
|
5,604
|
|
|
7,482
|
|
|
Refined products:
|
|
|
|
|
|
Gasoline
|
|
173,927
|
|
|
189,802
|
|
|
Diesel
|
|
148,581
|
|
|
103,935
|
|
|
Renewables:
|
|
|
|
|
|
Ethanol
|
|
56,513
|
|
|
51,542
|
|
|
Biodiesel
|
|
5,825
|
|
|
10,251
|
|
|
Total
|
|
$
|
519,603
|
|
|
$
|
463,143
|
|
Investments in Unconsolidated Entities
Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting.
Investments in partnerships and limited liability companies, unless our investment is considered to be minor, and investments in unincorporated joint ventures are also accounted for using the equity method of accounting. Under the equity method, we do not report the individual assets and liabilities of these entities on our unaudited condensed consolidated balance sheets; instead, our ownership interests are reported within investments in unconsolidated entities on our unaudited condensed consolidated balance sheets. Under the equity method, the investment is recorded at acquisition cost, increased by our proportionate share of any earnings and additional capital contributions and decreased by our proportionate share of any losses, distributions paid, and amortization of any excess investment. Excess investment is the amount by which our total investment exceeds our proportionate share of the net assets of the investee.
Our investments in unconsolidated entities consist of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity
|
|
Segment
|
|
Ownership
Interest (1)
|
|
Date Acquired
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Aircraft rental company (2)
|
|
Corporate and Other
|
|
50%
|
|
June 2019
|
|
$
|
900
|
|
|
$
|
—
|
|
|
Water services company (3)
|
|
Water Solutions
|
|
50%
|
|
August 2018
|
|
480
|
|
|
920
|
|
|
Natural gas liquids terminal company (4)
|
|
Liquids
|
|
50%
|
|
March 2019
|
|
205
|
|
|
207
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
1,585
|
|
|
$
|
1,127
|
|
|
|
|
|
(1)
|
Ownership interest percentages are at
June 30, 2019
.
|
|
|
|
|
(2)
|
This is an investment with a related party. See Note 13 for a further discussion.
|
|
|
|
|
(3)
|
This is an investment that we acquired as part of an acquisition in August 2018.
|
|
|
|
|
(4)
|
This is an investment that we acquired as part of an acquisition in March 2019.
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Other Noncurrent Assets
Other noncurrent assets consist of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Loan receivable (1)
|
|
$
|
16,107
|
|
|
$
|
19,474
|
|
|
Line fill (2)
|
|
33,437
|
|
|
33,437
|
|
|
Tank bottoms (3)
|
|
44,148
|
|
|
44,148
|
|
|
Minimum shipping fees - pipeline commitments (4)
|
|
—
|
|
|
23,494
|
|
|
Other
|
|
32,049
|
|
|
39,451
|
|
|
Total
|
|
$
|
125,741
|
|
|
$
|
160,004
|
|
|
|
|
|
(1)
|
Represents the noncurrent portion of a loan receivable associated with our financing of the construction of a natural gas liquids facility that is utilized by a third party who filed for Chapter11 bankruptcy subsequent to June 30, 2019. As of
June 30, 2019
, we are owed a total of
$26.4 million
under this loan receivable, of which
$13.0 million
is recorded within prepaid expenses and other current assets in our unaudited condensed unconsolidated balance sheet. Our loan receivable is secured by the natural gas liquids facility. The remaining amount represents the noncurrent portion of a loan receivable with Victory Propane.
|
|
|
|
|
(2)
|
Represents minimum volumes of product we are required to leave on certain third-party owned pipelines under long-term shipment commitments. At
June 30, 2019
, line fill consisted of
335,069
barrels of crude oil and
262,000
barrels of propane. At
March 31, 2019
, line fill consisted of
335,069
barrels of crude oil and
262,000
barrels of propane. Line fill held in pipelines we own is included within property, plant and equipment (see Note 5).
|
|
|
|
|
(3)
|
Tank bottoms, which are product volumes required for the operation of storage tanks, are recorded at historical cost. We recover tank bottoms when the storage tanks are removed from service. At
June 30, 2019
and
March 31, 2019
, tank bottoms held in third party terminals consisted of
389,737
barrels and
389,737
barrels of refined products, respectively. Tank bottoms held in terminals we own are included within property, plant and equipment (see Note 5).
|
|
|
|
|
(4)
|
Represents the minimum shipping fees paid in excess of volumes shipped, or deficiency credits, for
two
contracts with crude oil pipeline operators. This amount can be recovered when volumes shipped exceed the minimum monthly volume commitment (see Note 9). During the three months ended June 30, 2018, we entered into a definitive agreement, in which we agreed to provide the benefit of our deficiency credit under
one
of these contracts. As a result of providing this benefit to the third party, we wrote off
$67.7 million
of these deficiency credits and recorded a loss within
(gain) loss on disposal or impairment of assets, net
. Under the remaining other contract for which we have the future benefit, we currently have
ten months
in which to ship the excess volumes. At
June 30, 2019
, the deficiency credit for the remaining other contract of
$23.5 million
was reclassified to prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet.
|
Accrued Expenses and Other Payables
Accrued expenses and other payables consist of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Accrued compensation and benefits
|
|
$
|
18,721
|
|
|
$
|
19,558
|
|
|
Excise and other tax liabilities
|
|
40,985
|
|
|
40,339
|
|
|
Derivative liabilities
|
|
60,402
|
|
|
100,372
|
|
|
Accrued interest
|
|
26,120
|
|
|
24,882
|
|
|
Product exchange liabilities
|
|
27,116
|
|
|
21,081
|
|
|
Gavilon legal matter settlement (Note 9)
|
|
12,500
|
|
|
12,500
|
|
|
Other
|
|
28,399
|
|
|
29,718
|
|
|
Total
|
|
$
|
214,243
|
|
|
$
|
248,450
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Noncontrolling Interests
Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties.
Amounts are adjusted by the noncontrolling interest holder’s proportionate share of the subsidiaries’ earnings or losses each period and any distributions that are paid. Noncontrolling interests are reported as a component of equity.
Acquisitions
To determine if a transaction should be accounted for as a business combination or an acquisition of assets, we first calculate the relative fair values of the assets acquired. If substantially all of the relative fair value is concentrated in a single asset or group of similar assets, or if not but the transaction does not include a significant process (does not meet the definition of a business), we record the transaction as an acquisition of assets. For acquisitions of assets, the purchase price is allocated based on the relative fair values. For an acquisition of assets, goodwill is not recorded. All other transactions are recorded as business combinations. We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values. For a business combination, the excess of the purchase price over the net fair value of acquired assets and assumed liabilities is recorded as goodwill, which is not amortized but instead is evaluated for impairment at least annually.
Pursuant to GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination. As discussed in
Note 4
, certain of our acquisitions are still within this measurement period, and as a result, the acquisition date fair values we have recorded for the assets acquired and liabilities assumed are subject to change.
Also, as discussed in
Note 4
, we made certain adjustments during the
three months ended
June 30, 2019
to our estimates of the acquisition date fair values of the assets acquired and liabilities assumed in business combinations that occurred during the fiscal year ended March 31, 2019.
Reclassifications
We have reclassified certain prior period financial statement information to be consistent with the classification methods used in the current fiscal year. These reclassifications did not impact previously reported amounts of assets, liabilities, equity, net income, or cash flows.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments-Credit Losses.” The ASU requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected, which would include accounts receivable. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The ASU is effective for the Partnership beginning April 1, 2020, and requires a modified retrospective method of adoption, although early adoption is permitted. We are currently in the process of assessing the impact of this ASU on our consolidated financial statements.
In February 2016, the FASB issued ASC 842, “Leases.” This ASU replaced previous lease accounting guidance in GAAP. The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. It also retains a distinction between finance leases and operating leases. For lessors, the new accounting model remains largely the same, although some changes have been made to align it with the new lessee model and the ASC 606 revenue recognition guidance. We adopted ASC 842 effective April 1, 2019 using the modified retrospective method, with no adjustment to comparative period information, which remains reported under ASC 840, and no cumulative effect adjustment to equity. See
Note 15
for a further discussion of the impact of adoption of ASC 842 to our unaudited condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Note 3—Loss Per Common Unit
The following table presents our calculation of basic and diluted weighted average common units outstanding for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
Weighted average common units outstanding during the period:
|
|
|
|
|
|
Common units - Basic
|
|
125,886,738
|
|
|
121,544,421
|
|
|
Common units - Diluted
|
|
125,886,738
|
|
|
121,544,421
|
|
For the three months ended June 30, 2019, the Service Awards (as defined herein) and warrants were considered antidilutive. For the
three months ended
June 30, 2018
, the performance awards, warrants, Service Awards and the Class A Preferred Units (as defined herein) were considered antidilutive.
Our loss per common unit is as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands, except unit and per unit amounts)
|
|
Income (loss) from continuing operations
|
|
$
|
8,039
|
|
|
$
|
(165,133
|
)
|
|
Less: Continuing operations loss attributable to noncontrolling interests
|
|
268
|
|
|
345
|
|
|
Net income (loss) from continuing operations attributable to NGL Energy Partners LP
|
|
8,307
|
|
|
(164,788
|
)
|
|
Less: Distributions to preferred unitholders (1)
|
|
(129,460
|
)
|
|
(20,157
|
)
|
|
Less: Continuing operations net loss allocated to general partner (2)
|
|
85
|
|
|
151
|
|
|
Net loss from continuing operations allocated to common unitholders
|
|
$
|
(121,068
|
)
|
|
$
|
(184,794
|
)
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
—
|
|
|
$
|
(4,156
|
)
|
|
Less: Discontinued operations loss attributable to redeemable noncontrolling interests
|
|
—
|
|
|
398
|
|
|
Less: Discontinued operations loss allocated to general partner (2)
|
|
—
|
|
|
4
|
|
|
Net loss from discontinued operations allocated to common unitholders
|
|
$
|
—
|
|
|
$
|
(3,754
|
)
|
|
|
|
|
|
|
|
Net loss allocated to common unitholders
|
|
$
|
(121,068
|
)
|
|
$
|
(188,548
|
)
|
|
|
|
|
|
|
|
Basic loss per common unit
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.96
|
)
|
|
$
|
(1.52
|
)
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
(0.03
|
)
|
|
Net loss
|
|
$
|
(0.96
|
)
|
|
$
|
(1.55
|
)
|
|
Diluted loss per common unit
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.96
|
)
|
|
$
|
(1.52
|
)
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
(0.03
|
)
|
|
Net loss
|
|
$
|
(0.96
|
)
|
|
$
|
(1.55
|
)
|
|
Basic weighted average common units outstanding
|
|
125,886,738
|
|
|
121,544,421
|
|
|
Diluted weighted average common units outstanding
|
|
125,886,738
|
|
|
121,544,421
|
|
|
|
|
|
(1)
|
This amount includes distributions to preferred unitholders, the final accretion for the beneficial conversion of the Class A Preferred Units and the excess of the Class A Preferred Units repurchase price over the carrying value of the units, as discussed further in Note 10
.
|
|
|
|
|
(2)
|
Net loss allocated to the general partner includes distributions to which it is entitled as the holder of incentive distribution rights.
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Note 4
—Acquisitions
The following summarizes our acquisitions during the
three months ended
June 30, 2019
:
Saltwater Water Solutions Facilities
During the
three months ended
June 30, 2019
, we acquired
one
saltwater disposal facility (including
three
saltwater disposal wells) for total consideration of approximately
$53.0 million
.
As part of this acquisition, we recorded customer relationship, favorable contract, non-compete agreement and right-of way intangible assets. We estimated the value of these intangible assets using the income approach, which uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.
The agreement for this acquisition contemplates post-closing payments for certain working capital items. We are accounting for this transaction as a business combination. The following table summarizes the preliminary estimates of the fair values as of
June 30, 2019
for the assets acquired and liabilities assumed (in thousands):
|
|
|
|
|
|
|
|
Property, plant and equipment
|
$
|
24,324
|
|
|
Goodwill
|
2,413
|
|
|
Intangible assets
|
26,688
|
|
|
Other noncurrent liabilities
|
(425
|
)
|
|
Fair value of net assets acquired
|
$
|
53,000
|
|
As of
June 30, 2019
, the allocation of the purchase price is considered preliminary as we are continuing to gather additional information to finalize the fair values of the property, plant and equipment and intangible assets.
Goodwill represents the excess of the consideration paid for the acquired business over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill represents a premium paid to expand the number of our disposal sites in an oilfield production basin currently serviced by us, thereby enhancing our competitive position as a provider of disposal services in this oilfield production basin. We expect that all of the goodwill will be deductible for federal income tax purposes.
The operations of these water solutions facilities have been included in our unaudited condensed consolidated statement of operations since their acquisition date. Our unaudited condensed consolidated statement of operations for the
three months ended
June 30, 2019
includes revenues of
$1.9 million
and operating income of
$0.8 million
that were generated by the operations of these water solutions facilities. We incurred
less than $0.1 million
of transaction costs related to this acquisition during the
three months ended
June 30, 2019
, which is recorded within general and administrative expenses in our unaudited condensed consolidated statement of operations.
During the
three months ended
June 30, 2019
, we also acquired land and
two
saltwater disposal wells for total consideration of
$13.0 million
, which we are accounting for as an acquisition of assets. The consideration paid for this transaction was allocated primarily to property, plant and equipment.
The following summarizes the status of the preliminary purchase price allocation of acquisitions prior to April 1, 2019:
Saltwater Water Solutions Facilities
During the three months ended June 30, 2019, we completed the acquisition accounting for all saltwater disposal facilities and saltwater disposal wells acquired during the fiscal year ended March 31, 2019. Due to the receipt of additional information, we recorded a decrease of
$2.3 million
to intangible assets with the offset recorded to goodwill. There were no other adjustments to the fair value of assets acquired and liabilities assumed during the three months ended June 30, 2019.
Freshwater Water Solutions Facilities
During the three months ended June 30, 2019, we completed the acquisition accounting for
four
freshwater facilities (including
16
freshwater wells). There were no adjustments to the fair value of assets acquired and liabilities assumed during the
three months ended
June 30, 2019
for this acquisition.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
For a separate freshwater acquisition, we paid
$2.5 million
in cash to the sellers during the
three months ended
June 30, 2019
to complete the settlement of the acquisition. The offset of the cash payment was recorded to goodwill.
Natural Gas Liquids Terminal Business
During the three months ended June 30, 2019, we finalized the adjustments related to the working capital items received and recorded a decrease of
$2.7 million
to inventories, an increase of
$0.3 million
to other current assets, an increase of
$0.1 million
to property, plant and equipment, a decrease of
$0.9 million
to current liabilities and a decrease of
$0.5 million
to noncurrent liabilities.
Note 5
—Property, Plant and Equipment
Our property, plant and equipment consists of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
Estimated
Useful Lives
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
(in years)
|
|
(in thousands)
|
|
Natural gas liquids terminal and storage assets
|
2
|
-
|
30
|
|
$
|
280,849
|
|
|
$
|
280,106
|
|
|
Pipeline and related facilities
|
30
|
-
|
40
|
|
243,762
|
|
|
243,799
|
|
|
Refined products terminal assets and equipment
|
15
|
-
|
25
|
|
15,187
|
|
|
15,187
|
|
|
Vehicles and railcars
|
3
|
-
|
25
|
|
122,363
|
|
|
124,948
|
|
|
Water treatment facilities and equipment
|
3
|
-
|
30
|
|
734,713
|
|
|
704,666
|
|
|
Crude oil tanks and related equipment
|
2
|
-
|
30
|
|
225,599
|
|
|
225,476
|
|
|
Barges and towboats
|
5
|
-
|
30
|
|
103,737
|
|
|
103,735
|
|
|
Information technology equipment
|
3
|
-
|
7
|
|
33,518
|
|
|
33,082
|
|
|
Buildings and leasehold improvements
|
3
|
-
|
40
|
|
145,114
|
|
|
144,567
|
|
|
Land
|
|
|
|
|
70,362
|
|
|
63,368
|
|
|
Tank bottoms and line fill (1)
|
|
|
|
|
20,267
|
|
|
20,071
|
|
|
Other
|
3
|
-
|
20
|
|
15,035
|
|
|
15,018
|
|
|
Construction in progress
|
|
|
|
|
447,880
|
|
|
290,832
|
|
|
|
|
|
|
|
2,458,386
|
|
|
2,264,855
|
|
|
Accumulated depreciation
|
|
|
|
|
(442,868
|
)
|
|
(420,362
|
)
|
|
Net property, plant and equipment
|
|
|
|
|
$
|
2,015,518
|
|
|
$
|
1,844,493
|
|
|
|
|
|
(1)
|
Tank bottoms, which are product volumes required for the operation of storage tanks, are recorded at historical cost. We recover tank bottoms when the storage tanks are removed from service. Line fill, which represents our portion of the product volume required for the operation of the proportionate share of a pipeline we own, is recorded at historical cost.
|
The following table summarizes depreciation expense and capitalized interest expense for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Depreciation expense
|
|
$
|
25,821
|
|
|
$
|
24,729
|
|
|
Capitalized interest expense
|
|
$
|
—
|
|
|
$
|
149
|
|
Amounts in the table above do not include depreciation expense and capitalized interest related to our former Retail Propane segment, as these amounts have been classified within discontinued operations in our unaudited condensed consolidated statements of operations (see
Note 16
).
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
We record (gains) losses from the sales of property, plant and equipment and any write-downs in value due to impairment within
(gain) loss on disposal or impairment of assets, net
in our unaudited condensed consolidated statements of operations. The following table summarizes (gains) losses on the disposal or impairment of property, plant and equipment by segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Crude Oil Logistics
|
|
$
|
(533
|
)
|
|
$
|
(2,041
|
)
|
|
Water Solutions
|
|
48
|
|
|
2,475
|
|
|
Liquids
|
|
(3
|
)
|
|
(10
|
)
|
|
Total
|
|
$
|
(488
|
)
|
|
$
|
424
|
|
Note 6
—Goodwill
The following table summarizes changes in goodwill by segment during the
three months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil
Logistics
|
|
Water
Solutions
|
|
Liquids
|
|
Refined
Products and
Renewables
|
|
Total
|
|
|
|
(in thousands)
|
|
Balances at March 31, 2019
|
|
$
|
579,846
|
|
|
$
|
410,139
|
|
|
$
|
103,421
|
|
|
$
|
52,455
|
|
|
$
|
1,145,861
|
|
|
Revisions to acquisition accounting (Note 4)
|
|
—
|
|
|
4,755
|
|
|
—
|
|
|
—
|
|
|
4,755
|
|
|
Acquisitions (Note 4)
|
|
—
|
|
|
2,413
|
|
|
—
|
|
|
—
|
|
|
2,413
|
|
|
Balances at June 30, 2019
|
|
$
|
579,846
|
|
|
$
|
417,307
|
|
|
$
|
103,421
|
|
|
$
|
52,455
|
|
|
$
|
1,153,029
|
|
Note 7
—Intangible Assets
Our intangible assets consist of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
Description
|
|
Amortizable Lives
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
|
|
(in years)
|
|
(in thousands)
|
|
Amortizable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
3
|
-
|
30
|
|
$
|
753,432
|
|
|
$
|
(387,400
|
)
|
|
$
|
366,032
|
|
|
$
|
747,432
|
|
|
$
|
(370,072
|
)
|
|
$
|
377,360
|
|
|
Customer commitments
|
|
10
|
|
|
|
310,000
|
|
|
(82,667
|
)
|
|
227,333
|
|
|
310,000
|
|
|
(74,917
|
)
|
|
235,083
|
|
|
Pipeline capacity rights
|
|
30
|
|
|
|
161,785
|
|
|
(23,786
|
)
|
|
137,999
|
|
|
161,785
|
|
|
(22,438
|
)
|
|
139,347
|
|
|
Rights-of-way and easements
|
|
1
|
-
|
45
|
|
76,925
|
|
|
(5,081
|
)
|
|
71,844
|
|
|
73,409
|
|
|
(4,509
|
)
|
|
68,900
|
|
|
Water rights
|
|
14
|
|
|
|
64,868
|
|
|
(4,247
|
)
|
|
60,621
|
|
|
64,868
|
|
|
(3,018
|
)
|
|
61,850
|
|
|
Executory contracts and other agreements
|
|
5
|
-
|
30
|
|
55,030
|
|
|
(17,860
|
)
|
|
37,170
|
|
|
47,230
|
|
|
(17,212
|
)
|
|
30,018
|
|
|
Non-compete agreements
|
|
2
|
-
|
24
|
|
19,823
|
|
|
(3,469
|
)
|
|
16,354
|
|
|
12,723
|
|
|
(2,570
|
)
|
|
10,153
|
|
|
Debt issuance costs
(1)
|
|
5
|
|
|
|
42,353
|
|
|
(30,797
|
)
|
|
11,556
|
|
|
42,345
|
|
|
(29,521
|
)
|
|
12,824
|
|
|
Total amortizable
|
|
|
|
|
|
1,484,216
|
|
|
(555,307
|
)
|
|
928,909
|
|
|
1,459,792
|
|
|
(524,257
|
)
|
|
935,535
|
|
|
Non-amortizable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
|
|
|
2,800
|
|
|
—
|
|
|
2,800
|
|
|
2,800
|
|
|
—
|
|
|
2,800
|
|
|
Total
|
|
|
|
|
|
$
|
1,487,016
|
|
|
$
|
(555,307
|
)
|
|
$
|
931,709
|
|
|
$
|
1,462,592
|
|
|
$
|
(524,257
|
)
|
|
$
|
938,335
|
|
|
|
|
|
(1)
|
Includes debt issuance costs related to the Revolving Credit Facility (as defined herein). Debt issuance costs related to fixed-rate notes are reported as a reduction of the carrying amount of long-term debt.
|
The weighted-average remaining amortization period for intangible assets is approximately
13.6 years
.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Amortization expense is as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Recorded In
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Depreciation and amortization
|
|
$
|
28,387
|
|
|
$
|
27,316
|
|
|
Cost of sales
|
|
1,371
|
|
|
1,465
|
|
|
Interest expense
|
|
1,276
|
|
|
1,193
|
|
|
Operating expenses
|
|
151
|
|
|
—
|
|
|
Total
|
|
$
|
31,185
|
|
|
$
|
29,974
|
|
Amounts in the table above do not include amortization expense related to our former Retail Propane segment, as these amounts have been classified within discontinued operations within our unaudited condensed consolidated statements of operations (see
Note 16
).
Expected amortization of our intangible assets is as follows (in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
2020 (nine months)
|
$
|
93,141
|
|
|
2021
|
112,212
|
|
|
2022
|
99,373
|
|
|
2023
|
91,351
|
|
|
2024
|
85,211
|
|
|
Thereafter
|
447,621
|
|
|
Total
|
$
|
928,909
|
|
Note 8
—Long-Term Debt
Our long-term debt consists of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
Face
Amount
|
|
Unamortized
Debt Issuance
Costs (1)
|
|
Book
Value
|
|
Face
Amount
|
|
Unamortized
Debt Issuance
Costs (1)
|
|
Book
Value
|
|
|
|
(in thousands)
|
|
Revolving credit facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expansion capital borrowings
|
|
$
|
260,000
|
|
|
$
|
—
|
|
|
$
|
260,000
|
|
|
$
|
275,000
|
|
|
$
|
—
|
|
|
$
|
275,000
|
|
|
Working capital borrowings
|
|
895,000
|
|
|
—
|
|
|
895,000
|
|
|
896,000
|
|
|
—
|
|
|
896,000
|
|
|
Senior unsecured notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.500% Notes due 2023 ("2023 Notes")
|
|
607,323
|
|
|
(6,538
|
)
|
|
600,785
|
|
|
607,323
|
|
|
(6,916
|
)
|
|
600,407
|
|
|
6.125% Notes due 2025 ("2025 Notes")
|
|
389,135
|
|
|
(4,877
|
)
|
|
384,258
|
|
|
389,135
|
|
|
(5,092
|
)
|
|
384,043
|
|
|
7.500% Notes due 2026 ("2026 Notes")
|
|
450,000
|
|
|
(7,610
|
)
|
|
442,390
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other long-term debt
|
|
5,170
|
|
|
—
|
|
|
5,170
|
|
|
5,331
|
|
|
—
|
|
|
5,331
|
|
|
|
|
2,606,628
|
|
|
(19,025
|
)
|
|
2,587,603
|
|
|
2,172,789
|
|
|
(12,008
|
)
|
|
2,160,781
|
|
|
Less: Current maturities
|
|
649
|
|
|
—
|
|
|
649
|
|
|
648
|
|
|
—
|
|
|
648
|
|
|
Long-term debt
|
|
$
|
2,605,979
|
|
|
$
|
(19,025
|
)
|
|
$
|
2,586,954
|
|
|
$
|
2,172,141
|
|
|
$
|
(12,008
|
)
|
|
$
|
2,160,133
|
|
|
|
|
|
(1)
|
Debt issuance costs related to the Revolving Credit Facility are reported within intangible assets, rather than as a reduction of the carrying amount of long-term debt.
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Amortization expense for debt issuance costs related to long-term debt in the table above was
$0.8 million
and
$1.2 million
during the
three months ended
June 30, 2019
and
2018
, respectively.
Expected amortization of debt issuance costs is as follows (in thousands):
|
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
2020 (nine months)
|
|
$
|
2,618
|
|
|
2021
|
|
3,488
|
|
|
2022
|
|
3,488
|
|
|
2023
|
|
3,488
|
|
|
2024
|
|
2,864
|
|
|
Thereafter
|
|
3,079
|
|
|
Total
|
|
$
|
19,025
|
|
Credit Agreement
We are party to a
$1.765 billion
credit agreement (the “Credit Agreement”) with a syndicate of banks. As of
June 30, 2019
, the Credit Agreement includes a revolving credit facility to fund working capital needs, which had a capacity of
$1.250 billion
for cash borrowings and letters of credit (the “Working Capital Facility”), and a revolving credit facility to fund acquisitions and expansion projects, which had a capacity of
$515.0 million
(the “Expansion Capital Facility,” and together with the Working Capital Facility, the “Revolving Credit Facility”).
The Revolving Credit Facility allows us to reallocate amounts between the Expansion Capital Facility and Working Capital Facility.
We had letters of credit of
$141.8 million
on the Working Capital Facility at
June 30, 2019
. The capacity under the Working Capital Facility may be limited by a “borrowing base” (as defined in the Credit Agreement) which is calculated based on the value of certain working capital items at any point in time.
At
June 30, 2019
, the borrowings under the Credit Agreement had a weighted average interest rate of
4.27%
, calculated as the weighted average LIBOR rate of
2.41%
plus a margin of
1.75%
for LIBOR borrowings and the prime rate of
5.50%
plus a margin of
0.75%
on alternate base rate borrowings. At
June 30, 2019
, the interest rate in effect on letters of credit was
1.75%
. Commitment fees are charged at a rate ranging from
0.375%
to
0.50%
on any unused capacity.
The following table summarizes the debt covenant levels specified in the Credit Agreement as of
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured
|
|
Interest
|
|
Total Leverage
|
|
Period Beginning
|
|
Leverage Ratio (1)
|
|
Leverage Ratio (1)
|
|
Coverage Ratio (2)
|
|
Indebtedness Ratio (1)
|
|
June 30, 2019
|
|
4.50
|
|
|
3.25
|
|
|
2.75
|
|
|
6.50
|
|
|
September 30, 2019
|
|
4.50
|
|
|
3.25
|
|
|
2.75
|
|
|
6.25
|
|
|
March 31, 2020 and thereafter
|
|
4.50
|
|
|
3.25
|
|
|
2.75
|
|
|
6.00
|
|
|
|
|
|
(1)
|
Represents the maximum ratio for the period presented.
|
|
|
|
|
(2)
|
Represents the minimum ratio for the period presented.
|
At
June 30, 2019
, our leverage ratio was approximately
3.47
to
1
, our senior secured leverage ratio was approximately
0.59
to
1
, our interest coverage ratio was approximately
3.18
to
1
and our total leverage indebtedness ratio was approximately
5.20
to 1.
We were in compliance with the covenants under the Credit Agreement
at
June 30, 2019
.
Senior Unsecured Notes
On April 9, 2019, we issued
$450.0 million
of
7.50%
Senior Unsecured Notes Due 2026 (the “2026 Notes”) in a private placement. The 2026 Notes bear interest, which is payable on April 15 and October 15 of each year, beginning on October 15, 2019 at
7.50%
per annum. We received net proceeds of
$442.1 million
, after the initial purchasers’ discount of
$6.8 million
and offering costs of
$1.1 million
. The 2026 Notes mature on April 15, 2026.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
At
June 30, 2019
,
we were in compliance with the covenants under the indentures for all of the Senior Unsecured Notes
.
Other Long-Term Debt
We have other notes payable related to equipment financing. The interest rates on these instruments range from
4.13%
to
7.10%
per year and have an aggregate principal balance of
$5.2 million
at
June 30, 2019
.
Term Credit Agreement
On July 2, 2019 (the “Closing Date”), we entered into a term credit agreement (the “Term Credit Agreement”) with Toronto Dominion (Texas) LLC for a
$250.0 million
term loan facility. Toronto Dominion (Texas) LLC and certain of its affiliates are also lenders under our Credit Agreement. Proceeds from the term loan facility were used to fund a portion of the purchase price for the Mesquite (as defined herein) acquisition (see
Note 17
).
The commitments under the Term Credit Agreement expire on July 2, 2024. We are subject to prepayments of principal if we enter into certain transactions to sell assets, issue equity or obtain new borrowings.
The obligations under the Term Credit Agreement are guaranteed by the Partnership and certain of the Borrower’s wholly owned subsidiaries, and are secured by substantially all of the assets of the Borrower, the Partnership and the other subsidiary guarantors subject to certain customary exclusions.
All borrowings under the Term Credit Agreement bear interest, at either (a) an alternate base rate plus (i) during the first three-month period after the Closing Date, margin equal to the applicable margin for alternate base rate loans calculated under our existing revolving credit facility, (ii) 2.00% per annum for the second three-month period after the Closing Date, (iii) 2.25% per annum for the third three-month period after the Closing Date, (iv) 2.50% per annum for the fourth three-month period after the Closing Date, and (v) thereafter, the rate per year such that the alternate base rate equals a rate of interest agreed to between us and the administrative agent, or (b) an adjusted LIBOR rate plus (i) during the first three-month period after the Closing Date, margin equal to the applicable margin for LIBOR rate loans calculated under our existing revolving credit facility, (ii) 3.00% per annum for the second three-month period after the Closing Date, (iii) 3.25% per annum for the third three-month period after the Closing Date, (iv) 3.50% per annum for the fourth three-month period after the Closing Date, and (v) thereafter, such rate per annum such that the adjusted LIBOR rate equals a rate of interest agreed to between us and the administrative agent.
The Term Credit Agreement contains various customary representations, warranties and covenants by the Partnership and its subsidiaries, including, without limitation, (i) commencing September 30, 2019, the Partnership and the subsidiary guarantors will be subject to financial covenants limiting leverage, including senior leverage, secured leverage and total leverage, and requiring a minimum interest coverage, (ii) negative covenants limiting indebtedness, liens, equity distributions and fundamental changes involving the Partnership or its subsidiaries and (iii) affirmative covenants requiring, among other things, reporting of financial information and material events and covenants to maintain existence and pay taxes, in each case substantially consistent with the Partnership’s existing Revolving Credit Facility, which is described above.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Debt Maturity Schedule
The scheduled maturities of our long-term debt are as follows at
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
Revolving
Credit
Facility
|
|
Senior Unsecured Notes
|
|
Other
Long-Term
Debt
|
|
Total
|
|
|
|
(in thousands)
|
|
2020 (nine months)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
486
|
|
|
$
|
486
|
|
|
2021
|
|
—
|
|
|
—
|
|
|
4,684
|
|
|
4,684
|
|
|
2022
|
|
1,155,000
|
|
|
—
|
|
|
—
|
|
|
1,155,000
|
|
|
2023
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2024
|
|
—
|
|
|
607,323
|
|
|
—
|
|
|
607,323
|
|
|
Thereafter
|
|
—
|
|
|
839,135
|
|
|
—
|
|
|
839,135
|
|
|
Total
|
|
$
|
1,155,000
|
|
|
$
|
1,446,458
|
|
|
$
|
5,170
|
|
|
$
|
2,606,628
|
|
Note 9
—Commitments and Contingencies
Legal Contingencies
In August 2015, LCT Capital, LLC (“LCT”) filed a lawsuit against NGL Energy Holdings LLC (the “GP”) and the Partnership seeking payment for investment banking services relating to the purchase of TransMontaigne Inc. and related assets in July 2014. After pre-trial rulings, LCT was limited to pursuing claims of (i)
quantum meruit
(the value of the services rendered by LCT) and (ii) fraudulent misrepresentation against the defendants. Following a jury trial conducted in Delaware state court from July 23, 2018 through August 1, 2018, the jury returned a verdict consisting of an award of
$4.0 million
for
quantum meruit
and
$29.0 million
for fraudulent misrepresentation,
subject to statutory interest. The GP and the Partnership contend that
the jury verdict, at least in respect of fraudulent misrepresentation,
is not supportable by either
controlling law or
the evidentiary record. Both defendants have a pending motion for judgment as a matter of law on the fraudulent misrepresentation claim and plan to file post-verdict motions as appropriate
before the trial court, and, if need be, will file an appeal to the Delaware Supreme Court. It is our position that the awards, even if they each stand, are not cumulative. Any allocation of the ultimate verdict award between the GP and the Partnership will be made by the board of directors once all information is available to it and after the post-trial and any
appellate process has run its course and the verdict is final as a matter of law. Because the Partnership is a named defendant in the lawsuit, and any judgment ultimately awarded would be joint and several with the GP, we have determined that it is probable that the Partnership could be liable for a portion of this judgment. At this time, we believe the amount that could be allocated to the Partnership would not be material as it is estimated to be less than
$4.0 million
. As of
June 30, 2019
, we have accrued
$2.5 million
related to this matter.
We are party to various claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of our management, the ultimate resolution of these claims, legal actions, and complaints, after consideration of amounts accrued, insurance coverage, and other arrangements, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, the outcome of such matters is inherently uncertain, and estimates of our liabilities may change materially as circumstances develop.
Environmental Matters
At
June 30, 2019
, we have an environmental liability, measured on an undiscounted basis, of
$2.4 million
, which is recorded within accrued expenses and other payables in our unaudited condensed consolidated balance sheet. Our operations are subject to extensive federal, state, and local environmental laws and regulations. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in our business, and there can be no assurance that we will not incur significant costs. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs. Accordingly, we have adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials designed to prevent material environmental or other damage, and to limit the financial liability that could result from such events. However, some risk of environmental or other damage is inherent in our business.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
In 2015, as previously disclosed, the U.S. Environmental Protection Agency (“EPA”) informed NGL Crude Logistics, LLC, formerly known as Gavilon, LLC (“Gavilon Energy”), of alleged violations that occurred in 2011 by Gavilon Energy of the Clean Air Act’s renewable fuel standards regulations (prior to its acquisition by us in December 2013). On October 4, 2016, the U.S. Department of Justice, acting at the request of the EPA, filed a civil complaint in the Northern District of Iowa against Gavilon Energy and one of its then suppliers, Western Dubuque Biodiesel LLC (“Western Dubuque”). Consistent with the earlier allegations by the EPA, the civil complaint related to transactions between Gavilon Energy and Western Dubuque and the generation of biodiesel renewable identification numbers (“RINs”) sold by Western Dubuque to Gavilon Energy in 2011. On December 19, 2016, we filed a motion to dismiss the complaint. On January 9, 2017, the EPA filed an amended complaint. The amended complaint seeks an order declaring Western Dubuque’s RINs invalid and requiring the defendants to retire an equivalent number of valid RINs and that the defendants pay statutory civil penalties. On January 23, 2017, we filed a motion to dismiss the amended complaint. On May 24, 2017, the court denied our motion to dismiss. Subsequently, the EPA filed a second amended complaint seeking an order declaring Western Dubuque’s RINs invalid, an order requiring us to retire an equivalent number of valid RINs and an award against us of statutory civil penalties. In May 2018, the parties completed briefing on cross-motions for summary judgment concerning liability issues in the case. On July 3, 2018, the Court denied our summary judgment motion and largely granted the plaintiff’s two summary judgment motions on liability. On July 19, 2018, Gavilon Energy reached an agreement in principle with the EPA regarding the terms of a settlement of the case, which was memorialized in a consent decree lodged to the Court on September 27, 2018. Such terms will result in Gavilon Energy paying cash of
$25.0 million
and retiring
36 million
RINs, over a twelve-month period. The consent decree was approved by the Court on November 8, 2018. The consent decree resolves all matters between Gavilon Energy and the EPA in connection with the above-described complaint. During the fiscal
year ended March 31, 2019
, we paid the EPA
$12.5 million
and retired all
36 million
RINs. As of
June 30, 2019
, we have an accrual, which is included within accrued expenses and other payables in our unaudited condensed consolidated balance sheet, of
$12.5 million
.
Asset Retirement Obligations
We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement, or removal activities when the assets are retired. Our liability for asset retirement obligations is discounted to present value. To calculate the liability, we make estimates and assumptions about the retirement cost and the timing of retirement. Changes in our assumptions and estimates may occur as a result of the passage of time and the occurrence of future events. The following table summarizes changes in our asset retirement obligation, which is reported within other noncurrent liabilities in our unaudited condensed consolidated balance sheets (in thousands):
|
|
|
|
|
|
|
|
Balance at March 31, 2019
|
$
|
9,723
|
|
|
Liabilities incurred
|
294
|
|
|
Liabilities assumed in acquisitions
|
427
|
|
|
Accretion expense
|
195
|
|
|
Balance at June 30, 2019
|
$
|
10,639
|
|
In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets. However, the fair value of the asset retirement obligation cannot currently be reasonably estimated because the settlement dates are indeterminable. We will record an asset retirement obligation for these assets in the periods in which settlement dates are reasonably determinable.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Other Commitments
We have various noncancelable agreements for product storage, railcar spurs and real estate. The following table summarizes future minimum payments under these agreements at
June 30, 2019
(in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
2020 (nine months)
|
$
|
10,031
|
|
|
2021
|
10,757
|
|
|
2022
|
7,992
|
|
|
2023
|
5,603
|
|
|
2024
|
4,476
|
|
|
Thereafter
|
679
|
|
|
Total
|
$
|
39,538
|
|
Pipeline Capacity Agreements
We have executed noncancelable agreements with crude oil pipeline operators, which guarantee us minimum monthly shipping capacity on the pipelines. As a result, we are required to pay the minimum shipping fees if actual shipments are less than our allotted capacity. Under certain agreements we have the ability to recover minimum shipping fees previously paid if our shipping volumes exceed the minimum monthly shipping commitment during each month remaining under the agreement, with some contracts containing provisions that allow us to continue shipping up to
six months
after the maturity date of the contract in order to recapture previously paid minimum shipping delinquency fees. We currently have an asset recorded in prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet for minimum shipping fees paid in both the current and previous periods that are expected to be recovered in future periods by exceeding the minimum monthly volumes (see
Note 2
).
The future minimum throughput payments under these agreements at
June 30, 2019
are
$30.1 million
. The payments for these agreements will be completed at the end of fiscal year
2020
. Of the total future minimum throughput payments, a third party has contractually agreed to assume all rights and privileges and to be fully responsible for any minimum shipping fees due for actual shipments that are less than our allotted capacity related to
$22.6 million
of the fiscal year
2020
amount under a definitive agreement we signed during the three months ended June 30, 2018 (see
Note 13
).
Construction Commitments
At
June 30, 2019
, we had construction commitments of
$11.4 million
.
Sales and Purchase Contracts
We have entered into product sales and purchase contracts for which we expect the parties to physically settle and deliver the inventory in future periods.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
At
June 30, 2019
, we had the following commodity purchase commitments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil (1)
|
|
Natural Gas Liquids
|
|
|
|
Value
|
|
Volume
(in barrels)
|
|
Value
|
|
Volume
(in gallons)
|
|
Fixed-Price Commodity Purchase Commitments:
|
|
|
|
|
|
|
|
|
|
2020 (nine months)
|
|
$
|
77,233
|
|
|
1,456
|
|
|
$
|
13,811
|
|
|
21,714
|
|
|
2021
|
|
—
|
|
|
—
|
|
|
1,341
|
|
|
2,100
|
|
|
Total
|
|
$
|
77,233
|
|
|
1,456
|
|
|
$
|
15,152
|
|
|
23,814
|
|
|
|
|
|
|
|
|
|
|
|
|
Index-Price Commodity Purchase Commitments:
|
|
|
|
|
|
|
|
|
|
2020 (nine months)
|
|
$
|
1,315,538
|
|
|
24,124
|
|
|
$
|
502,600
|
|
|
1,070,293
|
|
|
2021
|
|
503,942
|
|
|
10,227
|
|
|
2,076
|
|
|
3,914
|
|
|
2022
|
|
397,731
|
|
|
8,264
|
|
|
—
|
|
|
—
|
|
|
2023
|
|
266,157
|
|
|
5,482
|
|
|
—
|
|
|
—
|
|
|
2024
|
|
200,233
|
|
|
4,110
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
2,683,601
|
|
|
52,207
|
|
|
$
|
504,676
|
|
|
1,074,207
|
|
|
|
|
|
(1)
|
Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (presented below) due primarily to our long-term purchase commitments for crude oil that we purchase and ship on the Grand Mesa Pipeline. As these purchase commitments are deliver-or-pay contracts, whereby our counterparty is required to pay us for any volumes not delivered, we have not entered into corresponding long-term sales contracts for volumes we may not receive.
|
At
June 30, 2019
, we had the following commodity sale commitments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil
|
|
Natural Gas Liquids
|
|
|
|
Value
|
|
Volume
(in barrels)
|
|
Value
|
|
Volume
(in gallons)
|
|
Fixed-Price Commodity Sale Commitments:
|
|
|
|
|
|
|
|
|
|
2020 (nine months)
|
|
$
|
84,851
|
|
|
1,541
|
|
|
$
|
123,655
|
|
|
154,945
|
|
|
2021
|
|
—
|
|
|
—
|
|
|
4,926
|
|
|
6,375
|
|
|
2022
|
|
—
|
|
|
—
|
|
|
116
|
|
|
141
|
|
|
Total
|
|
$
|
84,851
|
|
|
1,541
|
|
|
$
|
128,697
|
|
|
161,461
|
|
|
|
|
|
|
|
|
|
|
|
|
Index-Price Commodity Sale Commitments:
|
|
|
|
|
|
|
|
|
|
2020 (nine months)
|
|
$
|
1,059,581
|
|
|
17,955
|
|
|
$
|
763,429
|
|
|
1,112,979
|
|
|
2021
|
|
—
|
|
|
—
|
|
|
14,493
|
|
|
21,923
|
|
|
Total
|
|
$
|
1,059,581
|
|
|
17,955
|
|
|
$
|
777,922
|
|
|
1,134,902
|
|
We account for the contracts shown in the tables above using the
normal purchase and normal sale election
.
Under this accounting policy election, we do not record the physical contracts at fair value at each balance sheet date; instead, we record the purchase or sale at the contracted value once the delivery occurs.
Contracts in the tables above may have offsetting derivative contracts (described in
Note 11
) or inventory positions (described in
Note 2
).
Certain other forward purchase and sale contracts do not qualify for the normal purchase and normal sale election. These contracts are recorded at fair value in our unaudited condensed consolidated balance sheet and are not included in the tables above. These contracts are included in the derivative disclosures in
Note 11
, and represent
$61.7 million
of our prepaid expenses and other current assets and
$60.4 million
of our accrued expenses and other payables at
June 30, 2019
.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Note 10
—Equity
Partnership Equity
The Partnership’s equity consists of a
0.1%
general partner interest and a
99.9%
limited partner interest, which consists of common units. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its
0.1%
general partner interest. Our general partner is not required to guarantee or pay any of our debts and obligations.
General Partner Contributions
In connection with the warrants that were exercised for common units during the
three months ended
June 30, 2019
, we issued
1,460
notional units to our general partner for
less than $0.1 million
in order to maintain its
0.1%
interest in us.
Equity Issuances
On August 24, 2016, we entered into an equity distribution agreement in connection with an at-the-market program (the “ATM Program”) pursuant to which we may issue and sell up to
$200.0 million
of common units. We did not sell any common units under the ATM Program during the
three months ended
June 30, 2019
, and approximately
$134.7 million
remained available for sale under the ATM Program at
June 30, 2019
. The registration statement applicable to this program expired in July 2019.
Our Distributions
The following table summarizes distributions declared on our common units during the last two quarters:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount Per Unit
|
|
Amount Paid/Payable to Limited Partners
|
|
Amount Paid/Payable to General Partner
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
(in thousands)
|
|
April 24, 2019
|
|
May 7, 2019
|
|
May 15, 2019
|
|
$
|
0.3900
|
|
|
$
|
49,127
|
|
|
$
|
85
|
|
|
July 23, 2019
|
|
August 7, 2019
|
|
August 14, 2019
|
|
$
|
0.3900
|
|
|
$
|
49,127
|
|
|
$
|
85
|
|
Class A Convertible Preferred Units
In 2016, we received net proceeds of
$235.0 million
(net of offering costs of
$5.0 million
) in connection with the issuance of
19,942,169
Class A Convertible Preferred Units (“Class A Preferred Units”) and
4,375,112
warrants.
We allocated the net proceeds on a relative fair value basis to the Class A Preferred Units, which includes the value of a beneficial conversion feature, and warrants. Accretion for the beneficial conversion feature, recorded as a deemed distribution, was
$36.5 million
and
$9.0 million
during the
three months ended
June 30, 2019
and
2018
, respectively.
On April 5, 2019, we redeemed
7,468,978
of the Class A Preferred Units. The applicable Class A redemption price was
$13.389
per Class A Preferred Unit, calculated at
111.25%
of
$12.035
(the Class A Preferred Unit price), plus accrued but unpaid and accumulated distributions of
$0.338
. The amount per Class A Preferred Unit paid to each Class A preferred unitholder was
$13.727
, for a total payment of
$102.5 million
. On April 5, 2019, all
1,458,371
outstanding warrants to purchase common units were exercised for proceeds of
less than $0.1 million
.
On May 11, 2019, we redeemed the remaining
12,473,191
outstanding Class A Preferred Units. The applicable Class A redemption price was
$13.2385
per Class A Preferred Unit, calculated at
110%
of
$12.035
, plus accrued but unpaid and accumulated distributions of
$0.1437
. The amount per Class A Preferred Unit paid to each Class A preferred unitholder was
$13.3822
, for a total payment of
$166.9 million
. In addition, we paid the Class A preferred unitholders the distribution declared on
April 24, 2019
for the quarter ended March 31, 2019 of
$4.0 million
, or
$0.3234
per unit, which was paid to the holders of the Class A Preferred Units on
May 10, 2019
.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Class B Preferred Units
On June 13, 2017, we issued
8,400,000
of our
9.00%
Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) representing limited partner interests at a price of
$25.00
per unit for net proceeds of
$202.7 million
(net of the underwriters’ discount of
$6.6 million
and offering costs of
$0.7 million
).
On July 2, 2019, we issued
4,185,642
Class B Preferred Units to fund a portion of the purchase price for the Mesquite acquisition (see
Note 17
).
The current distribution rate for the Class B Preferred Units is 9.0% per year of the $25.00 liquidation preference per unit (equal to $2.25 per unit per year).
The following table summarizes distributions declared on our Class B Preferred Units during the last two quarters:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Paid to Class B
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount Per Unit
|
|
Preferred Unitholders
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 15, 2019
|
|
April 1, 2019
|
|
April 15, 2019
|
|
$
|
0.5625
|
|
|
$
|
4,725
|
|
|
June 14, 2019
|
|
July 1, 2019
|
|
July 15, 2019
|
|
$
|
0.5625
|
|
|
$
|
4,725
|
|
The distribution amount paid on
July 15, 2019
is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at
June 30, 2019
.
Class C Preferred Units
On April 2, 2019, we issued
1,800,000
of our
9.625%
Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) representing limited partner interests at a price of
$25.00
per unit for net proceeds of
$42.6 million
(net of the underwriters’ discount of
$1.4 million
and offering costs of
$0.9 million
).
The current distribution rate for the Class C Preferred Units is 9.625% per year of the $25.00 liquidation preference per unit (equal to $2.41 per unit per year).
On
June 14, 2019
, the board of directors of our general partner declared a distribution on the Class C Preferred Units for the
three months ended
June 30, 2019
of
$1.1 million
, or
$0.5949
per unit, in the aggregate, which was paid to the holders of the Class C Preferred Units on
July 15, 2019
.
The distribution amount paid on
July 15, 2019
is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at
June 30, 2019
.
Class D Preferred Units
On the Closing Date, we entered into a Class D Preferred Unit and Warrant Purchase Agreement pursuant to which we agreed to issue, in a private placement,
$400.0 million
of our Class D preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of
17,000,000
common units for net proceeds of
$385.0 million
(net of a closing fee of
$8.0 million
payable to affiliates of the purchasers and certain estimated expenses and expense reimbursements). Proceeds from this issuance were used to fund a portion of the purchase price for the Mesquite acquisition (see
Note 17
).
The holders of the Class D Preferred Units will be entitled to receive a cumulative, quarterly distribution in arrears on each Class D Preferred Unit then held at an annual rate of (i) 9.00% per annum for all periods during which the Class D Preferred Units are outstanding beginning on the Closing Date and ending on the date and including the last day of the eleventh full quarter following the Closing Date, (ii) 10.00% per annum for all periods during which the Class D Preferred Units are outstanding beginning on and including the first day of the twelfth full quarter following the Closing Date and ending on the last day of the nineteenth full quarter following the Closing Date, and (iii) thereafter, 10.00% per annum or, at the purchasers’ election from time to time, a floating rate equal to the applicable three-month LIBOR, plus 7.00% per annum.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
At any time after the Closing Date, the Partnership shall have the right to redeem all of the outstanding Class D Preferred Units at a price per Class D Preferred Unit equal to the sum of the then-unpaid accumulations with respect to such Class D Preferred Unit and the greater of either the applicable multiple on invested capital or the applicable redemption price based on an applicable internal rate of return, as more fully described in the Amended and Restated Partnership Agreement. At any time on or after the eighth anniversary of the Closing Date, each Class D Preferred Unitholder will have the right to require the Partnership to redeem on a date not prior to the 180th day after such anniversary all or a portion of the Class D Preferred Units then held by such preferred unitholder for the then-applicable redemption price, which may be paid in cash or, at the Partnership’s election, a combination of cash and a number of Common Units not to exceed one-half of the aggregate then-applicable redemption price, as more fully described in the Amended and Restated Partnership Agreement. Upon a Class D Change of Control (as defined in the Amended and Restated Partnership Agreement), each Class D Preferred Unitholder will have the right to require the Partnership to redeem the Class D Preferred Units then held by such Preferred Unitholder at a price per Class D Preferred Unit equal to applicable redemption price. The Class D Preferred Units generally will not have any voting rights, except with respect to certain matters which require the vote of the Class D Preferred Units. The Class D Preferred Units generally do not have any voting rights, except that the Class D Preferred Units shall be entitled to vote as a separate class on any matter on which unitholders are entitled to vote that adversely affects the rights, powers, privileges or preferences of the Class D Preferred Units in relation to other classes of Partnership Interests (as defined in the Amended and Restated Partnership Agreement) or as required by law. The consent of a majority of the then-outstanding Class D Preferred Units, with one vote per Class D Preferred Unit, shall be required to approve any matter for which the preferred unitholders are entitled to vote as a separate class or the consent of the representative of the Class D Preferred Unitholders, as applicable.
The warrants issued in the private placement are exercisable for, in the aggregate,
17,000,000
common units. Warrants to purchase
10,000,000
common units were issued with an exercise price of
$17.45
per common unit (the “Premium Warrants”), and the remaining warrants to purchase
7,000,000
common units were issued with an exercise price of
$14.54
per common unit (the “Par Warrants”). The warrants may be exercised from and after the first anniversary of the Closing Date. Unexercised warrants will expire on the tenth anniversary of the Closing Date. The warrants will not participate in cash distributions.
Upon a change of control, all unvested warrants shall immediately vest and be exercisable in full. A change of control occurs when (a) the current general partner owners cease to own, directly or indirectly, at least 50% of the outstanding voting securities of the general partner, (b) the general partner withdraws or is removed by the limited partners, (c) the common units are no longer listed on a national exchange, or (d) the general partners and/or its affiliates become beneficial owner, directly or indirectly, of 80% or more of the outstanding common units or any transaction or event that occurs due to default on our credit agreement.
Registration Rights Agreement
In connection with the issuance of the Class D Preferred Units, we entered into a registrations rights agreements (“Registration Rights Agreement”) with the purchasers of the Class D Preferred Units (“Purchasers”), pursuant to which we are required to prepare and file a registration statement (the “Registration Statement”) within 180 days of the Closing Date, to permit the public resale of (i) the Class D Preferred Units, (ii) the common units issued or issuable upon the exercise of the warrants, (iii) the common units that are issuable pursuant to the terms of the Class D Preferred Units in connection with a redemption of the Class D Preferred Units and (iv) any common units issued in lieu of cash as liquidated damages under the Registration Rights Agreement. The Partnership is also required to use its commercially reasonable efforts to cause the Registration Statement to become effective no later than 360 days after the Closing Date. The Registration Rights Agreement provides that if the Registration Statement is not declared effective on or prior to the Registration Statement Deadline, the Partnership will be liable to the Purchasers for liquidated damages in accordance with a formula, subject to the limitations set forth in the Registration Rights Agreement. Such liquidated damages would be payable in cash, or if payment in cash would breach any covenant or a cause a default under a credit facility or any other debt instrument filed by the Partnership as an exhibit to a periodic report filed with the SEC, then such liquidated damages would be payable in the form of newly issued common units. In addition, the Registration Rights Agreement grants the Purchasers piggyback registration rights. These registration rights are transferable to affiliates of the Purchasers and, in certain circumstances, to third parties.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Board Rights Agreement
In connection with the issuance of the Class D Preferred Units, we entered into a board rights agreement pursuant to which affiliates of the Purchasers will have the right to designate up to one director on the board of directors of our general partner, so long as the Purchasers and their respective affiliates, in the aggregate, own either at least (i) (A) 50% of the number of Preferred Units issued on the Closing Date or (B) 50% of the aggregate liquidation preference of any class or series of Class D Parity Securities (as defined in the Amended and Restated Partnership Agreement), or (ii) Warrants and/or common units that, in the aggregate, comprise 10% or more of the then-outstanding Common Units.
Amended and Restated Partnership Agreement
On July 2, 2019, NGL Energy Holdings LLC executed the Sixth Amended and Restated Agreement of Limited Partnership. The preferences, rights, powers and duties of holders of Class D Preferred Units are defined in the Amended and Restated Partnership Agreement. The Class D Preferred Units rank senior to the common units with respect to payment of distributions and distribution of assets upon liquidation, dissolution and winding up, and are in parity with the Class B Preferred Units and Class C Preferred Units. The Class D Preferred Units have no stated maturity, but we may redeem the Class D Preferred Units at any time after the Closing Date or upon the occurrence of a change in control.
Equity-Based Incentive Compensation
Our general partner has adopted a long-term incentive plan (“LTIP”), which allows for the issuance of equity-based compensation. Our general partner has granted certain restricted units to employees and directors, which vest in tranches, subject to the continued service of the recipients. The awards may also vest upon a change of control, at the discretion of the board of directors of our general partner.
No
distributions accrue to or are paid on the restricted units during the vesting period.
The restricted units vest contingent on the continued service of the recipients through the vesting date (the “Service Awards”).
The following table summarizes the Service Award activity during the
three months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
Unvested Service Award units at March 31, 2019
|
|
2,308,400
|
|
|
Units granted
|
|
17,500
|
|
|
Units forfeited
|
|
(8,550
|
)
|
|
Unvested Service Award units at June 30, 2019
|
|
2,317,350
|
|
The following table summarizes the scheduled vesting of our unvested Service Award units at
June 30, 2019
:
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
2020 (nine months)
|
|
1,009,175
|
|
|
2021
|
|
872,925
|
|
|
2022
|
|
435,250
|
|
|
Total
|
|
2,317,350
|
|
Service Awards are valued at the average of the high/low sales price as of the grant date less the present value of the expected distribution stream over the vesting period using a risk-free interest rate. We record the expense for each Service Award on a straight-line basis over the requisite period for the entire award (that is, over the requisite service period of the last separately vesting portion of the award), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date value of the award that is vested at that date.
During the
three months ended
June 30, 2019
and
2018
, we recorded compensation expense related to Service Award units of
$2.8 million
and
$2.8 million
, respectively.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The following table summarizes the estimated future expense we expect to record on the unvested Service Award units at
June 30, 2019
(in thousands):
|
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
|
2020 (nine months)
|
|
$
|
5,454
|
|
|
2021
|
|
4,216
|
|
|
2022
|
|
1,375
|
|
|
Total
|
|
$
|
11,045
|
|
As of
June 30, 2019
, there are approximately
3.4 million
common units remaining available for issuance under the LTIP.
Note 11
—Fair Value of Financial Instruments
Our cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities (excluding derivative instruments) are carried at amounts which reasonably approximate their fair values due to their short-term nature.
Commodity Derivatives
The following table summarizes the estimated fair values of our commodity derivative assets and liabilities reported in our unaudited condensed consolidated balance sheet at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
Derivative
Assets
|
|
Derivative
Liabilities
|
|
Derivative
Assets
|
|
Derivative
Liabilities
|
|
|
|
(in thousands)
|
|
Level 1 measurements
|
|
$
|
69,517
|
|
|
$
|
(26,139
|
)
|
|
$
|
49,509
|
|
|
$
|
(7,273
|
)
|
|
Level 2 measurements
|
|
63,137
|
|
|
(60,547
|
)
|
|
86,785
|
|
|
(100,564
|
)
|
|
|
|
132,654
|
|
|
(86,686
|
)
|
|
136,294
|
|
|
(107,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Netting of counterparty contracts (1)
|
|
(26,326
|
)
|
|
26,326
|
|
|
(7,501
|
)
|
|
7,501
|
|
|
Net cash collateral held
|
|
(15,782
|
)
|
|
(133
|
)
|
|
(18,271
|
)
|
|
(208
|
)
|
|
Commodity derivatives
|
|
$
|
90,546
|
|
|
$
|
(60,493
|
)
|
|
$
|
110,522
|
|
|
$
|
(100,544
|
)
|
|
|
|
|
(1)
|
Relates to commodity derivative assets and liabilities that are expected to be net settled on an exchange or through a netting arrangement with the counterparty. Our physical contracts that do not qualify as normal purchase normal sale transactions are not subject to such netting arrangements.
|
The following table summarizes the accounts that include our commodity derivative assets and liabilities in our unaudited condensed consolidated balance sheets at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Prepaid expenses and other current assets
|
|
$
|
90,522
|
|
|
$
|
110,521
|
|
|
Other noncurrent assets
|
|
24
|
|
|
1
|
|
|
Accrued expenses and other payables
|
|
(60,402
|
)
|
|
(100,372
|
)
|
|
Other noncurrent liabilities
|
|
(91
|
)
|
|
(172
|
)
|
|
Net commodity derivative asset
|
|
$
|
30,053
|
|
|
$
|
9,978
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The following table summarizes our open commodity derivative contract positions at the dates indicated. We do not account for these derivatives as hedges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts
|
|
Settlement Period
|
|
Net Long
(Short)
Notional Units
(in barrels)
|
|
Fair Value
of
Net Assets
(Liabilities)
|
|
|
|
|
|
(in thousands)
|
|
At June 30, 2019:
|
|
|
|
|
|
|
|
Crude oil fixed-price (1)
|
|
July 2019–December 2020
|
|
(2,200
|
)
|
|
$
|
2,580
|
|
|
Propane fixed-price (1)
|
|
July 2019–December 2020
|
|
947
|
|
|
(2,430
|
)
|
|
Refined products fixed-price (1)
|
|
July 2019–January 2021
|
|
(4,623
|
)
|
|
45,692
|
|
|
Other
|
|
July 2019–March 2022
|
|
|
|
126
|
|
|
|
|
|
|
|
|
45,968
|
|
|
Net cash collateral held
|
|
|
|
|
|
(15,915
|
)
|
|
Net commodity derivative asset
|
|
|
|
|
|
$
|
30,053
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2019:
|
|
|
|
|
|
|
|
Crude oil fixed-price (1)
|
|
April 2019–December 2020
|
|
(1,961
|
)
|
|
1,014
|
|
|
Propane fixed-price (1)
|
|
April 2019–March 2020
|
|
198
|
|
|
608
|
|
|
Refined products fixed-price (1)
|
|
April 2019–January 2021
|
|
(2,296
|
)
|
|
22,079
|
|
|
Other
|
|
April 2019–March 2022
|
|
|
|
4,756
|
|
|
|
|
|
|
|
|
28,457
|
|
|
Net cash collateral held
|
|
|
|
|
|
(18,479
|
)
|
|
Net commodity derivative asset
|
|
|
|
|
|
$
|
9,978
|
|
|
|
|
|
(1)
|
We may have fixed price physical purchases, including inventory, offset by floating price physical sales or floating price physical purchases offset by fixed price physical sales. These contracts are derivatives we have entered into as an economic hedge against the risk of mismatches between fixed and floating price physical obligations.
|
|
|
|
|
(2)
|
We may purchase or sell a physical commodity where the underlying contract pricing mechanisms are tied to different commodity price indices. These contracts are derivatives we have entered into as an economic hedge against the risk of one commodity price moving relative to another commodity price.
|
During the
three months ended
June 30, 2019
and
2018
, we recorded
a net gain
of
$26.5 million
and
a net loss
of
$52.7 million
, respectively, from our commodity derivatives to revenues and cost of sales in our unaudited condensed consolidated statements of operations.
Credit Risk
We have credit policies that we believe minimize our overall credit risk, including an evaluation of potential counterparties’ financial condition (including credit ratings), collateral requirements under certain circumstances, and the use of industry standard master netting agreements, which allow for offsetting counterparty receivable and payable balances for certain transactions.
At
June 30, 2019
,
our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers.
This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, as the counterparties may be similarly affected by changes in economic, regulatory or other conditions. If a counterparty does not perform on a contract, we may not realize amounts that have been recorded in our unaudited condensed consolidated balance sheets and recognized in our net income.
Interest Rate Risk
The Revolving Credit Facility is variable-rate debt with interest rates that are generally indexed to bank prime or LIBOR interest rates.
At
June 30, 2019
,
we had
$1.2 billion
of outstanding borrowings under the Revolving Credit Facility at a weighted average interest rate of
4.27%
.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Fair Value of Fixed-Rate Notes
The following table provides fair value estimates of our fixed-rate notes at
June 30, 2019
(in thousands):
|
|
|
|
|
|
|
|
Senior Unsecured Notes:
|
|
|
2023 Notes
|
$
|
634,243
|
|
|
2025 Notes
|
$
|
386,460
|
|
|
2026 Notes
|
$
|
469,125
|
|
For the Senior Unsecured Notes, the fair value estimates were developed based on publicly traded quotes and would be classified as Level 1 in the fair value hierarchy.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Note 12
—Segments
The following table summarizes revenues related to our segments. Transactions between segments are recorded based on prices negotiated between the segments. The “Corporate and Other” category in the table below includes certain corporate expenses that are not allocated to the reportable segments. The table below does not include amounts related to our former Retail Propane segment, as these amounts has been classified within discontinued operations in our unaudited condensed consolidated statements of operations (see
Note 16
).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Revenues:
|
|
|
|
|
|
Crude Oil Logistics:
|
|
|
|
|
|
Topic 606 revenues
|
|
|
|
|
|
Crude oil sales
|
|
$
|
682,069
|
|
|
$
|
756,511
|
|
|
Crude oil transportation and other
|
|
39,997
|
|
|
28,546
|
|
|
Non-Topic 606 revenues
|
|
3,621
|
|
|
3,298
|
|
|
Elimination of intersegment sales
|
|
(9,527
|
)
|
|
(4,525
|
)
|
|
Total Crude Oil Logistics revenues
|
|
716,160
|
|
|
783,830
|
|
|
Water Solutions:
|
|
|
|
|
|
Topic 606 revenues
|
|
|
|
|
|
Disposal service fees
|
|
51,140
|
|
|
54,004
|
|
|
Sale of recovered hydrocarbons
|
|
14,335
|
|
|
20,378
|
|
|
Freshwater revenues
|
|
2,096
|
|
|
500
|
|
|
Other service revenues
|
|
4,212
|
|
|
1,251
|
|
|
Non-Topic 606 revenues
|
|
—
|
|
|
12
|
|
|
Total Water Solutions revenues
|
|
71,783
|
|
|
76,145
|
|
|
Liquids:
|
|
|
|
|
|
Topic 606 revenues
|
|
|
|
|
|
Propane sales
|
|
139,374
|
|
|
186,489
|
|
|
Butane sales
|
|
82,225
|
|
|
113,200
|
|
|
Other product sales
|
|
114,605
|
|
|
151,805
|
|
|
Service revenues
|
|
8,787
|
|
|
5,671
|
|
|
Non-Topic 606 revenues
|
|
3,845
|
|
|
4,397
|
|
|
Elimination of intersegment sales
|
|
(1,189
|
)
|
|
(1,665
|
)
|
|
Total Liquids revenues
|
|
347,647
|
|
|
459,897
|
|
|
Refined Products and Renewables:
|
|
|
|
|
|
Topic 606 revenues
|
|
|
|
|
|
Refined products sales
|
|
1,412,158
|
|
|
1,428,212
|
|
|
Service fees and other revenues
|
|
511
|
|
|
4,750
|
|
|
Non-Topic 606 revenues
|
|
4,089,377
|
|
|
3,091,445
|
|
|
Total Refined Products and Renewables revenues
|
|
5,502,046
|
|
|
4,524,407
|
|
|
Corporate and Other:
|
|
|
|
|
|
Non-Topic 606 revenues
|
|
255
|
|
|
376
|
|
|
Elimination of intersegment sales
|
|
—
|
|
|
(221
|
)
|
|
Total Corporate and Other revenues
|
|
255
|
|
|
155
|
|
|
Total revenues
|
|
$
|
6,637,891
|
|
|
$
|
5,844,434
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The following tables summarize depreciation and amortization expense and operating income (loss) by segment for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Depreciation and Amortization:
|
|
|
|
|
|
Crude Oil Logistics
|
|
$
|
17,585
|
|
|
$
|
19,309
|
|
|
Water Solutions
|
|
28,223
|
|
|
25,309
|
|
|
Liquids
|
|
7,251
|
|
|
6,505
|
|
|
Refined Products and Renewables
|
|
1,928
|
|
|
1,669
|
|
|
Corporate and Other
|
|
2,868
|
|
|
3,147
|
|
|
Total depreciation and amortization
|
|
$
|
57,855
|
|
|
$
|
55,939
|
|
|
|
|
|
|
|
|
Operating Income (Loss):
|
|
|
|
|
|
Crude Oil Logistics
|
|
$
|
33,802
|
|
|
$
|
(99,738
|
)
|
|
Water Solutions
|
|
13,689
|
|
|
969
|
|
|
Liquids
|
|
8,484
|
|
|
2,623
|
|
|
Refined Products and Renewables
|
|
5,920
|
|
|
29,022
|
|
|
Corporate and Other
|
|
(15,342
|
)
|
|
(17,430
|
)
|
|
Total operating income (loss)
|
|
$
|
46,553
|
|
|
$
|
(84,554
|
)
|
The following table summarizes additions to property, plant and equipment and intangible assets by segment for the periods indicated. This information has been prepared on the accrual basis, and includes property, plant and equipment and intangible assets acquired in acquisitions. The information below does not include goodwill by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Crude Oil Logistics
|
|
$
|
14,805
|
|
|
$
|
8,382
|
|
|
Water Solutions
|
|
203,900
|
|
|
130,422
|
|
|
Liquids
|
|
5,549
|
|
|
992
|
|
|
Refined Products and Renewables
|
|
4
|
|
|
—
|
|
|
Corporate and Other
|
|
739
|
|
|
331
|
|
|
Total
|
|
$
|
224,997
|
|
|
$
|
140,127
|
|
The following tables summarize long-lived assets (consisting of property, plant and equipment, intangible assets, and goodwill) and total assets by segment at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Long-lived assets, net:
|
|
|
|
|
|
Crude Oil Logistics
|
|
$
|
1,610,899
|
|
|
$
|
1,584,636
|
|
|
Water Solutions
|
|
1,791,345
|
|
|
1,600,836
|
|
|
Liquids (1)
|
|
631,416
|
|
|
498,767
|
|
|
Refined Products and Renewables
|
|
554,915
|
|
|
217,881
|
|
|
Corporate and Other
|
|
29,716
|
|
|
26,569
|
|
|
Total
|
|
$
|
4,618,291
|
|
|
$
|
3,928,689
|
|
|
|
|
|
(1)
|
Includes
$29.0 million
and
$0.5 million
of non-US long-lived assets at
June 30, 2019
and
March 31, 2019
, respectively.
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Total assets:
|
|
|
|
|
|
Crude Oil Logistics
|
|
$
|
2,177,945
|
|
|
$
|
2,237,612
|
|
|
Water Solutions
|
|
1,862,624
|
|
|
1,668,292
|
|
|
Liquids (1)
|
|
837,184
|
|
|
721,008
|
|
|
Refined Products and Renewables
|
|
1,435,978
|
|
|
1,198,562
|
|
|
Corporate and Other
|
|
81,174
|
|
|
77,019
|
|
|
Total
|
|
$
|
6,394,905
|
|
|
$
|
5,902,493
|
|
|
|
|
|
(1)
|
Includes
$41.8 million
and
$12.0 million
of non-US total assets at
June 30, 2019
and
March 31, 2019
, respectively.
|
Note 13
—Transactions with Affiliates
A member of the board of directors of our general partner is an executive officer of WPX Energy, Inc. (“WPX”). We purchase crude oil from and sell crude oil to WPX (certain of the purchases and sales that were entered into in contemplation of each other are recorded on a net basis within revenues in our unaudited condensed consolidated statement of operations). We also treat and dispose of wastewater and solids received from WPX.
SemGroup Corporation (“SemGroup”) holds ownership interests in our general partner. We sell product to and purchase product from SemGroup, and these transactions are included within revenues and cost of sales, respectively, in our unaudited condensed consolidated statements of operations. We also lease crude oil storage from SemGroup.
The following table summarizes these related party transactions for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Sales to WPX
|
|
$
|
8,436
|
|
|
$
|
—
|
|
|
Purchases from WPX (1)
|
|
$
|
80,771
|
|
|
$
|
—
|
|
|
Sales to SemGroup
|
|
$
|
241
|
|
|
$
|
120
|
|
|
Purchases from SemGroup
|
|
$
|
—
|
|
|
$
|
1,020
|
|
|
Sales to entities affiliated with management
|
|
$
|
1,021
|
|
|
$
|
5,280
|
|
|
Purchases from entities affiliated with management
|
|
$
|
1,156
|
|
|
$
|
76,534
|
|
|
|
|
|
(1)
|
Amount primarily relates to purchases of crude oil under the definitive agreement we signed with WPX.
|
Accounts receivable from affiliates consist of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Receivables from NGL Energy Holdings LLC
|
|
$
|
7,355
|
|
|
$
|
7,277
|
|
|
Receivables from WPX
|
|
4,043
|
|
|
5,185
|
|
|
Receivables from SemGroup
|
|
41
|
|
|
71
|
|
|
Receivables from entities affiliated with management
|
|
68
|
|
|
334
|
|
|
Total
|
|
$
|
11,507
|
|
|
$
|
12,867
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Accounts payable to affiliates consist of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
Payables to WPX
|
|
$
|
22,785
|
|
|
$
|
27,844
|
|
|
Payables to entities affiliated with management
|
|
267
|
|
|
625
|
|
|
Payables to equity method investees
|
|
19
|
|
|
—
|
|
|
Total
|
|
$
|
23,071
|
|
|
$
|
28,469
|
|
Other Related Party Transactions
Acquisition of Interest in KAIR2014 LLC
During the
three months ended
June 30, 2019
, we purchased a
50%
interest in an aircraft rental company, KAIR2014 LLC, for
$0.9 million
in cash and accounted for our interest using the equity method of accounting (see
Note 2
). The remaining interest in KAIR2014 LLC is owned by our Chief Executive Officer, H. Michael Krimbill.
Acquisition of Interest in NGL Energy Holdings LLC
During the
three months ended
June 30, 2019
, we purchased, in two transactions, a
1.89%
interest in our general partner, NGL Energy Holdings LLC, for
$2.4 million
in cash and accounted for this as a deduction within limited partners’ equity in our unaudited condensed consolidated balance sheet.
Note 14
—Revenue from Contracts with Customers
Effective April 1, 2018, we recognize revenue for services and products under revenue contracts as our obligations to either perform services or deliver or sell products under the contracts are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation in the contract and is recognized as revenue when, or as, the performance obligation is satisfied. Our revenue contracts in scope under ASC 606 primarily have a single performance obligation. The evaluation of when performance obligations have been satisfied and the transaction price that is allocated to our performance obligations requires significant judgment and assumptions, including our evaluation of the timing of when control of the underlying good or service has transferred to our customers and the relative stand-alone selling price of goods and services provided to customers under contracts with multiple performance obligations. Actual results can vary from those judgments and assumptions. We do not have any material contracts with multiple performance obligations or under which we receive material amounts of non-cash consideration. Our costs to obtain or fulfill our revenue contracts were not material as of
June 30, 2019
.
The majority of our revenue agreements are within scope under ASC 606 and the remainder of our revenue comes from contracts that are accounted for as derivatives under ASC 815 or that contain nonmonetary exchanges or leases and are in scope under Topics 845 and 842, respectively. See
Note 12
for a detail of disaggregated revenue. Revenue from contracts accounted for as derivatives under ASC 815 within our Refined Products and Renewables segment includes
$28.4 million
of
net gains
related to changes in the mark-to-market value of these arrangements recorded during the three months ended
June 30, 2019
.
Remaining Performance Obligations
Most of our service contracts are such that we have the right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date. Therefore, we are utilizing the practical expedient in ASC 606-10-55-18 under which we recognize revenue in the amount to which we have the right to invoice. Applying this practical expedient, we are not required to disclose the transaction price allocated to remaining performance obligations under these agreements. The following table summarizes the amount and timing of revenue recognition for such contracts at
June 30, 2019
(in thousands):
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
2020 (nine months)
|
$
|
144,623
|
|
|
2021
|
128,778
|
|
|
2022
|
120,091
|
|
|
2023
|
113,915
|
|
|
2024
|
99,443
|
|
|
Thereafter
|
242,127
|
|
|
Total
|
$
|
848,977
|
|
Contract Assets and Liabilities
The following tables summarize the balances of our contract assets and liabilities at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
March 31, 2019
|
|
June 30, 2019
|
|
|
|
(in thousands)
|
|
Accounts receivable from contracts with customers
|
|
$
|
740,878
|
|
|
$
|
533,216
|
|
|
|
|
|
|
|
|
|
|
Contract liabilities balance at March 31, 2019
|
|
$
|
8,921
|
|
|
Payment received and deferred
|
|
24,810
|
|
|
Payment recognized in revenue
|
|
(5,418
|
)
|
|
Contract liabilities balance at June 30, 2019
|
|
$
|
28,313
|
|
Note 15
—Leases
We adopted ASC 842 effective April 1, 2019 using the modified retrospective method, with no adjustment to comparative period information, which remains reported under ASC 840, and no cumulative effect adjustment to equity. Upon adoption, we recorded operating lease right-of-use assets of
$551.2 million
and operating lease obligations of
$549.0 million
. The adoption of this standard did not impact our unaudited condensed consolidated statement of operations or unaudited condensed consolidated statement of cash flows for the three months ended
June 30, 2019
.
We also elected the following transitional practical expedients, which allowed us to (i) not evaluate land easements prior to April 1, 2019; (ii) use hindsight in determining the lease term; (iii) not reassess whether current or expired contracts contain leases; (iv) not reassess the lease classification for any expired or existing leases; and (v) not reassess initial costs.
Lessee Accounting
Our leasing activity primarily consists of product storage, office space, real estate, railcars, and equipment. We determine if an agreement contains a lease at the inception of the arrangement. If an arrangement is determined to contain a lease, we classify the lease as an operating lease or a finance lease depending on the terms of the arrangement. All of our leases are classified as operating leases. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term when we control the use of the asset by obtaining substantially all of the economic benefits of the asset and direct the use of the asset. Operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and operating lease liabilities with an initial term of greater than one year are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Our incremental borrowing rate represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We do not have any leases that provide for guarantees of residual value.
Our lease agreements may include options to extend or terminate the lease which are included in the measurement of our operating lease liability when it is reasonably certain that we will exercise the option. Lease renewal terms vary from
one year
to
30 years
. Operating lease expense is recognized on a straight-line basis over the lease term. We have variable lease payments, including adjustments to lease payments based on an index or rate, such as a consumer price index, fair value adjustments to lease payments, and common area maintenance, real estate taxes, and insurance payments in certain real estate leases. We also have certain land leas
es within our Water Solutions segment that require us to pay a royalty, which could be
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
based on a flat rate per barrel disposed or a percentage of revenue
generated. Variable lease payments are excluded from operating lease right-of-use assets and operating lease liabilities and are expensed as incurred. Operating lease right-of-use assets also include any lease prepayments and exclude lease incentives. For leases acquired as a result of an acquisition, the right-of-use asset also includes adjustments for any favorable or unfavorable market terms present in the lease.
Short-term leases with an initial term of 12 months or less that do not include a purchase option, with the exception of railcar leases, are not recorded on the unaudited condensed consolidated balance sheet. Operating lease expense for short-term leases is recognized on a straight-line basis over the lease term and amounts related to short-term leases are disclosed within our condensed consolidated financial statements.
We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases of buildings and land, we account for the lease and non-lease components as a single lease component based on the election of the practical expedient to not separate lease components from non-lease components.
At
June 30, 2019
, we had operating lease right-of-use assets of
$518.0 million
and current and noncurrent operating lease obligations of
$77.0 million
and
$439.1 million
, respectively, on our unaudited condensed consolidated balance sheet. At
June 30, 2019
, the weighted-average remaining lease term and weighted-average discount rate for our operating leases was
14.95 years
and
6.55%
, respectively.
The following table summarizes the components of our lease expense for the period indicated:
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2019
|
|
|
(in thousands)
|
|
Operating lease cost
|
$
|
29,398
|
|
|
Variable lease cost
|
1,808
|
|
|
Short-term lease cost
|
126
|
|
|
Total lease cost
|
$
|
31,332
|
|
Rental expense relating to operating leases was
$27.9 million
during the three months ended
June 30, 2018
. This amount does not include rental expense related to our former Retail Propane segment, as this amount has been classified within discontinued operations within our unaudited condensed consolidated statements of operations (see
Note 16
).
The following table summarizes maturities of our operating lease liabilities at
June 30, 2019
(in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
2020 (nine months)
|
$
|
82,061
|
|
|
2021
|
91,400
|
|
|
2022
|
70,650
|
|
|
2023
|
50,556
|
|
|
2024
|
39,252
|
|
|
Thereafter
|
500,059
|
|
|
Total lease payments
|
833,978
|
|
|
Less imputed interest
|
(317,874
|
)
|
|
Total operating lease liabilities
|
$
|
516,104
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The following table summarizes future minimum lease payments under various noncancelable operating lease agreements at March 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
2020
|
$
|
127,718
|
|
|
2021
|
105,697
|
|
|
2022
|
83,595
|
|
|
2023
|
54,599
|
|
|
2024
|
18,841
|
|
|
Thereafter
|
41,845
|
|
|
Total
|
$
|
432,295
|
|
The following table summarizes supplemental cash flow and non-cash information related to our operating leases for the period indicated:
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2019
|
|
|
(in thousands)
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
29,108
|
|
|
Operating lease right-of-use assets obtained in exchange for operating lease obligations
|
$
|
552,527
|
|
Lessor Accounting and Subleases
Our lessor arrangements include storage and railcar contracts, of which certain agreements contain renewal options for periods of between
one year
and
five years
. We determine if an agreement contains a lease at the inception of the arrangement. If an arrangement is determined to contain a lease, we classify the lease as operating, sales-type or direct financing. Lessor accounting under ASC 842 is substantially unchanged and all of our leases will continue to be classified as operating leases. We also, from time to time, sublease certain of our storage capacity and railcars to third parties. Fixed rental revenue is recognized on a straight-line basis over the lease term. During the
three months ended
June 30, 2019
, fixed rental revenue was
$5.4 million
, which includes
$1.4 million
of sublease revenue.
The following table summarizes future minimum lease payments receivable under various noncancelable operating lease agreements at
June 30, 2019
(in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending March 31,
|
|
|
2020 (nine months)
|
$
|
14,975
|
|
|
2021
|
13,444
|
|
|
2022
|
5,471
|
|
|
2023
|
1,550
|
|
|
2024
|
1,325
|
|
|
Thereafter
|
1,574
|
|
|
Total
|
$
|
38,339
|
|
Note 16
—Discontinued Operations
As discussed in
Note 1
, as of June 30, 2018, the operations of our Retail Propane segment were classified as discontinued. On July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior and on August 14, 2018, we sold our previously held interest in Victory Propane. See
Note 1
for a further discussion.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
The following table summarizes the results of operations from discontinued operations related to our former Retail Propane segment for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2018
|
|
|
|
(in thousands)
|
|
Revenues
|
|
$
|
66,673
|
|
|
Cost of sales
|
|
34,496
|
|
|
Operating expenses
|
|
24,502
|
|
|
General and administrative expense
|
|
2,396
|
|
|
Depreciation and amortization
|
|
8,706
|
|
|
Gain on disposal or impairment of assets, net
|
|
(11
|
)
|
|
Operating loss from discontinued operations
|
|
(3,416
|
)
|
|
Loss in earnings of unconsolidated entities
|
|
(115
|
)
|
|
Interest expense
|
|
(125
|
)
|
|
Other expense, net
|
|
(500
|
)
|
|
Loss from discontinued operations, net of tax (1)
|
|
$
|
(4,156
|
)
|
|
|
|
|
(1)
|
Amount includes loss attributable to redeemable noncontrolling interests of
$0.4 million
for the
three months ended
June 30, 2018
.
|
Continuing Involvement
As of
June 30, 2019
, we have commitments to sell up to
43.2 million
gallons of propane, valued at
$29.7 million
(based on the contract price) to Superior and DCC LPG, the purchasers of our former Retail Propane segment, through April 2020. During the three months ended
June 30, 2019
, we received a combined
$1.4 million
from Superior and DCC LPG for propane sold to them during the period.
Note 17
—Subsequent Events
Acquisitions
On July 2, 2019, we acquired all of the assets of Mesquite Disposals Unlimited, LLC (“Mesquite”) (including
35
saltwater disposal wells) for a total purchase price of
$892.5 million
. The purchase price was comprised of (i)
$592.5 million
in cash, (ii) the issuance of
$100.0 million
of our Class B Preferred Units and (iii) up to
$200.0 million
in cash to be paid in
two
deferred installments contingent on certain performance metrics of the assets being acquired. Mesquite SWD Inc. will remain the operator of the Mesquite assets led by Mesquite’s current management team. The assets consist of a fully interconnected produced water pipeline transportation and disposal system in Eddy and Lea Counties, New Mexico, and Loving County, Texas. As of the filing date of this Quarterly Report, we have not obtained all of the information to determine the preliminary purchase price allocation.
Term Credit Agreement
On July 2, 2019, we entered into the Term Credit Agreement with Toronto Dominion (Texas) LLC for a
$250.0 million
term loan facility. Toronto Dominion (Texas) LLC and certain of its affiliates are also lenders under our Credit Agreement. Proceeds from the term loan facility were used to fund a portion of the purchase price for the Mesquite acquisition discussed above (see
Note 8
).
Issuance of Class D Convertible Preferred Units
On the Closing Date, we entered into a Class D Preferred Unit and Warrant Purchase Agreement pursuant to which we agreed to issue, in a private placement,
$400.0 million
Class D Preferred Units and warrants exercisable to purchase an aggregate of
17,000,000
common units for net proceeds of
$385.0 million
(net of a closing fee of
$8.0 million
payable to affiliates of the purchasers and certain estimated expenses and expense reimbursements). Proceeds from this issuance were used to fund a portion of the purchase price for the Mesquite acquisition discussed above (see
Note 10
).
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Sale of TransMontaigne Product Services, LLC
On August 8, 2019, we announced that we signed a definitive agreement to sell TransMontaigne Product Services, LLC (“TPSL”) and associated assets to a strategic buyer with substantial assets for estimated proceeds of approximately
$300 million
, including equity consideration, inventory, net working capital and the monetization of certain derivative positions at closing, based on June 30, 2019 values and subject to actual values at closing. TPSL makes up a portion of our Refined Products and Renewables segment. The divested assets include (i) TPSL Terminaling Services Agreement with TransMontaigne Partners LP, including the exclusive rights to utilize
18
terminals; (ii) line space along Colonial and Plantation Pipelines; (iii)
two
wholly-owned refined products terminals in Georgia and multiple third-party throughput agreements; and (iv) all associated customer contracts, inventory and other working capital associated with the assets. Proceeds from this transaction will be used to reduce outstanding indebtedness under our Revolving Credit Facility. The transaction is subject to certain regulatory and other customary closing conditions and is expected to close during the second fiscal quarter.
The following table summarizes the major classes of assets and liabilities of this business at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
March 31, 2019
|
|
|
|
(in thousands)
|
|
ASSETS
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
Accounts receivable-trade, net
|
|
$
|
121,543
|
|
|
$
|
164,716
|
|
|
Inventories
|
|
212,111
|
|
|
210,373
|
|
|
Prepaid expenses and other current assets
|
|
15,704
|
|
|
12,361
|
|
|
Total current assets
|
|
349,358
|
|
|
387,450
|
|
|
Property, plant and equipment, net
|
|
15,185
|
|
|
15,553
|
|
|
Goodwill
|
|
32,712
|
|
|
32,712
|
|
|
Intangible assets, net
|
|
136,074
|
|
|
137,446
|
|
|
Operating lease right-of-use assets
|
|
308,117
|
|
|
—
|
|
|
Other noncurrent assets
|
|
46,871
|
|
|
46,147
|
|
|
Total assets
|
|
$
|
888,317
|
|
|
$
|
619,308
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
Accounts payable-trade
|
|
$
|
77,352
|
|
|
$
|
85,602
|
|
|
Accrued expenses and other payables
|
|
51,041
|
|
|
56,719
|
|
|
Advance payments received from customers
|
|
460
|
|
|
460
|
|
|
Operating lease obligations
|
|
7,526
|
|
|
—
|
|
|
Total current liabilities
|
|
136,379
|
|
|
142,781
|
|
|
Operating lease obligations (noncurrent)
|
|
300,591
|
|
|
—
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
436,970
|
|
|
$
|
142,781
|
|
Note 18—Unaudited Condensed Consolidating Guarantor and Non-Guarantor Financial Information
Certain of our wholly owned subsidiaries have, jointly and severally, fully and unconditionally guaranteed the Senior Unsecured Notes (see
Note 8
). Pursuant to Rule 3-10 of Regulation S-X, we have presented in columnar format the unaudited condensed consolidating financial information for NGL Energy Partners LP (Parent), NGL Energy Finance Corp., the guarantor subsidiaries on a combined basis, and the non-guarantor subsidiaries on a combined basis in the tables below. NGL Energy Partners LP and NGL Energy Finance Corp. are co-issuers of the Senior Unsecured Notes. Since NGL Energy Partners LP received the proceeds from the issuance of the Senior Unsecured Notes, all activity has been reflected in the NGL Energy Partners LP (Parent) column in the tables below.
During the periods presented in the tables below, the status of certain subsidiaries changed, in that they either became guarantors of or ceased to be guarantors of the Senior Unsecured Notes. For purposes of the tables below, when the status of a subsidiary changes, all subsidiary activity is included in either the guarantor subsidiaries column or non-guarantor subsidiaries column based on the status of the subsidiary at the balance sheet date regardless of activity during the year.
There are no significant restrictions that prevent the parent or any of the guarantor subsidiaries from obtaining funds from their respective subsidiaries by dividend or loan. None of the assets of the guarantor subsidiaries (other than the investments in non-guarantor subsidiaries) are restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
For purposes of the tables below, (i) the unaudited condensed consolidating financial information is presented on a legal entity basis, (ii) investments in consolidated subsidiaries are accounted for as equity method investments, and (iii) contributions, distributions, and advances to (from) consolidated entities are reported on a net basis within net changes in advances with consolidated entities in the unaudited condensed consolidating statement of cash flow tables below.
As discussed further in
Note 1
and
Note 16
, the results of operations and cash flows related to our former Retail Propane segment (including equity in earnings of Victory Propane) have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unaudited Condensed Consolidating Balance Sheet
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,256
|
|
|
$
|
—
|
|
|
$
|
59
|
|
|
$
|
7,186
|
|
|
$
|
—
|
|
|
$
|
27,501
|
|
|
Accounts receivable-trade, net of allowance for doubtful accounts
|
|
—
|
|
|
—
|
|
|
905,218
|
|
|
6,764
|
|
|
—
|
|
|
911,982
|
|
|
Accounts receivable-affiliates
|
|
—
|
|
|
—
|
|
|
11,503
|
|
|
4
|
|
|
—
|
|
|
11,507
|
|
|
Inventories
|
|
—
|
|
|
—
|
|
|
518,550
|
|
|
1,053
|
|
|
—
|
|
|
519,603
|
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
—
|
|
|
177,386
|
|
|
1,309
|
|
|
—
|
|
|
178,695
|
|
|
Total current assets
|
|
20,256
|
|
|
—
|
|
|
1,612,716
|
|
|
16,316
|
|
|
—
|
|
|
1,649,288
|
|
|
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation
|
|
—
|
|
|
—
|
|
|
1,774,413
|
|
|
241,105
|
|
|
—
|
|
|
2,015,518
|
|
|
GOODWILL
|
|
—
|
|
|
—
|
|
|
1,147,854
|
|
|
5,175
|
|
|
—
|
|
|
1,153,029
|
|
|
INTANGIBLE ASSETS, net of accumulated amortization
|
|
—
|
|
|
—
|
|
|
857,711
|
|
|
73,998
|
|
|
—
|
|
|
931,709
|
|
|
INVESTMENTS IN UNCONSOLIDATED ENTITIES
|
|
—
|
|
|
—
|
|
|
1,585
|
|
|
—
|
|
|
—
|
|
|
1,585
|
|
|
NET INTERCOMPANY RECEIVABLES (PAYABLES)
|
|
988,222
|
|
|
—
|
|
|
(888,074
|
)
|
|
(100,148
|
)
|
|
—
|
|
|
—
|
|
|
INVESTMENTS IN CONSOLIDATED SUBSIDIARIES
|
|
2,539,474
|
|
|
—
|
|
|
155,793
|
|
|
—
|
|
|
(2,695,267
|
)
|
|
—
|
|
|
OPERATING LEASE RIGHT-OF-USE ASSETS
|
|
—
|
|
|
—
|
|
|
514,512
|
|
|
3,523
|
|
|
—
|
|
|
518,035
|
|
|
OTHER NONCURRENT ASSETS
|
|
—
|
|
|
—
|
|
|
125,556
|
|
|
185
|
|
|
—
|
|
|
125,741
|
|
|
Total assets
|
|
$
|
3,547,952
|
|
|
$
|
—
|
|
|
$
|
5,302,066
|
|
|
$
|
240,154
|
|
|
$
|
(2,695,267
|
)
|
|
$
|
6,394,905
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable-trade
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
804,043
|
|
|
$
|
10,098
|
|
|
$
|
—
|
|
|
$
|
814,141
|
|
|
Accounts payable-affiliates
|
|
1
|
|
|
—
|
|
|
23,070
|
|
|
—
|
|
|
—
|
|
|
23,071
|
|
|
Accrued expenses and other payables
|
|
28,733
|
|
|
—
|
|
|
183,575
|
|
|
1,935
|
|
|
—
|
|
|
214,243
|
|
|
Advance payments received from customers
|
|
—
|
|
|
—
|
|
|
20,602
|
|
|
7,711
|
|
|
—
|
|
|
28,313
|
|
|
Current maturities of long-term debt
|
|
—
|
|
|
—
|
|
|
649
|
|
|
—
|
|
|
—
|
|
|
649
|
|
|
Operating lease obligations
|
|
—
|
|
|
—
|
|
|
76,759
|
|
|
262
|
|
|
—
|
|
|
77,021
|
|
|
Total current liabilities
|
|
28,734
|
|
|
—
|
|
|
1,108,698
|
|
|
20,006
|
|
|
—
|
|
|
1,157,438
|
|
|
LONG-TERM DEBT, net of debt issuance costs and current maturities
|
|
1,427,433
|
|
|
—
|
|
|
1,159,521
|
|
|
—
|
|
|
—
|
|
|
2,586,954
|
|
|
OPERATING LEASE OBLIGATIONS
|
|
—
|
|
|
—
|
|
|
435,943
|
|
|
3,140
|
|
|
—
|
|
|
439,083
|
|
|
OTHER NONCURRENT LIABILITIES
|
|
—
|
|
|
—
|
|
|
58,430
|
|
|
2,735
|
|
|
—
|
|
|
61,165
|
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ equity
|
|
2,091,785
|
|
|
—
|
|
|
2,539,474
|
|
|
214,491
|
|
|
(2,753,747
|
)
|
|
2,092,003
|
|
|
Accumulated other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(218
|
)
|
|
—
|
|
|
(218
|
)
|
|
Noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58,480
|
|
|
58,480
|
|
|
Total equity
|
|
2,091,785
|
|
|
—
|
|
|
2,539,474
|
|
|
214,273
|
|
|
(2,695,267
|
)
|
|
2,150,265
|
|
|
Total liabilities and equity
|
|
$
|
3,547,952
|
|
|
$
|
—
|
|
|
$
|
5,302,066
|
|
|
$
|
240,154
|
|
|
$
|
(2,695,267
|
)
|
|
$
|
6,394,905
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unaudited Condensed Consolidating Balance Sheet
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
12,798
|
|
|
$
|
—
|
|
|
$
|
3,728
|
|
|
$
|
2,046
|
|
|
$
|
—
|
|
|
$
|
18,572
|
|
|
Accounts receivable-trade, net of allowance for doubtful accounts
|
|
—
|
|
|
—
|
|
|
1,160,908
|
|
|
2,011
|
|
|
—
|
|
|
1,162,919
|
|
|
Accounts receivable-affiliates
|
|
—
|
|
|
—
|
|
|
12,867
|
|
|
—
|
|
|
—
|
|
|
12,867
|
|
|
Inventories
|
|
—
|
|
|
—
|
|
|
462,109
|
|
|
1,034
|
|
|
—
|
|
|
463,143
|
|
|
Prepaid expenses and other current assets
|
|
—
|
|
|
—
|
|
|
154,697
|
|
|
475
|
|
|
—
|
|
|
155,172
|
|
|
Total current assets
|
|
12,798
|
|
|
—
|
|
|
1,794,309
|
|
|
5,566
|
|
|
—
|
|
|
1,812,673
|
|
|
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation
|
|
—
|
|
|
—
|
|
|
1,635,637
|
|
|
208,856
|
|
|
—
|
|
|
1,844,493
|
|
|
GOODWILL
|
|
—
|
|
|
—
|
|
|
1,140,686
|
|
|
5,175
|
|
|
—
|
|
|
1,145,861
|
|
|
INTANGIBLE ASSETS, net of accumulated amortization
|
|
—
|
|
|
—
|
|
|
862,988
|
|
|
75,347
|
|
|
—
|
|
|
938,335
|
|
|
INVESTMENTS IN UNCONSOLIDATED ENTITIES
|
|
—
|
|
|
—
|
|
|
1,127
|
|
|
—
|
|
|
—
|
|
|
1,127
|
|
|
NET INTERCOMPANY RECEIVABLES (PAYABLES)
|
|
862,186
|
|
|
—
|
|
|
(808,610
|
)
|
|
(53,576
|
)
|
|
—
|
|
|
—
|
|
|
INVESTMENTS IN CONSOLIDATED SUBSIDIARIES
|
|
2,503,848
|
|
|
—
|
|
|
170,690
|
|
|
—
|
|
|
(2,674,538
|
)
|
|
—
|
|
|
OTHER NONCURRENT ASSETS
|
|
—
|
|
|
—
|
|
|
160,004
|
|
|
—
|
|
|
—
|
|
|
160,004
|
|
|
Total assets
|
|
$
|
3,378,832
|
|
|
$
|
—
|
|
|
$
|
4,956,831
|
|
|
$
|
241,368
|
|
|
$
|
(2,674,538
|
)
|
|
$
|
5,902,493
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable-trade
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
957,724
|
|
|
$
|
6,941
|
|
|
$
|
—
|
|
|
$
|
964,665
|
|
|
Accounts payable-affiliates
|
|
1
|
|
|
—
|
|
|
28,468
|
|
|
—
|
|
|
—
|
|
|
28,469
|
|
|
Accrued expenses and other payables
|
|
25,497
|
|
|
—
|
|
|
221,456
|
|
|
1,497
|
|
|
—
|
|
|
248,450
|
|
|
Advance payments received from customers
|
|
—
|
|
|
—
|
|
|
8,010
|
|
|
911
|
|
|
—
|
|
|
8,921
|
|
|
Current maturities of long-term debt
|
|
—
|
|
|
—
|
|
|
648
|
|
|
—
|
|
|
—
|
|
|
648
|
|
|
Total current liabilities
|
|
25,498
|
|
|
—
|
|
|
1,216,306
|
|
|
9,349
|
|
|
—
|
|
|
1,251,153
|
|
|
LONG-TERM DEBT, net of debt issuance costs and current maturities
|
|
984,450
|
|
|
—
|
|
|
1,175,683
|
|
|
—
|
|
|
—
|
|
|
2,160,133
|
|
|
OTHER NONCURRENT LIABILITIES
|
|
—
|
|
|
—
|
|
|
60,994
|
|
|
2,581
|
|
|
—
|
|
|
63,575
|
|
|
CLASS A 10.75% CONVERTIBLE PREFERRED UNITS
|
|
149,814
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149,814
|
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ equity
|
|
2,219,070
|
|
|
—
|
|
|
2,503,848
|
|
|
229,693
|
|
|
(2,733,286
|
)
|
|
2,219,325
|
|
|
Accumulated other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(255
|
)
|
|
—
|
|
|
(255
|
)
|
|
Noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58,748
|
|
|
58,748
|
|
|
Total equity
|
|
2,219,070
|
|
|
—
|
|
|
2,503,848
|
|
|
229,438
|
|
|
(2,674,538
|
)
|
|
2,277,818
|
|
|
Total liabilities and equity
|
|
$
|
3,378,832
|
|
|
$
|
—
|
|
|
$
|
4,956,831
|
|
|
$
|
241,368
|
|
|
$
|
(2,674,538
|
)
|
|
$
|
5,902,493
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unaudited Condensed Consolidating Statement of Operations
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,624,362
|
|
|
$
|
15,005
|
|
|
$
|
(1,476
|
)
|
|
$
|
6,637,891
|
|
|
COST OF SALES
|
|
—
|
|
|
—
|
|
|
6,454,701
|
|
|
(8
|
)
|
|
(1,226
|
)
|
|
6,453,467
|
|
|
OPERATING COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
—
|
|
|
—
|
|
|
59,932
|
|
|
4,585
|
|
|
(250
|
)
|
|
64,267
|
|
|
General and administrative
|
|
—
|
|
|
—
|
|
|
20,153
|
|
|
210
|
|
|
—
|
|
|
20,363
|
|
|
Depreciation and amortization
|
|
—
|
|
|
—
|
|
|
51,318
|
|
|
2,890
|
|
|
—
|
|
|
54,208
|
|
|
Gain on disposal or impairment of assets, net
|
|
—
|
|
|
—
|
|
|
(967
|
)
|
|
—
|
|
|
—
|
|
|
(967
|
)
|
|
Operating Income
|
|
—
|
|
|
—
|
|
|
39,225
|
|
|
7,328
|
|
|
—
|
|
|
46,553
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated entities
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
Interest expense
|
|
(25,789
|
)
|
|
—
|
|
|
(14,119
|
)
|
|
(11
|
)
|
|
11
|
|
|
(39,908
|
)
|
|
Other income, net
|
|
—
|
|
|
—
|
|
|
1,078
|
|
|
8
|
|
|
(11
|
)
|
|
1,075
|
|
|
(Loss) Income From Continuing Operations Before Income Taxes
|
|
(25,789
|
)
|
|
—
|
|
|
26,192
|
|
|
7,325
|
|
|
—
|
|
|
7,728
|
|
|
INCOME TAX BENEFIT
|
|
—
|
|
|
—
|
|
|
311
|
|
|
—
|
|
|
—
|
|
|
311
|
|
|
EQUITY IN NET INCOME FROM CONTINUING OPERATIONS OF CONSOLIDATED SUBSIDIARIES
|
|
34,096
|
|
|
—
|
|
|
7,593
|
|
|
—
|
|
|
(41,689
|
)
|
|
—
|
|
|
Net Income
|
|
8,307
|
|
|
—
|
|
|
34,096
|
|
|
7,325
|
|
|
(41,689
|
)
|
|
8,039
|
|
|
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
|
|
|
|
|
|
|
|
|
|
268
|
|
|
268
|
|
|
NET INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
|
|
$
|
8,307
|
|
|
$
|
—
|
|
|
$
|
34,096
|
|
|
$
|
7,325
|
|
|
$
|
(41,421
|
)
|
|
$
|
8,307
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unaudited Condensed Consolidating Statement of Operations
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,840,539
|
|
|
$
|
4,693
|
|
|
$
|
(798
|
)
|
|
$
|
5,844,434
|
|
|
COST OF SALES
|
|
—
|
|
|
—
|
|
|
5,696,990
|
|
|
(36
|
)
|
|
(798
|
)
|
|
5,696,156
|
|
|
OPERATING COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
—
|
|
|
—
|
|
|
54,172
|
|
|
2,090
|
|
|
—
|
|
|
56,262
|
|
|
General and administrative
|
|
—
|
|
|
—
|
|
|
22,048
|
|
|
342
|
|
|
—
|
|
|
22,390
|
|
|
Depreciation and amortization
|
|
—
|
|
|
—
|
|
|
49,131
|
|
|
2,914
|
|
|
—
|
|
|
52,045
|
|
|
Loss on disposal or impairment of assets, net
|
|
—
|
|
|
—
|
|
|
101,335
|
|
|
—
|
|
|
—
|
|
|
101,335
|
|
|
Revaluation of liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
800
|
|
|
—
|
|
|
800
|
|
|
Operating Loss
|
|
—
|
|
|
—
|
|
|
(83,137
|
)
|
|
(1,417
|
)
|
|
—
|
|
|
(84,554
|
)
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated entities
|
|
—
|
|
|
—
|
|
|
219
|
|
|
—
|
|
|
—
|
|
|
219
|
|
|
Interest expense
|
|
(29,500
|
)
|
|
—
|
|
|
(16,767
|
)
|
|
(12
|
)
|
|
11
|
|
|
(46,268
|
)
|
|
Loss on early extinguishment of liabilities, net
|
|
(137
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(137
|
)
|
|
Other expense, net
|
|
—
|
|
|
—
|
|
|
(33,546
|
)
|
|
—
|
|
|
(196
|
)
|
|
(33,742
|
)
|
|
Loss From Continuing Operations Before Income Taxes
|
|
(29,637
|
)
|
|
—
|
|
|
(133,231
|
)
|
|
(1,429
|
)
|
|
(185
|
)
|
|
(164,482
|
)
|
|
INCOME TAX EXPENSE
|
|
—
|
|
|
—
|
|
|
(651
|
)
|
|
—
|
|
|
—
|
|
|
(651
|
)
|
|
EQUITY IN NET LOSS FROM CONTINUING OPERATIONS OF CONSOLIDATED SUBSIDIARIES
|
|
(138,909
|
)
|
|
—
|
|
|
(1,647
|
)
|
|
—
|
|
|
140,556
|
|
|
—
|
|
|
Loss From Continuing Operations
|
|
(168,546
|
)
|
|
—
|
|
|
(135,529
|
)
|
|
(1,429
|
)
|
|
140,371
|
|
|
(165,133
|
)
|
|
Loss From Discontinued Operations, Net of Tax
|
|
—
|
|
|
—
|
|
|
(3,380
|
)
|
|
(961
|
)
|
|
185
|
|
|
(4,156
|
)
|
|
Net Loss
|
|
(168,546
|
)
|
|
—
|
|
|
(138,909
|
)
|
|
(2,390
|
)
|
|
140,556
|
|
|
(169,289
|
)
|
|
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
|
|
|
|
|
|
|
|
|
|
345
|
|
|
345
|
|
|
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS
|
|
|
|
|
|
|
|
|
|
398
|
|
|
398
|
|
|
NET LOSS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
|
|
$
|
(168,546
|
)
|
|
$
|
—
|
|
|
$
|
(138,909
|
)
|
|
$
|
(2,390
|
)
|
|
$
|
141,299
|
|
|
$
|
(168,546
|
)
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unaudited Condensed Consolidating Statements of Comprehensive Income (Loss)
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
Net income
|
|
$
|
8,307
|
|
|
$
|
—
|
|
|
$
|
34,096
|
|
|
$
|
7,325
|
|
|
$
|
(41,689
|
)
|
|
$
|
8,039
|
|
|
Other comprehensive inco
me
|
|
—
|
|
|
—
|
|
|
17
|
|
|
20
|
|
|
—
|
|
|
37
|
|
|
Comprehensive income
|
|
$
|
8,307
|
|
|
$
|
—
|
|
|
$
|
34,113
|
|
|
$
|
7,345
|
|
|
$
|
(41,689
|
)
|
|
$
|
8,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
Net loss
|
|
$
|
(168,546
|
)
|
|
$
|
—
|
|
|
$
|
(138,909
|
)
|
|
$
|
(2,390
|
)
|
|
$
|
140,556
|
|
|
$
|
(169,289
|
)
|
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(10
|
)
|
|
—
|
|
|
(11
|
)
|
|
Comprehensive loss
|
|
$
|
(168,546
|
)
|
|
$
|
—
|
|
|
$
|
(138,910
|
)
|
|
$
|
(2,400
|
)
|
|
$
|
140,556
|
|
|
$
|
(169,300
|
)
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unaudited Condensed Consolidating Statement of Cash Flows
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidated
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(22,759
|
)
|
|
$
|
—
|
|
|
83,695
|
|
|
$
|
8,958
|
|
|
$
|
69,894
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
—
|
|
|
—
|
|
|
(127,378
|
)
|
|
(28,013
|
)
|
|
(155,391
|
)
|
|
Acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(54,548
|
)
|
|
—
|
|
|
(54,548
|
)
|
|
Net settlements of commodity derivatives
|
|
—
|
|
|
—
|
|
|
6,447
|
|
|
—
|
|
|
6,447
|
|
|
Proceeds from sales of assets
|
|
—
|
|
|
—
|
|
|
1,523
|
|
|
150
|
|
|
1,673
|
|
|
Investments in unconsolidated entities
|
|
—
|
|
|
—
|
|
|
(889
|
)
|
|
—
|
|
|
(889
|
)
|
|
Distributions of capital from unconsolidated entities
|
|
—
|
|
|
—
|
|
|
439
|
|
|
—
|
|
|
439
|
|
|
Repayments on loan for natural gas liquids facility
|
|
—
|
|
|
—
|
|
|
3,022
|
|
|
—
|
|
|
3,022
|
|
|
Net cash used in investing activities
|
|
—
|
|
|
—
|
|
|
(171,384
|
)
|
|
(27,863
|
)
|
|
(199,247
|
)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings under Revolving Credit Facility
|
|
—
|
|
|
—
|
|
|
1,139,000
|
|
|
—
|
|
|
1,139,000
|
|
|
Payments on Revolving Credit Facility
|
|
—
|
|
|
—
|
|
|
(1,155,000
|
)
|
|
—
|
|
|
(1,155,000
|
)
|
|
Issuance of senior unsecured notes
|
|
450,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
450,000
|
|
|
Payments on other long-term debt
|
|
—
|
|
|
—
|
|
|
(163
|
)
|
|
—
|
|
|
(163
|
)
|
|
Debt issuance costs
|
|
(7,865
|
)
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(7,873
|
)
|
|
Distributions to general and common unit partners and preferred unitholders
|
|
(62,288
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62,288
|
)
|
|
Proceeds from sale of preferred units, net of offering costs
|
|
42,638
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,638
|
|
|
Payments for redemption of preferred units
|
|
(265,128
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(265,128
|
)
|
|
Payments for settlement and early extinguishment of liabilities
|
|
—
|
|
|
—
|
|
|
(543
|
)
|
|
—
|
|
|
(543
|
)
|
|
Investment in NGL Energy Holdings LLC
|
|
(2,361
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,361
|
)
|
|
Net changes in advances with consolidated entities
|
|
(124,779
|
)
|
|
—
|
|
|
100,734
|
|
|
24,045
|
|
|
—
|
|
|
Net cash provided by financing activities
|
|
30,217
|
|
|
—
|
|
|
84,020
|
|
|
24,045
|
|
|
138,282
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
7,458
|
|
|
—
|
|
|
(3,669
|
)
|
|
5,140
|
|
|
8,929
|
|
|
Cash and cash equivalents, beginning of period
|
|
12,798
|
|
|
—
|
|
|
3,728
|
|
|
2,046
|
|
|
18,572
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
20,256
|
|
|
$
|
—
|
|
|
$
|
59
|
|
|
$
|
7,186
|
|
|
$
|
27,501
|
|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
Unaudited Condensed Consolidating Statement of Cash Flows
(in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
NGL Energy
Partners LP
(Parent)
|
|
NGL Energy
Finance Corp.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities-continuing operations
|
|
$
|
(50,211
|
)
|
|
$
|
—
|
|
|
$
|
(22,043
|
)
|
|
$
|
(747
|
)
|
|
$
|
(185
|
)
|
|
$
|
(73,186
|
)
|
|
Net cash provided by operating activities-discontinued operations
|
|
—
|
|
|
—
|
|
|
26,220
|
|
|
5,821
|
|
|
—
|
|
|
32,041
|
|
|
Net cash (used in) provided by operating activities
|
|
(50,211
|
)
|
|
—
|
|
|
4,177
|
|
|
5,074
|
|
|
(185
|
)
|
|
(41,145
|
)
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
—
|
|
|
—
|
|
|
(70,788
|
)
|
|
(1,922
|
)
|
|
—
|
|
|
(72,710
|
)
|
|
Acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(112,665
|
)
|
|
(3,927
|
)
|
|
—
|
|
|
(116,592
|
)
|
|
Net settlements of commodity derivatives
|
|
—
|
|
|
—
|
|
|
(60,861
|
)
|
|
—
|
|
|
—
|
|
|
(60,861
|
)
|
|
Proceeds from sales of assets
|
|
—
|
|
|
—
|
|
|
5,406
|
|
|
—
|
|
|
—
|
|
|
5,406
|
|
|
Proceeds from divestitures of businesses and investments, net
|
|
—
|
|
|
—
|
|
|
18,594
|
|
|
—
|
|
|
—
|
|
|
18,594
|
|
|
Investments in unconsolidated entities
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
Repayments on loan for natural gas liquids facility
|
|
—
|
|
|
—
|
|
|
2,707
|
|
|
—
|
|
|
—
|
|
|
2,707
|
|
|
Loan to affiliate
|
|
—
|
|
|
—
|
|
|
(1,050
|
)
|
|
—
|
|
|
—
|
|
|
(1,050
|
)
|
|
Net cash used in investing activities-continuing operations
|
|
—
|
|
|
—
|
|
|
(218,663
|
)
|
|
(5,849
|
)
|
|
—
|
|
|
(224,512
|
)
|
|
Net cash used in investing activities-discontinued operations
|
|
—
|
|
|
—
|
|
|
(19,061
|
)
|
|
(3,947
|
)
|
|
—
|
|
|
(23,008
|
)
|
|
Net cash used in investing activities
|
|
—
|
|
|
—
|
|
|
(237,724
|
)
|
|
(9,796
|
)
|
|
—
|
|
|
(247,520
|
)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings under Revolving Credit Facility
|
|
—
|
|
|
—
|
|
|
962,000
|
|
|
—
|
|
|
—
|
|
|
962,000
|
|
|
Payments on Revolving Credit Facility
|
|
—
|
|
|
—
|
|
|
(605,500
|
)
|
|
—
|
|
|
—
|
|
|
(605,500
|
)
|
|
Repurchase of senior secured and senior unsecured notes
|
|
(5,069
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,069
|
)
|
|
Payments on other long-term debt
|
|
—
|
|
|
—
|
|
|
(163
|
)
|
|
—
|
|
|
—
|
|
|
(163
|
)
|
|
Debt issuance costs
|
|
—
|
|
|
—
|
|
|
(771
|
)
|
|
—
|
|
|
—
|
|
|
(771
|
)
|
|
Contributions from noncontrolling interest owners, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|
—
|
|
|
169
|
|
|
Distributions to general and common unit partners and preferred unitholders
|
|
(53,905
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53,905
|
)
|
|
Repurchase of warrants
|
|
(14,988
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,988
|
)
|
|
Payments for settlement and early extinguishment of liabilities
|
|
—
|
|
|
—
|
|
|
(1,195
|
)
|
|
—
|
|
|
—
|
|
|
(1,195
|
)
|
|
Net changes in advances with consolidated entities
|
|
112,572
|
|
|
—
|
|
|
(122,539
|
)
|
|
9,782
|
|
|
185
|
|
|
—
|
|
|
Net cash provided by financing activities-continuing operations
|
|
38,610
|
|
|
—
|
|
|
231,832
|
|
|
9,951
|
|
|
185
|
|
|
280,578
|
|
|
Net cash used in financing activities-discontinued operations
|
|
—
|
|
|
—
|
|
|
(295
|
)
|
|
(30
|
)
|
|
—
|
|
|
(325
|
)
|
|
Net cash provided by financing activities
|
|
38,610
|
|
|
—
|
|
|
231,537
|
|
|
9,921
|
|
|
185
|
|
|
280,253
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
(11,601
|
)
|
|
—
|
|
|
(2,010
|
)
|
|
5,199
|
|
|
—
|
|
|
(8,412
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
16,915
|
|
|
—
|
|
|
3,329
|
|
|
1,850
|
|
|
—
|
|
|
22,094
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
5,314
|
|
|
$
|
—
|
|
|
$
|
1,319
|
|
|
$
|
7,049
|
|
|
$
|
—
|
|
|
$
|
13,682
|
|
Consolidated Results of Operations
The following table summarizes our unaudited condensed consolidated statements of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
|
Total revenues
|
$
|
6,637,891
|
|
|
$
|
5,844,434
|
|
|
Total cost of sales
|
6,453,467
|
|
|
5,696,156
|
|
|
Operating expenses
|
64,267
|
|
|
56,262
|
|
|
General and administrative expense
|
20,363
|
|
|
22,390
|
|
|
Depreciation and amortization
|
54,208
|
|
|
52,045
|
|
|
(Gain) loss on disposal or impairment of assets, net
|
(967
|
)
|
|
101,335
|
|
|
Revaluation of liabilities
|
—
|
|
|
800
|
|
|
Operating income (loss)
|
46,553
|
|
|
(84,554
|
)
|
|
Equity in earnings of unconsolidated entities
|
8
|
|
|
219
|
|
|
Interest expense
|
(39,908
|
)
|
|
(46,268
|
)
|
|
Loss on early extinguishment of liabilities, net
|
—
|
|
|
(137
|
)
|
|
Other income (expense), net
|
1,075
|
|
|
(33,742
|
)
|
|
Income (loss) from continuing operations before income taxes
|
7,728
|
|
|
(164,482
|
)
|
|
Income tax benefit (expense)
|
311
|
|
|
(651
|
)
|
|
Income (loss) from continuing operations
|
8,039
|
|
|
(165,133
|
)
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
(4,156
|
)
|
|
Net income (loss)
|
8,039
|
|
|
(169,289
|
)
|
|
Less: Net loss attributable to noncontrolling interests
|
268
|
|
|
345
|
|
|
Less: Net loss attributable to redeemable noncontrolling interests
|
—
|
|
|
398
|
|
|
Net income (loss) attributable to NGL Energy Partners LP
|
$
|
8,307
|
|
|
$
|
(168,546
|
)
|
Items Impacting the Comparability of Our Financial Results
Our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to business combinations, disposals and other transactions. Our results of operations for the three months ended
June 30, 2019
are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending
March 31, 2020
.
Recent Developments
Acquisitions
As discussed below, we completed numerous acquisitions during the fiscal year ended March 31, 2019 and the
three months ended
June 30, 2019
. These acquisitions impact the comparability of our results of operations between our current and prior fiscal years.
During the
three months ended
June 30, 2019
, in our Water Solutions segment, we acquired land and
one
saltwater disposal facility (including
five
saltwater disposal wells). See
Note 4
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.
During the fiscal year ended March 31, 2019, in our Water Solutions segment, we acquired the remaining 18.375% interest in NGL Water Pipelines, LLC, six saltwater disposal facilities (including 22 saltwater disposal wells), two ranches and four freshwater facilities (including 45 freshwater wells). In our Liquids segment, we acquired the natural gas liquids terminal business of DCP Midstream, LP and in our Refined Products and Renewables segment, we acquired two refined products terminals.
Dispositions
Sale of South Pecos Water Disposal Business
On February 28, 2019, we completed the sale of our South Pecos water disposal business to a subsidiary of WaterBridge Resources LLC for $232.2 million in net cash proceeds and recorded a gain on disposal of $107.9 million during the fiscal year ended March 31, 2019.
Sale of Bakken Saltwater Disposal Business
On November 30, 2018, we completed the sale of NGL Water Solutions Bakken, LLC to an affiliate of Tallgrass Energy, LP for $85.0 million in net cash proceeds and recorded a gain on disposal of $33.4 million during the fiscal year ended March 31, 2019.
Sale of Interest in E Energy Adams, LLC
On May 3, 2018, we completed the sale of our previously held 20% interest in E Energy Adams, LLC for
$18.6 million
in net cash proceeds and recorded a gain on disposal of $3.0 million during the fiscal year ended March 31, 2019.
Issuance of Senior Unsecured Notes
During the
three months ended
June 30, 2019
, we entered into the Note Purchase Agreement whereby we issued
$450.0 million
of the
7.50%
Senior Unsecured Notes Due 2026 (the “2026 Notes”) in a private placement. See
Note 8
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further description of these notes.
Issuance of Class C Preferred Units
During the
three months ended
June 30, 2019
, we issued
1,800,000
of our
9.625%
Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) representing limited partner interests at a price of
$25.00
per unit for net proceeds of
$42.6 million
. See
Note 10
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further description of the Class C Preferred Units.
Redemption of Class A Preferred Units
On April 5, 2019, we redeemed 7,468,978 of the 10.75% Class A Convertible Preferred Units (“Class A Preferred Units”) for a total payment of $102.5 million. On April 5, 2019, all 1,458,371 outstanding warrants to purchase common units were exercised for proceeds of less than $0.1 million.
On May 11, 2019, we redeemed the remaining 12,473,191 outstanding Class A Preferred Units for a total payment of $166.9 million. See
Note 10
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further description of the redemption of the Class A Preferred Units.
Subsequent Events
See
Note 17
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of transactions that occurred subsequent to
June 30, 2019
.
Segment Operating Results for the
Three Months Ended June 30, 2019
and
2018
Crude Oil Logistics
The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
|
|
(in thousands, except per barrel amounts)
|
|
Revenues:
|
|
|
|
|
|
|
|
Crude oil sales
|
|
$
|
682,069
|
|
|
$
|
756,511
|
|
|
$
|
(74,442
|
)
|
|
Crude oil transportation and other
|
|
43,618
|
|
|
31,844
|
|
|
11,774
|
|
|
Total revenues (1)
|
|
725,687
|
|
|
788,355
|
|
|
(62,668
|
)
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost of sales-excluding impact of derivatives
|
|
662,038
|
|
|
741,510
|
|
|
(79,472
|
)
|
|
Cost of sales-derivative (gain) loss
|
|
(3,271
|
)
|
|
11,258
|
|
|
(14,529
|
)
|
|
Operating expenses
|
|
14,378
|
|
|
12,595
|
|
|
1,783
|
|
|
General and administrative expenses
|
|
1,771
|
|
|
1,607
|
|
|
164
|
|
|
Depreciation and amortization expense
|
|
17,585
|
|
|
19,229
|
|
|
(1,644
|
)
|
|
(Gain) loss on disposal or impairment of assets, net
|
|
(616
|
)
|
|
101,894
|
|
|
(102,510
|
)
|
|
Total expenses
|
|
691,885
|
|
|
888,093
|
|
|
(196,208
|
)
|
|
Segment operating income (loss)
|
|
$
|
33,802
|
|
|
$
|
(99,738
|
)
|
|
$
|
133,540
|
|
|
|
|
|
|
|
|
|
|
Crude oil sold (barrels)
|
|
11,291
|
|
|
11,225
|
|
|
66
|
|
|
Crude oil transported on owned pipelines (barrels)
|
|
11,789
|
|
|
9,987
|
|
|
1,802
|
|
|
Crude oil storage capacity - owned and leased (barrels) (2)
|
|
5,232
|
|
|
6,371
|
|
|
(1,139
|
)
|
|
Crude oil storage capacity leased to third parties (barrels) (2)
|
|
2,563
|
|
|
2,564
|
|
|
(1
|
)
|
|
Crude oil inventory (barrels) (2)
|
|
1,125
|
|
|
1,164
|
|
|
(39
|
)
|
|
Crude oil sold ($/barrel)
|
|
$
|
60.408
|
|
|
$
|
67.395
|
|
|
$
|
(6.987
|
)
|
|
Cost per crude oil sold ($/barrel)
|
|
$
|
58.344
|
|
|
$
|
67.062
|
|
|
$
|
(8.718
|
)
|
|
Crude oil product margin ($/barrel)
|
|
$
|
2.064
|
|
|
$
|
0.333
|
|
|
$
|
1.731
|
|
|
|
|
|
(1)
|
Revenues include
$9.5 million
and
$4.5 million
of intersegment sales during the
three months ended
June 30, 2019
and
2018
, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
|
|
|
|
|
(2)
|
Information is presented as of
June 30, 2019
and
June 30, 2018
, respectively.
|
Crude Oil Sales Revenues.
The
decrease
was due primarily to
a decrease in crude oil prices during the
three months ended
June 30, 2019
,
compared to the
three months ended
June 30, 2018
. The increase in production volumes for us to market has not slowed down even though crude oil prices are declining.
We continue to market crude oil volumes in the majority of the basins across the United States to support our various pipeline, terminal and transportation assets.
Crude Oil Transportation and Other Revenues.
The
increase
was primarily due to a new crude marketing agreement that was effective as of July 2018. The revenue generated by this agreement was $7.6 million for the
three months ended
June 30, 2019
. The increase
was also due to our Grand Mesa Pipeline, which
increased
revenues by
$3.0 million
during the
three months ended
June 30, 2019
, compared to the
three months ended
June 30, 2018
,
primarily due to increased production growth in the DJ Basin.
During the
three months ended
June 30, 2019
, financial volumes
on the Grand Mesa Pipeline averaged approximately
133,000
barrels per day
(volume amounts are from both internal and external parties).
Cost of Sales-Excluding Impact of Derivatives.
The
decrease
was due primarily to
a decrease
in crude oil prices during the
three months ended
June 30, 2019
,
compared to the
three months ended
June 30, 2018
.
Cost of Sales-Derivatives.
Our cost of sales during the
three months ended
June 30, 2019
included
$1.4 million
of
net realized gains
on derivatives and
$1.9 million
of
net unrealized gains
on derivatives. The gains were due to the significant
decline in crude oil prices during the quarter.
Our cost of sales during the
three months ended
June 30, 2018
included
$3.8 million
of
net realized losses
on derivatives and
$7.4 million
of
net unrealized losses
on derivatives.
Operating and General and Administrative Expenses
.
The
increase
was due to utilities related to the higher volumes on Grand Mesa.
Depreciation and Amortization Expense.
The
decrease
was due primarily to downsizing our fleet of crude transportation and marine assets, which decreased depreciation and amortization expense by $1.1 million during the
three months ended
June 30, 2019
, compared to the
three months ended
June 30, 2018
. The decrease was also due to certain intangible assets being fully amortized in prior periods.
(Gain) Loss on Disposal or Impairment of Assets, Net
. During the
three months ended
June 30, 2019
, we recorded
a net gain
of
$0.6 million
related to the disposal of certain assets. During the
three months ended
June 30, 2018
, we recorded a loss of
$105.0 million
on our transaction with a third party in which they agreed to be fully responsible for our future minimum volume commitment in exchange for $67.7 million of deficiency credits on a contract with a crude oil pipeline operator and $35.3 million in cash. The loss also includes additional costs of $2.0 million related to this transaction. The loss was offset by a gain of $3.1 million due primarily to the sale of a crude oil terminal and the receipt of additional proceeds from the sale of our 50% interest in Glass Mountain Pipeline, LLC.
Water Solutions
The following table summarizes the operating results of our Water Solutions segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
|
|
(in thousands, except per barrel and per day amounts)
|
|
Revenues:
|
|
|
|
|
|
|
|
Wastewater disposal service fees
|
|
$
|
45,927
|
|
|
$
|
48,003
|
|
|
$
|
(2,076
|
)
|
|
Sale of recovered hydrocarbons
|
|
14,335
|
|
|
20,227
|
|
|
(5,892
|
)
|
|
Other service revenues
|
|
11,521
|
|
|
7,915
|
|
|
3,606
|
|
|
Total revenues
|
|
71,783
|
|
|
76,145
|
|
|
(4,362
|
)
|
|
Expenses:
|
|
|
|
|
|
|
|
Cost of sales-excluding impact of derivatives
|
|
248
|
|
|
589
|
|
|
(341
|
)
|
|
Cost of sales-derivative (gain) loss
|
|
(3,055
|
)
|
|
13,680
|
|
|
(16,735
|
)
|
|
Operating expenses
|
|
32,456
|
|
|
31,524
|
|
|
932
|
|
|
General and administrative expenses
|
|
963
|
|
|
799
|
|
|
164
|
|
|
Depreciation and amortization expense
|
|
28,071
|
|
|
25,309
|
|
|
2,762
|
|
|
(Gain) loss on disposal or impairment of assets, net
|
|
(589
|
)
|
|
2,475
|
|
|
(3,064
|
)
|
|
Revaluation of liabilities
|
|
—
|
|
|
800
|
|
|
(800
|
)
|
|
Total expenses
|
|
58,094
|
|
|
75,176
|
|
|
(17,082
|
)
|
|
Segment operating income
|
|
$
|
13,689
|
|
|
$
|
969
|
|
|
$
|
12,720
|
|
|
|
|
|
|
|
|
|
|
Wastewater processed (barrels per day)
|
|
|
|
|
|
|
|
Permian Basin
|
|
399,629
|
|
|
421,535
|
|
|
(21,906
|
)
|
|
Eagle Ford Basin
|
|
267,244
|
|
|
279,184
|
|
|
(11,940
|
)
|
|
DJ Basin
|
|
169,620
|
|
|
136,115
|
|
|
33,505
|
|
|
Other Basins
|
|
12,394
|
|
|
83,038
|
|
|
(70,644
|
)
|
|
Total
|
|
848,887
|
|
|
919,872
|
|
|
(70,985
|
)
|
|
Solids processed (barrels per day)
|
|
5,442
|
|
|
5,899
|
|
|
(457
|
)
|
|
Skim oil sold (barrels per day)
|
|
2,860
|
|
|
3,615
|
|
|
(755
|
)
|
|
Service fees for wastewater processed ($/barrel)
|
|
$
|
0.59
|
|
|
$
|
0.57
|
|
|
$
|
0.02
|
|
|
Recovered hydrocarbons for wastewater processed ($/barrel)
|
|
$
|
0.19
|
|
|
$
|
0.24
|
|
|
$
|
(0.05
|
)
|
|
Operating expenses for wastewater processed ($/barrel)
|
|
$
|
0.42
|
|
|
$
|
0.38
|
|
|
$
|
0.04
|
|
Wastewater Disposal Service Fee Revenues.
The
decrease
was due primarily to
a decrease
in the volume of wastewater processed as a result of the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019, partially offset by wastewater processed at facilities acquired from acquisitions and newly developed facilities.
Recovered Hydrocarbon Revenues.
The
decrease
was due primarily to
a decrease
in the volume of wastewater processed as a result of the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019 and lower crude oil prices, partially offset by wastewater processed at facilities acquired from acquisitions and newly developed facilities. These revenues were negatively impacted by a lower percentage of skim oil volumes recovered per wastewater barrel processed
.
This lower percentage was due primarily to an increase in wastewater transported through pipelines (which contains less oil per barrel of wastewater), as well as operational changes in the DJ Basin.
Other Service Revenues.
Other service revenues primarily include solids disposal revenues, water pipeline revenues, land surface use revenues and freshwater revenues. The
increase
was due primarily to an increase in land surface use revenues in our New Mexico operations which began during the
three months ended
September 30, 2018 as well as freshwater revenues due to increased volumes and acquisitions.
Cost of Sales-Excluding Impact of Derivatives
.
The
decrease
was due primarily to operational changes in the DJ basin during the
three months ended
June 30, 2019
.
Cost of Sales-Derivatives
.
We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the hydrocarbons we expect to recover when processing the wastewater and selling the skim oil.
Our cost of sales during the
three months ended
June 30, 2019
included
$0.2 million
of
net unrealized gains
on derivatives and
$2.9 million
of
net realized gains
on derivatives.
In June 2019, we settled derivative contracts that had scheduled settlement dates from April through December 2020 and recorded a gain of $1.9 million on those derivatives.
Our cost of sales during the
three months ended
June 30, 2018
included
$4.6 million
of
net realized losses
on derivatives and
$9.1 million
of
net unrealized losses
on derivatives.
Operating and General and Administrative Expenses
.
The
increase
was due primarily to
the increase in the number of water disposal facilities and wells that we own and operate, both through acquisitions and development of new facilities, partially offset by the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019
.
Depreciation and Amortization Expense
.
The
increase
was due primarily to acquisitions and newly developed facilities, partially offset by
the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019
.
(Gain) Loss on Disposal or Impairment of Assets, Net
.
During the
three months ended
June 30, 2019
, we recorded a gain of
$1.0 million
for cash received related to a previous loan receivable. In addition, during the
three months ended
June 30, 2019
, we recorded
a net loss
of
$0.4 million
on the disposals of certain assets. During the
three months ended
June 30, 2018
, we recorded
a net loss
of
$2.5 million
on the disposals of certain assets.
Liquids
The following table summarizes the operating results of our Liquids segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
|
|
(in thousands, except per gallon amounts)
|
|
Propane sales:
|
|
|
|
|
|
|
|
Revenues (1)
|
|
$
|
140,159
|
|
|
$
|
188,391
|
|
|
$
|
(48,232
|
)
|
|
Cost of sales-excluding impact of derivatives
|
|
135,199
|
|
|
180,545
|
|
|
(45,346
|
)
|
|
Cost of sales-derivative loss
|
|
2,810
|
|
|
352
|
|
|
2,458
|
|
|
Product margin
|
|
2,150
|
|
|
7,494
|
|
|
(5,344
|
)
|
|
|
|
|
|
|
|
|
|
Butane sales:
|
|
|
|
|
|
|
|
|
|
Revenues (1)
|
|
82,312
|
|
|
114,223
|
|
|
(31,911
|
)
|
|
Cost of sales-excluding impact of derivatives
|
|
75,541
|
|
|
111,443
|
|
|
(35,902
|
)
|
|
Cost of sales-derivative (gain) loss
|
|
(6,105
|
)
|
|
2,566
|
|
|
(8,671
|
)
|
|
Product margin
|
|
12,876
|
|
|
214
|
|
|
12,662
|
|
|
|
|
|
|
|
|
|
|
|
Other product sales:
|
|
|
|
|
|
|
|
Revenues (1)
|
|
115,816
|
|
|
153,318
|
|
|
(37,502
|
)
|
|
Cost of sales-excluding impact of derivatives
|
|
106,956
|
|
|
147,679
|
|
|
(40,723
|
)
|
|
Cost of sales-derivative loss (gain)
|
|
157
|
|
|
(1,070
|
)
|
|
1,227
|
|
|
Product margin
|
|
8,703
|
|
|
6,709
|
|
|
1,994
|
|
|
|
|
|
|
|
|
|
|
Service revenues:
|
|
|
|
|
|
|
|
Revenues (1)
|
|
10,549
|
|
|
5,630
|
|
|
4,919
|
|
|
Cost of sales
|
|
3,983
|
|
|
665
|
|
|
3,318
|
|
|
Product margin
|
|
6,566
|
|
|
4,965
|
|
|
1,601
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating expenses
|
|
13,098
|
|
|
8,827
|
|
|
4,271
|
|
|
General and administrative expenses
|
|
1,487
|
|
|
1,474
|
|
|
13
|
|
|
Depreciation and amortization expense
|
|
7,229
|
|
|
6,468
|
|
|
761
|
|
|
Gain on disposal or impairment of assets, net
|
|
(3
|
)
|
|
(10
|
)
|
|
7
|
|
|
Total expenses
|
|
21,811
|
|
|
16,759
|
|
|
5,052
|
|
|
Segment operating income
|
|
$
|
8,484
|
|
|
$
|
2,623
|
|
|
$
|
5,861
|
|
|
|
|
|
|
|
|
|
|
Liquids storage capacity - owned and leased (gallons) (2)
|
|
397,343
|
|
|
438,968
|
|
|
(41,625
|
)
|
|
|
|
|
|
|
|
|
|
Propane sold (gallons)
|
|
245,267
|
|
|
233,786
|
|
|
11,481
|
|
|
Propane sold ($/gallon)
|
|
$
|
0.571
|
|
|
$
|
0.806
|
|
|
$
|
(0.235
|
)
|
|
Cost per propane sold ($/gallon)
|
|
$
|
0.563
|
|
|
$
|
0.774
|
|
|
$
|
(0.211
|
)
|
|
Propane product margin ($/gallon)
|
|
$
|
0.008
|
|
|
$
|
0.032
|
|
|
$
|
(0.024
|
)
|
|
Propane inventory (gallons) (2)
|
|
76,012
|
|
|
62,816
|
|
|
13,196
|
|
|
Propane storage capacity leased to third parties (gallons) (2)
|
|
45,436
|
|
|
29,662
|
|
|
15,774
|
|
|
|
|
|
|
|
|
|
|
Butane sold (gallons)
|
|
142,479
|
|
|
113,025
|
|
|
29,454
|
|
|
Butane sold ($/gallon)
|
|
$
|
0.578
|
|
|
$
|
1.011
|
|
|
$
|
(0.433
|
)
|
|
Cost per butane sold ($/gallon)
|
|
$
|
0.487
|
|
|
$
|
1.009
|
|
|
$
|
(0.522
|
)
|
|
Butane product margin ($/gallon)
|
|
$
|
0.091
|
|
|
$
|
0.002
|
|
|
$
|
0.089
|
|
|
Butane inventory (gallons) (2)
|
|
53,219
|
|
|
54,577
|
|
|
(1,358
|
)
|
|
Butane storage capacity leased to third parties (gallons) (2)
|
|
33,894
|
|
|
51,660
|
|
|
(17,766
|
)
|
|
|
|
|
|
|
|
|
|
Other products sold (gallons)
|
|
119,258
|
|
|
116,985
|
|
|
2,273
|
|
|
Other products sold ($/gallon)
|
|
$
|
0.971
|
|
|
$
|
1.311
|
|
|
$
|
(0.340
|
)
|
|
Cost per other products sold ($/gallon)
|
|
$
|
0.898
|
|
|
$
|
1.253
|
|
|
$
|
(0.355
|
)
|
|
Other products product margin ($/gallon)
|
|
$
|
0.073
|
|
|
$
|
0.058
|
|
|
$
|
0.015
|
|
|
Other products inventory (gallons) (2)
|
|
8,363
|
|
|
6,357
|
|
|
2,006
|
|
|
|
|
|
(1)
|
Revenues include
$1.2 million
and
$1.7 million
of intersegment sales during the
three months ended
June 30, 2019
and
2018
, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
|
|
|
|
|
(2)
|
Information is presented as of
June 30, 2019
and
June 30, 2018
, respectively.
|
Propane Sales and Cost of Sales-Excluding Impact of Derivatives.
The
decrease
s in revenues and cost of sales excluding the impact of derivatives, were due primarily to lower commodity prices, partially offset by increased volumes.
Cost of Sales-Derivatives.
Our cost of wholesale propane sales included $3.2 million of net unrealized losses on derivatives and $0.4 million of net realized gains on derivatives during the
three months ended
June 30, 2019
. During the
three months ended
June 30, 2018
, our cost of wholesale propane sales included $0.3 million of net unrealized losses on derivatives and less than $0.1 million of net realized losses on derivatives.
Propane product margins, excluding the impact of derivatives, decreased due to decreasing commodity prices over the quarter.
Butane Sales and Cost of Sales-Excluding Impact of Derivatives.
The
decrease
s in revenues and cost of sales, excluding the impact of derivatives, were due to lower commodity prices, partially offset by
increased
volumes.
Cost of Sales-Derivatives.
Our cost of butane sales during the
three months ended
June 30, 2019
included $4.8 million of net unrealized gains on derivatives and $1.3 million of net realized gains on derivatives. Our cost of butane sales included $2.5 million of net unrealized losses on derivatives and $0.1 million of net realized losses on derivatives during the
three months ended
June 30, 2018
.
Butane product margins, excluding the impact of derivatives, increased versus the prior year quarter in large part due to increased volumes and margins on volumes sold into the export market.
Other Products Sales and Cost of Sales-Excluding Impact of Derivatives.
The decreases in revenues and cost of sales, excluding the impact of derivatives, were due to lower commodity prices, partially offset by increased volumes in our Y-grade business streams.
Cost of Sales-Derivatives.
Our cost of sales of other products included $0.2 million of net realized losses on derivatives and less than $0.1 million of net unrealized gains on derivatives during the
three months ended
June 30, 2019
. Our cost of sales of other products during the
three months ended
June 30, 2018
included $0.6 million of net unrealized gains on derivatives and $0.5 million of net realized gains on derivatives.
Other product sales product margins during the
three months ended
June 30, 2019
were impacted by decreasing commodity prices.
Service Revenues.
This revenue includes storage, terminaling and transportation services income. Revenue for the current quarter increased due to transportation costs associated with increased transloading and Y-grade volumes, as well as the addition of the new terminals in the northeast from the March 2019 acquisition.
Operating and General and Administrative Expenses.
Expenses for the current quarter were
higher
primarily due to the addition of the new terminals in the northeast from the March 2019 acquisition.
Depreciation and Amortization Expense.
Expense for the current quarter was higher due to the addition of the new terminals in the northeast from the March 2019 acquisition.
Gain on Disposal or Impairment of Assets, Net
.
During the
three months ended
June 30, 2019
and
June 30, 2018
, we recorded a gain of
less than $0.1 million
related to the sale of assets.
Refined Products
and Renewables
The following table summarizes the operating results of our Refined Products and Renewables segment for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
|
|
(in thousands, except per barrel amounts)
|
|
Refined products sales:
|
|
|
|
|
|
|
|
Revenues-excluding impact of derivatives
|
|
$
|
5,390,643
|
|
|
$
|
4,453,924
|
|
|
$
|
936,719
|
|
|
Cost of sales-excluding impact of derivatives
|
|
5,402,547
|
|
|
4,401,681
|
|
|
1,000,866
|
|
|
Derivative (gain) loss
|
|
(21,369
|
)
|
|
25,109
|
|
|
(46,478
|
)
|
|
Product margin
|
|
9,465
|
|
|
27,134
|
|
|
(17,669
|
)
|
|
|
|
|
|
|
|
|
|
Renewables sales:
|
|
|
|
|
|
|
|
Revenues-excluding impact of derivatives
|
|
80,140
|
|
|
65,084
|
|
|
15,056
|
|
|
Cost of sales-excluding impact of derivatives
|
|
75,313
|
|
|
65,278
|
|
|
10,035
|
|
|
Derivative loss
|
|
4,333
|
|
|
790
|
|
|
3,543
|
|
|
Product margin (loss)
|
|
494
|
|
|
(984
|
)
|
|
1,478
|
|
|
|
|
|
|
|
|
|
|
Service fees and other revenues
|
|
2,870
|
|
|
5,399
|
|
|
(2,529
|
)
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating expenses
|
|
4,030
|
|
|
2,937
|
|
|
1,093
|
|
|
General and administrative expenses
|
|
2,299
|
|
|
2,295
|
|
|
4
|
|
|
Depreciation and amortization expense
|
|
580
|
|
|
321
|
|
|
259
|
|
|
Gain on disposal or impairment of assets, net
|
|
—
|
|
|
(3,026
|
)
|
|
3,026
|
|
|
Total expenses
|
|
6,909
|
|
|
2,527
|
|
|
4,382
|
|
|
Segment operating income
|
|
$
|
5,920
|
|
|
$
|
29,022
|
|
|
$
|
(23,102
|
)
|
|
|
|
|
|
|
|
|
|
Gasoline sold (barrels)
|
|
54,400
|
|
|
40,738
|
|
|
13,662
|
|
|
Diesel sold (barrels)
|
|
13,837
|
|
|
11,777
|
|
|
2,060
|
|
|
Ethanol sold (barrels)
|
|
679
|
|
|
544
|
|
|
135
|
|
|
Biodiesel sold (barrels)
|
|
163
|
|
|
328
|
|
|
(165
|
)
|
|
Refined products and renewables storage capacity - leased (barrels) (1)
|
|
9,845
|
|
|
9,523
|
|
|
322
|
|
|
Refined products and renewables storage capacity sub-leased to third parties (barrels) (1)
|
|
270
|
|
|
293
|
|
|
(23
|
)
|
|
Gasoline inventory (barrels) (1)
|
|
2,383
|
|
|
3,323
|
|
|
(940
|
)
|
|
Diesel inventory (barrels) (1)
|
|
1,857
|
|
|
965
|
|
|
892
|
|
|
Ethanol inventory (barrels) (1)
|
|
1,796
|
|
|
714
|
|
|
1,082
|
|
|
Biodiesel inventory (barrels) (1)
|
|
224
|
|
|
165
|
|
|
59
|
|
|
Refined products sold ($/barrel)
|
|
$
|
78.999
|
|
|
$
|
84.812
|
|
|
$
|
(5.813
|
)
|
|
Cost per refined products sold ($/barrel)
|
|
$
|
78.860
|
|
|
$
|
84.296
|
|
|
$
|
(5.436
|
)
|
|
Refined products product margin ($/barrel)
|
|
$
|
0.139
|
|
|
$
|
0.516
|
|
|
$
|
(0.377
|
)
|
|
Renewable products sold ($/barrel)
|
|
$
|
95.178
|
|
|
$
|
74.638
|
|
|
$
|
20.540
|
|
|
Cost per renewable products sold ($/barrel)
|
|
$
|
94.591
|
|
|
$
|
75.766
|
|
|
$
|
18.825
|
|
|
Renewable products product margin (loss) ($/barrel)
|
|
$
|
0.587
|
|
|
$
|
(1.128
|
)
|
|
$
|
1.715
|
|
|
|
|
|
(1)
|
Information is presented as of
June 30, 2019
and
June 30, 2018
, respectively.
|
Refined Products Revenues-Excluding Impact of Derivatives and Cost of Sales-Excluding Impact of Derivatives.
The
increases
in revenues-excluding impact of derivatives and cost of sales-excluding impact of derivatives were due to
increased
volumes
,
partially offset by
a decrease
in refined products prices.
The
increased
volumes were due primarily to the continued demand for motor fuels.
The
decrease
in prices was due primarily to supply and demand for refined fuels at our wholesale locations.
During the
three months ended
June 30, 2019
,
Gulf Coast prices decreased compared to such prices during the
three months ended
June 30, 2018
,
which negatively affected our margins-excluding impact of derivatives.
Refined Products
-
Derivative (Gain) Loss
.
Our margin during the
three months ended
June 30, 2019
included
a gain
of
$21.4 million
from our risk management activities due primarily to unrealized gains on our open forward physical positions.
Our margin during the
three months ended
June 30, 2018
included
a loss
of
$25.1 million
from our risk management activities due primarily to NYMEX futures prices increasing on our short future positions.
Renewables Revenues-Excluding Impact of Derivatives and Cost of Sales-Excluding Impact of Derivatives.
The
increases
in revenues-excluding impact of derivatives and cost of sales-excluding impact of derivatives were due primarily to
an increase
in renewables prices, partially offset by
decreased
volumes.
The
increase
in prices was due primarily to more sales of biodiesel and ethanol during the
three months ended
June 30, 2019
, compared to more sales of biodiesel renewable identification numbers during the
three months ended
June 30, 2018
.
Renewables
-
Derivative Loss
.
Our margin during the
three months ended
June 30, 2019
included
a loss
of
$4.3 million
from our risk management activities due primarily to unrealized losses on our open forward physical positions and NYMEX futures prices increasing on our short future positions
.
Our margin during the
three months ended
June 30, 2018
included
a loss
of
$0.8 million
from our risk management activities due primarily to NYMEX futures prices increasing on our short future positions.
Service Fees and Other Revenues.
The
decrease
was due primarily to an early termination settlement for one of our sublease agreements during the
three months ended
June 30, 2018
.
Operating and General and Administrative Expenses.
The
increase
was due primarily to acquisitions during the fiscal year ended March 31, 2019 and environmental expenses. During the three months ended June 30, 2018, our environmental expense was lower as a result of an insurance recovery we received related to a historical environmental indemnification agreement.
Depreciation and Amortization Expense.
The
increase
was due primarily to acquisitions during the fiscal year ended March 31, 2019.
Gain on Disposal or Impairment of Assets, Net
.
During the
three months ended
June 30, 2018
, we recorded a gain of
$3.0 million
on the sale of our previously held 20% interest in E Energy Adams, LLC.
Corporate and Other
The operating loss within “Corporate and Other” includes the following components for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
|
|
(in thousands)
|
|
Other revenues
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
255
|
|
|
$
|
376
|
|
|
$
|
(121
|
)
|
|
Cost of sales (1)
|
|
465
|
|
|
490
|
|
|
(25
|
)
|
|
Loss
|
|
(210
|
)
|
|
(114
|
)
|
|
(96
|
)
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Operating expenses
|
|
305
|
|
|
381
|
|
|
(76
|
)
|
|
General and administrative expenses
|
|
13,843
|
|
|
16,215
|
|
|
(2,372
|
)
|
|
Depreciation and amortization expense
|
|
743
|
|
|
718
|
|
|
25
|
|
|
Loss on disposal or impairment of assets, net
|
|
241
|
|
|
2
|
|
|
239
|
|
|
Total expenses
|
|
15,132
|
|
|
17,316
|
|
|
(2,184
|
)
|
|
Operating loss
|
|
$
|
(15,342
|
)
|
|
$
|
(17,430
|
)
|
|
$
|
2,088
|
|
|
|
|
|
(1)
|
Cost of sales include
$0.2 million
of intersegment cost of sales during the three months ended June 30, 2018 that are eliminated in our unaudited condensed consolidated statements of operations.
|
General and Administrative Expenses.
The decrease during the
three months ended
June 30, 2019
was due primarily to lower equity-based compensation expense as well as lower legal expenses. During the three months ended June 30, 2019, equity-based compensation expense was $3.7 million, compared to $5.5 million during the three months ended June 30, 2018. The decrease is primarily due to the cancellation of our performance awards during the year ended March 31, 2019, which resulted in an approximately $1.3 million decrease, as well as a decrease in bonuses paid in common units of approximately $0.5 million. In addition, legal expenses decreased from approximately $2.8 million during the three months ended June 30, 2018 to $1.2 million during the three months ended June 30, 2019. These decreases were partially offset by an increase in acquisition expenses of approximately $1.0 million.
Equity in Earnings of Unconsolidated Entities
The
decrease
of
$0.2 million
during the
three months ended
June 30, 2019
was due primarily to the sale of our investment in E Energy Adams, LLC on May 3, 2018 and the sale of our investment in an unincorporated joint venture as part of the South Pecos water disposal business transaction on February 28, 2019
.
Interest Expense
Interest expense includes interest charged on the Revolving Credit Facility (as defined herein) and senior notes, as well as, amortization of debt issuance costs, letter of credit fees, interest on equipment financing notes, and accretion of interest on non-interest bearing debt obligations. The
decrease
of
$6.4 million
during the
three months ended
June 30, 2019
was primarily due to lower average outstanding balances on our revolving credit facility as well as the redemption of our senior unsecured notes that were to mature in 2019 and 2021. This decline was offset by interest expense as a result of the issuance of the 2026 Notes.
Loss on Early Extinguishment of Liabilities, Net
During the three months ended
June 30, 2018
, the net loss (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding senior unsecured notes.
Other Income (Expense), Net
The following table summarizes the components of
other income (expense), net
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
|
Interest income (1)
|
$
|
1,078
|
|
|
$
|
1,416
|
|
|
Gavilon legal matter settlement (2)
|
—
|
|
|
(35,000
|
)
|
|
Other
|
(3
|
)
|
|
(158
|
)
|
|
Other income (expense), net
|
$
|
1,075
|
|
|
$
|
(33,742
|
)
|
|
|
|
|
(1)
|
Relates primarily to a loan receivable associated with our financing of the construction of a natural gas liquids facility that is utilized by a third party and a loan receivable with Victory Propane (see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).
|
|
|
|
|
(2)
|
Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).
|
Income Tax (Benefit) Expense
Income tax benefit
was
$0.3 million
during the
three months ended
June 30, 2019
, compared to income tax expense of
$0.7 million
during the
three months ended
June 30, 2018
.
See
Note 2
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.
Noncontrolling Interests - Redeemable and Non-redeemable
Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties.
The
decrease
in the noncontrolling interest loss
of
$0.5 million
during the
three months ended
June 30, 2019
was due primarily to a loss from operations of Atlantic Propane, LLC in the prior year quarter, which we sold in July 2018, and a loss from operations of the Sawtooth joint venture
.
Non-GAAP Financial Measures
In addition to financial results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided the non-GAAP financial measures of EBITDA and Adjusted EBITDA. These non-GAAP financial measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other entities, even when similar terms are used to identify such measures.
We define
EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense.
We define
Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or market adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other.
We
also include
in Adjusted EBITDA certain inventory valuation adjustments related to
our
Refined Products and Renewables segment, as discussed below.
EBITDA and Adjusted EBITDA should not be considered as alternatives to
net income (loss)
,
income (loss) from continuing operations before income taxes
,
cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations.
We believe
that EBITDA provides additional information to investors for evaluating
our
ability to make quarterly distributions to
our
unitholders and is presented solely as a supplemental measure.
We believe
that Adjusted EBITDA provides additional information to investors for evaluating
our
financial performance without regard to
our
financing methods, capital structure and historical cost basis.
Further, EBITDA and Adjusted EBITDA, as
we define
them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities.
Other than for
our
Refined Products and Renewables segment, for purposes of
our
Adjusted EBITDA calculation,
we make
a distinction between realized and unrealized gains and losses on derivatives.
During the period when a derivative contract is open,
we record
changes in the fair value of the derivative as an unrealized gain or loss.
When a derivative contract matures or is settled,
we reverse
the previously recorded unrealized gain or loss and record a realized gain or loss.
We do
not draw such a distinction between realized and unrealized gains and losses on derivatives of
our
Refined Products and Renewables segment.
The primary hedging strategy of
our
Refined Products and Renewables segment is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges are six months to one year in duration at inception.
The “inventory valuation adjustment” row in the reconciliation table
reflects the difference between the market value of the inventory of
our
Refined Products and Renewables segment at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge.
We include
this in Adjusted EBITDA because the unrealized gains and losses associated with derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA.
The following table reconciles
net income (loss)
to EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
|
Net income (loss)
|
$
|
8,039
|
|
|
$
|
(169,289
|
)
|
|
Less: Net loss attributable to noncontrolling interests
|
268
|
|
|
345
|
|
|
Less: Net loss attributable to redeemable noncontrolling interests
|
—
|
|
|
398
|
|
|
Net income (loss) attributable to NGL Energy Partners LP
|
8,307
|
|
|
(168,546
|
)
|
|
Interest expense
|
39,910
|
|
|
46,412
|
|
|
Income tax (benefit) expense
|
(311
|
)
|
|
651
|
|
|
Depreciation and amortization
|
54,844
|
|
|
61,575
|
|
|
EBITDA
|
102,750
|
|
|
(59,908
|
)
|
|
Net unrealized (gains) losses on derivatives
|
(3,474
|
)
|
|
18,953
|
|
|
Inventory valuation adjustment (1)
|
(19,746
|
)
|
|
(24,602
|
)
|
|
Lower of cost or market adjustments
|
(918
|
)
|
|
(413
|
)
|
|
(Gain) loss on disposal or impairment of assets, net
|
(967
|
)
|
|
101,343
|
|
|
Loss on early extinguishment of liabilities, net
|
—
|
|
|
137
|
|
|
Equity-based compensation expense (2)
|
3,701
|
|
|
5,511
|
|
|
Acquisition expense (3)
|
2,091
|
|
|
1,252
|
|
|
Revaluation of liabilities (4)
|
—
|
|
|
800
|
|
|
Gavilon legal matter settlement (5)
|
—
|
|
|
35,000
|
|
|
Other (6)
|
3,323
|
|
|
2,241
|
|
|
Adjusted EBITDA
|
$
|
86,760
|
|
|
$
|
80,314
|
|
|
|
|
|
(1)
|
Amount reflects the difference between the market value of the inventory of our Refined Products and Renewables segment at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. See “Non-GAAP Financial Measures” section above for a further discussion.
|
|
|
|
|
(2)
|
Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in Note 10 to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.
|
|
|
|
|
(3)
|
Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including amounts accrued related to the LCT Capital, LLC legal matter (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion), partially offset by reimbursement for certain legal costs incurred in prior periods.
|
|
|
|
|
(4)
|
Amounts represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.
|
|
|
|
|
(5)
|
Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion). We have excluded this amount from Adjusted EBITDA as it relates to transactions that occurred prior to our acquisition of Gavilon LLC in December 2013.
|
|
|
|
|
(6)
|
Amount for the three months ended
June 30, 2019
represents non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations. Amount for the three months ended
June 30, 2018
represents non-cash operating expenses related to our Grand Mesa Pipeline, certain expenses related to discontinued operations, unrealized loss on marketable securities and accretion expense for asset retirement obligations.
|
The following tables reconcile depreciation and amortization amounts per the EBITDA table above to depreciation and amortization amounts reported in our unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Reconciliation to unaudited condensed consolidated statements of operations:
|
|
|
|
|
|
Depreciation and amortization per EBITDA table
|
|
$
|
54,844
|
|
|
$
|
61,575
|
|
|
Intangible asset amortization recorded to cost of sales
|
|
(1,371
|
)
|
|
(1,465
|
)
|
|
Depreciation and amortization of unconsolidated entities
|
|
(6
|
)
|
|
(189
|
)
|
|
Depreciation and amortization attributable to noncontrolling interests
|
|
741
|
|
|
734
|
|
|
Depreciation and amortization attributable to discontinued operations
|
|
—
|
|
|
(8,610
|
)
|
|
Depreciation and amortization per unaudited condensed consolidated statements of operations
|
|
$
|
54,208
|
|
|
$
|
52,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Reconciliation to unaudited condensed consolidated statements of cash flows:
|
|
|
|
|
|
Depreciation and amortization per EBITDA table
|
|
$
|
54,844
|
|
|
$
|
61,575
|
|
|
Amortization of debt issuance costs recorded to interest expense
|
|
2,125
|
|
|
2,429
|
|
|
Amortization of royalty expense recorded to operating expense
|
|
151
|
|
|
—
|
|
|
Depreciation and amortization of unconsolidated entities
|
|
(6
|
)
|
|
(189
|
)
|
|
Depreciation and amortization attributable to noncontrolling interests
|
|
741
|
|
|
734
|
|
|
Depreciation and amortization attributable to discontinued operations
|
|
—
|
|
|
(8,610
|
)
|
|
Depreciation and amortization per unaudited condensed consolidated statements of cash flows
|
|
$
|
57,855
|
|
|
$
|
55,939
|
|
The following table reconciles interest expense per the EBITDA table above to interest expense reported in our unaudited condensed consolidated statements of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Interest expense per EBITDA table
|
|
$
|
39,910
|
|
|
$
|
46,412
|
|
|
Interest expense attributable to unconsolidated entities
|
|
(2
|
)
|
|
(14
|
)
|
|
Interest expense attributable to discontinued operations
|
|
—
|
|
|
(130
|
)
|
|
Interest expense per unaudited condensed consolidated statements of operations
|
|
$
|
39,908
|
|
|
$
|
46,268
|
|
The following table summarizes additional amounts attributable to discontinued operations in the EBITDA table above for the period indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2018
|
|
|
|
(in thousands)
|
|
Net unrealized losses on derivatives
|
|
$
|
94
|
|
|
Loss on disposal or impairment of assets, net
|
|
$
|
9
|
|
|
Other expense
|
|
$
|
424
|
|
The following tables reconcile operating income (loss) to Adjusted EBITDA by segment for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
Crude Oil
Logistics
|
|
Water
Solutions
|
|
Liquids
|
|
Refined
Products
and
Renewables
|
|
Corporate
and
Other
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Operating income (loss)
|
|
$
|
33,802
|
|
|
$
|
13,689
|
|
|
$
|
8,484
|
|
|
$
|
5,920
|
|
|
$
|
(15,342
|
)
|
|
$
|
46,553
|
|
|
Depreciation and amortization
|
|
17,585
|
|
|
28,071
|
|
|
7,229
|
|
|
580
|
|
|
743
|
|
|
54,208
|
|
|
Amortization recorded to cost of sales
|
|
—
|
|
|
—
|
|
|
23
|
|
|
1,348
|
|
|
—
|
|
|
1,371
|
|
|
Net unrealized gains on derivatives
|
|
(1,858
|
)
|
|
(167
|
)
|
|
(1,449
|
)
|
|
—
|
|
|
—
|
|
|
(3,474
|
)
|
|
Inventory valuation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,746
|
)
|
|
—
|
|
|
(19,746
|
)
|
|
Lower of cost or market adjustments
|
|
—
|
|
|
—
|
|
|
(1,508
|
)
|
|
590
|
|
|
—
|
|
|
(918
|
)
|
|
(Gain) loss on disposal or impairment of assets, net
|
|
(616
|
)
|
|
(589
|
)
|
|
(3
|
)
|
|
—
|
|
|
241
|
|
|
(967
|
)
|
|
Equity-based compensation expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,701
|
|
|
3,701
|
|
|
Acquisition expense
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
2,071
|
|
|
2,091
|
|
|
Other (expense) income, net
|
|
(4
|
)
|
|
—
|
|
|
12
|
|
|
73
|
|
|
994
|
|
|
1,075
|
|
|
Adjusted EBITDA attributable to unconsolidated entities
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
11
|
|
|
15
|
|
|
Adjusted EBITDA attributable to noncontrolling interest
|
|
—
|
|
|
(75
|
)
|
|
(397
|
)
|
|
—
|
|
|
—
|
|
|
(472
|
)
|
|
Other
|
|
3,165
|
|
|
140
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
3,323
|
|
|
Adjusted EBITDA
|
|
$
|
52,074
|
|
|
$
|
41,089
|
|
|
$
|
12,413
|
|
|
$
|
(11,235
|
)
|
|
$
|
(7,581
|
)
|
|
$
|
86,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
Crude Oil
Logistics
|
|
Water
Solutions
|
|
Liquids
|
|
Refined
Products
and
Renewables
|
|
Corporate
and
Other
|
|
Discontinued Operations
|
|
Consolidated
|
|
|
|
(in thousands)
|
|
Operating (loss) income
|
|
$
|
(99,738
|
)
|
|
$
|
969
|
|
|
$
|
2,623
|
|
|
$
|
29,022
|
|
|
$
|
(17,430
|
)
|
|
$
|
—
|
|
|
$
|
(84,554
|
)
|
|
Depreciation and amortization
|
|
19,229
|
|
|
25,309
|
|
|
6,468
|
|
|
321
|
|
|
718
|
|
|
—
|
|
|
52,045
|
|
|
Amortization recorded to cost of sales
|
|
80
|
|
|
—
|
|
|
37
|
|
|
1,348
|
|
|
—
|
|
|
—
|
|
|
1,465
|
|
|
Net unrealized losses on derivatives
|
|
7,412
|
|
|
9,110
|
|
|
2,337
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,859
|
|
|
Inventory valuation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,602
|
)
|
|
—
|
|
|
—
|
|
|
(24,602
|
)
|
|
Lower of cost or market adjustments
|
|
—
|
|
|
—
|
|
|
(504
|
)
|
|
91
|
|
|
—
|
|
|
—
|
|
|
(413
|
)
|
|
Loss (gain) on disposal or impairment of assets, net
|
|
101,894
|
|
|
2,475
|
|
|
(10
|
)
|
|
(3,026
|
)
|
|
2
|
|
|
—
|
|
|
101,335
|
|
|
Equity-based compensation expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,511
|
|
|
—
|
|
|
5,511
|
|
|
Acquisition expense
|
|
—
|
|
|
—
|
|
|
160
|
|
|
—
|
|
|
1,136
|
|
|
—
|
|
|
1,296
|
|
|
Other income (expense), net
|
|
14
|
|
|
—
|
|
|
35
|
|
|
(17
|
)
|
|
(33,774
|
)
|
|
—
|
|
|
(33,742
|
)
|
|
Adjusted EBITDA attributable to unconsolidated entities
|
|
—
|
|
|
(54
|
)
|
|
—
|
|
|
476
|
|
|
(43
|
)
|
|
—
|
|
|
379
|
|
|
Adjusted EBITDA attributable to noncontrolling interest
|
|
—
|
|
|
(112
|
)
|
|
(322
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(434
|
)
|
|
Revaluation of liabilities
|
|
—
|
|
|
800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
800
|
|
|
Gavilon legal matter settlement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35,000
|
|
|
—
|
|
|
35,000
|
|
|
Other
|
|
1,550
|
|
|
100
|
|
|
17
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
1,817
|
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,552
|
|
|
5,552
|
|
|
Adjusted EBITDA
|
|
$
|
30,441
|
|
|
$
|
38,597
|
|
|
$
|
10,841
|
|
|
$
|
3,763
|
|
|
$
|
(8,880
|
)
|
|
$
|
5,552
|
|
|
$
|
80,314
|
|
Liquidity, Sources of Capital and Capital Resource Activities
Our principal sources of liquidity and capital are the cash flows from our operations, borrowings under the Revolving Credit Facility and accessing capital markets. See
Note 8
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a detailed description of our long-term debt. Our cash flows from operations are discussed below.
Our borrowing needs vary during the year due in part to the seasonal nature of our Liquids and Refined Products and Renewables businesses. Our greatest working capital borrowing needs generally occur during the period of June through December, when we are building our natural gas liquids inventories in anticipation of the heating season as well as building our gasoline inventory in anticipation of the winter gasoline contango and blending season. Our working capital borrowing needs generally decline during the period of January through March, when the cash flows from our Liquids segment are the greatest and gasoline inventories need to be minimized due to certain inventory requirements.
Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement) to unitholders as of the record date. Available cash for any quarter generally consists of all cash on hand at the end of that quarter, less the amount of cash reserves established by our general partner, to (i) provide for the proper conduct of our business, (ii) comply with applicable law, any of our debt instruments or other agreements, and (iii) provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters.
We believe that our anticipated cash flows from operations and the borrowing capacity under the Revolving Credit Facility are sufficient to meet our liquidity needs. If our plans or assumptions change or are inaccurate, or if we make acquisitions, we may need to raise additional capital or sell assets. Our ability to raise additional capital, if necessary, depends on various factors and conditions, including market conditions. We cannot give any assurances that we can raise additional capital to meet these needs. Commitments or expenditures, if any, we may make toward any acquisition projects are at our discretion.
We believe our Water Solutions and Crude Oil Logistics businesses have organic growth opportunities with the activity in our core basins, including the Delaware Basin and DJ Basin in particular. We plan to pursue a strategy of growth through acquisitions as well as undertaking certain capital expansion projects. We expect to consider financing future acquisitions and capital expansion projects through available capacity on the Revolving Credit Facility or other forms of financing.
Other sources of liquidity during the
three months ended
June 30, 2019
are discussed below.
Issuance of Class C Preferred Units
During the
three months ended
June 30, 2019
, we issued
1,800,000
of our Class C Preferred Units representing limited partner interests at a price of
$25.00
per unit for net proceeds of
$42.6 million
. See
Note 10
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further description of the Class C Preferred Units.
2026 Notes
During the
three months ended
June 30, 2019
, we entered into the 2026 note purchase agreement whereby we issued
$450.0 million
of the 2026 Notes in a private placement. The 2026 Notes bear interest at
7.50%
which is payable on April 15 and October 15 of each year, beginning on October 15, 2019. See
Note 8
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further description of these notes.
Subsequent Events
See
Note 17
to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of transactions that occurred subsequent to
June 30, 2019
.
Long-Term Debt
Credit Agreement
We are party to a
$1.765 billion
credit agreement (the “Credit Agreement”) with a syndicate of banks. As of
June 30, 2019
, the Credit Agreement includes a revolving credit facility to fund working capital needs, which had a capacity of
$1.250 billion
for cash borrowings and letters of credit (the “Working Capital Facility”), and a revolving credit facility to fund acquisitions and expansion projects, which had a capacity of
$515.0 million
(the “Expansion Capital Facility,” and together with the Working Capital Facility, the “Revolving Credit Facility”).
The Revolving Credit Facility allows us to reallocate amounts between the Expansion Capital Facility and Working Capital Facility.
We had letters of credit of
$141.8 million
on the Working Capital Facility at
June 30, 2019
. The commitments under the Credit Agreement expire on October 5, 2021.
We were in compliance with the covenants under the Credit Agreement
at
June 30, 2019
.
Senior Unsecured Notes
The senior unsecured notes include the 2023 Notes, 2025 Notes and 2026 Notes (collectively, the “Senior Unsecured Notes”).
On April 9, 2019, we issued
$450.0 million
of the 2026 Notes in a private placement. Interest is payable on April 15 and October 15 of each year, beginning on October 15, 2019. We received net proceeds of
$442.1 million
, after the initial purchasers’ discount of
$6.8 million
and offering costs of
$1.1 million
. The 2026 Notes mature on April 15, 2026.
At
June 30, 2019
,
we were in compliance with the covenants under the indentures for all of the Senior Unsecured Notes
.
Term Credit Agreement
On July 2, 2019, we entered into a term credit agreement with Toronto Dominion (Texas) LLC for a $250.0 million term loan facility. Toronto Dominion (Texas) LLC and certain of its affiliates are also lenders under our Credit Agreement. The commitments under the Term Credit Agreement expire on July 2, 2024.
For a further discussion of the Revolving Credit Facility, Senior Unsecured Notes and the Term Credit Agreement, see
Note 8
to our unaudited condensed consolidated financial statements included in this Quarterly Report.
Revolving Credit Facility Borrowings
The following table summarizes the Revolving Credit Facility borrowings for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balance
Outstanding
|
|
Lowest
Balance
|
|
Highest
Balance
|
|
|
|
(in thousands)
|
|
Three Months Ended June 30, 2019
|
|
|
|
|
|
|
|
Expansion capital borrowings
|
|
$
|
154,604
|
|
|
$
|
—
|
|
|
$
|
335,000
|
|
|
Working capital borrowings
|
|
$
|
836,154
|
|
|
$
|
744,000
|
|
|
$
|
934,000
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|
|
|
Expansion capital borrowings
|
|
$
|
88,121
|
|
|
$
|
—
|
|
|
$
|
265,500
|
|
|
Working capital borrowings
|
|
$
|
974,808
|
|
|
$
|
894,500
|
|
|
$
|
1,075,500
|
|
Capital Expenditures, Acquisitions and Other Investments
The following table summarizes expansion and maintenance capital expenditures (which excludes additions for tank bottoms and line fill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated. Amounts in the table below include capital expenditures and acquisitions related to our former Retail Propane segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
Other
|
|
|
|
Expansion (1)
|
|
Maintenance (2)
|
|
Acquisitions (3)
|
|
Investments (4)
|
|
|
|
(in thousands)
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
2019
|
|
$
|
159,265
|
|
|
$
|
16,929
|
|
|
$
|
54,548
|
|
|
$
|
889
|
|
|
2018
|
|
$
|
76,998
|
|
|
$
|
12,390
|
|
|
$
|
135,662
|
|
|
$
|
6
|
|
|
|
|
|
(1)
|
The amount for the
three months ended
June 30, 2018
includes $0.4 million related to our former Retail Propane segment.
|
|
|
|
|
(2)
|
The amount for the
three months ended
June 30, 2018
includes $3.3 million related to our former Retail Propane segment.
|
|
|
|
|
(3)
|
The amount for the
three months ended
June 30, 2018
includes $19.1 million related to our former Retail Propane segment.
|
|
|
|
|
(4)
|
Amounts for the
three months ended
June 30, 2019
and
2018
primarily related to contributions made to unconsolidated entities. There was no amount for the
three months ended
June 30, 2018
related to our former Retail Propane segment.
|
Cash Flows
The following table summarizes the sources (uses) of our cash flows from continuing operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Cash Flows Provided by (Used in):
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
Operating activities, before changes in operating assets and liabilities
|
|
$
|
43,623
|
|
|
$
|
51,139
|
|
|
Changes in operating assets and liabilities
|
|
26,271
|
|
|
(124,325
|
)
|
|
Operating activities-continuing operations
|
|
$
|
69,894
|
|
|
$
|
(73,186
|
)
|
|
Investing activities-continuing operations
|
|
$
|
(199,247
|
)
|
|
$
|
(224,512
|
)
|
|
Financing activities-continuing operations
|
|
$
|
138,282
|
|
|
$
|
280,578
|
|
Operating Activities-Continuing Operations.
The seasonality of our Liquids business has a significant effect on our cash flows from operating activities. Increases in natural gas liquids prices typically reduce our operating cash flows due to higher cash requirements to fund increases in inventories, and decreases in natural gas liquids prices typically increase our operating cash flows due to lower cash requirements to fund increases in inventories. In our Liquids business, we typically experience operating losses or lower operating income during our first and second quarters, or the six months ending September 30, as a result of lower volumes of natural gas liquids sales and when we are building our inventory levels for the upcoming heating season. The heating season runs through the six months ending March 31. The seasonal motor fuel blend during the third quarter of our fiscal year impacts the value of our gasoline inventory in our Refined Products and Renewables business and also represents a period when we build inventory into our system. We borrow under the Revolving Credit Facility to supplement our operating cash flows during the periods in which we are building inventory. Our operations, and as a result our cash flows, are also impacted by positive and negative movements in commodity prices, which cause fluctuations in the value of inventory, accounts receivable and payables, due to increases and decreases in revenues and cost of sales. The
decrease
in net cash used in operating activities during the
three months ended
June 30, 2019
was due primarily to fluctuations in the value of accounts receivable and accounts payable during the
three months ended
June 30, 2019
.
Investing Activities-Continuing Operations
. Net cash used in investing activities was
$199.2 million
during the
three months ended
June 30, 2019
, compared to net cash used in investing activities of
$224.5 million
during the
three months ended
June 30, 2018
. The
decrease
in net cash used in investing activities was due primarily to:
|
|
|
|
•
|
a
$67.3 million
decrease
in payments to settle derivatives; and
|
|
|
|
|
•
|
a
$61.2 million
decrease
in cash paid for acquisitions and investments in unconsolidated entities during the
three months ended
June 30, 2019
.
|
These
decreases
in net cash used in investing activities were partially offset by:
|
|
|
|
•
|
an increase
in capital expenditures from
$72.7 million
during the
three months ended
June 30, 2018
to
$155.4 million
during the
three months ended
June 30, 2019
due primarily to expansion projects in our Water Solutions segment; and
|
|
|
|
|
•
|
a
$22.3 million
decrease
in proceeds primarily related to the sale of our previously held 20% interest in E Energy Adams, LLC during the
three months ended
June 30, 2018
.
|
Financing Activities-Continuing Operations
. Net cash provided by financing activities was
$138.3 million
during the
three months ended
June 30, 2019
, compared to net cash provided by financing activities of
$280.6 million
during the
three months ended
June 30, 2018
. The
decrease
in net cash provided by financing activities was due primarily to:
|
|
|
|
•
|
a decrease
of
$372.5 million
in borrowings on the Revolving Credit Facility (net of repayments) during the
three months ended
June 30, 2019
; and
|
|
|
|
|
•
|
$265.1 million
in payments for the redemption of the Class A Preferred Units during the
three months ended
June 30, 2019
.
|
These
decreases
in net cash provided by financing activities were partially offset by:
|
|
|
|
•
|
$450.0 million
in proceeds from the issuance of the 2026 Notes during the
three months ended
June 30, 2019
; and
|
|
|
|
|
•
|
$42.6 million
in net proceeds from the issuance of the Class C Preferred Units during the
three months ended
June 30, 2019
.
|
Distributions Declared
Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement) to unitholders as of the record date. See further discussion of our cash distribution policy in Item 5. Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities included in our Annual Report.
On
June 14, 2019
, the board of directors of our general partner declared a distribution on the 9.00% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) and the Class C Preferred Units for the
three months ended
June 30, 2019
of
$4.7 million
and
$1.1 million
, respectively. The distributions were paid to the holders of the Class B Preferred Units and the Class C Preferred Units on
July 15, 2019
.
On
July 23, 2019
, the board of directors of our general partner declared a distribution of
$0.39
per common unit to the unitholders of record on
August 7, 2019
. The distribution is to be paid on
August 14, 2019
.
For a further discussion of our distributions, see
Note 10
to our unaudited condensed consolidated financial statements included in this Quarterly Report.
Contractual Obligations
The following table summarizes our contractual obligations at
June 30, 2019
for our fiscal years ending thereafter:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ending March 31,
|
|
Fiscal Year Ending March 31,
|
|
|
|
|
|
Total
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
|
|
(in thousands)
|
|
Principal payments on long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expansion capital borrowings
|
|
$
|
260,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
260,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Working capital borrowings
|
|
895,000
|
|
|
—
|
|
|
—
|
|
|
895,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Senior unsecured notes
|
|
1,446,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
607,323
|
|
|
839,135
|
|
|
Other long-term debt
|
|
5,170
|
|
|
486
|
|
|
4,684
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Interest payments on long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility (1)
|
|
127,538
|
|
|
40,754
|
|
|
54,240
|
|
|
32,544
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Senior unsecured notes
|
|
584,791
|
|
|
64,047
|
|
|
103,134
|
|
|
103,134
|
|
|
103,134
|
|
|
103,134
|
|
|
108,208
|
|
|
Other long-term debt
|
|
263
|
|
|
154
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Letters of credit
|
|
141,763
|
|
|
—
|
|
|
—
|
|
|
141,763
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Future minimum commitment payments under noncancelable agreements (2)
|
|
69,674
|
|
|
40,167
|
|
|
10,757
|
|
|
7,992
|
|
|
5,603
|
|
|
4,476
|
|
|
679
|
|
|
Future minimum lease payments under noncancelable operating leases
|
|
833,978
|
|
|
82,061
|
|
|
91,400
|
|
|
70,650
|
|
|
50,556
|
|
|
39,252
|
|
|
500,059
|
|
|
Construction commitments (3)
|
|
11,408
|
|
|
11,408
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Fixed-price commodity purchase commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil
|
|
77,233
|
|
|
77,233
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Natural gas liquids
|
|
15,152
|
|
|
13,811
|
|
|
1,341
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Index-price commodity purchase commitments (4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (5)
|
|
2,683,601
|
|
|
1,315,538
|
|
|
503,942
|
|
|
397,731
|
|
|
266,157
|
|
|
200,233
|
|
|
—
|
|
|
Natural gas liquids
|
|
504,676
|
|
|
502,600
|
|
|
2,076
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total contractual obligations
|
|
$
|
7,656,705
|
|
|
$
|
2,148,259
|
|
|
$
|
771,683
|
|
|
$
|
1,908,814
|
|
|
$
|
425,450
|
|
|
$
|
954,418
|
|
|
$
|
1,448,081
|
|
|
|
|
|
(1)
|
The estimated interest payments on the Revolving Credit Facility are based on principal and letters of credit outstanding at
June 30, 2019
. See Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report for additional information on the Credit Agreement.
|
|
|
|
|
(2)
|
We have executed noncancelable agreements with crude oil pipeline operators, which guarantee us minimum monthly shipping capacity on the pipelines. As a result, we are required to pay the minimum shipping fees if actual shipments are less than our allotted capacity. Under certain agreements we have the ability to recover minimum shipping fees previously paid if our shipping volumes exceed the minimum monthly shipping commitment during each month remaining under the agreement, with some contracts containing provisions that allow us to continue shipping up to six months after the maturity date of the contract in order to recapture previously paid minimum shipping delinquency fees. A third party has contractually agreed to assume all rights and privileges and to be fully responsible for any minimum shipping fees due for actual shipments that are less than our allocated capacity related to
$22.6 million
of the fiscal year 2020 amount under a definitive agreement we signed during the
three months ended
June 30, 2018
. We also have executed noncancelable agreements for product storage, railcar spurs and real estate. See Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for additional information.
|
|
|
|
|
(3)
|
At
June 30, 2019
, the construction commitments relate to three new barges currently being built.
|
|
|
|
|
(4)
|
Index prices are based on a forward price curve at
June 30, 2019
. A theoretical change of $0.10 per gallon of natural gas liquids in the underlying commodity price at
June 30, 2019
would result in a change of
$107.4 million
in the value of our index-price natural gas liquids purchase commitments. A theoretical change of $1.00 per barrel of crude oil in the underlying commodity price at
June 30, 2019
would result in a change of
$52.2 million
in the value of our index-price crude oil purchase commitments. See Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for further detail of the commitments.
|
|
|
|
|
(5)
|
Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report) due primarily to our long-term purchase commitments for crude oil that we purchase and ship on the Grand Mesa Pipeline. As these purchase commitments are deliver-or-pay contracts, whereby our counterparty is required to pay us for any volumes not delivered, we have not entered into corresponding long-term sales contracts for volumes we may not receive.
|
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements other than the letters of credit discussed in
Note 8
to our unaudited condensed consolidated financial statements included in this Quarterly Report and short-term leases discussed in
Note 15
to our unaudited condensed consolidated financial statements included in this Quarterly Report.
Environmental Legislation
See our Annual Report for a discussion of proposed environmental legislation and regulations that, if enacted, could result in increased compliance and operating costs. However, at this time we cannot predict the structure or outcome of any future legislation or regulations or the eventual cost we could incur in compliance.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements that are applicable to us, see
Note 2
to our unaudited condensed consolidated financial statements included in this Quarterly Report.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires the selection and application of appropriate accounting principles to the relevant facts and circumstances of our operations and the use of estimates made by management. We have identified certain accounting policies that are most important to the portrayal of our consolidated financial position and results of operations. The application of these accounting policies, which requires subjective or complex judgments regarding estimates and projected outcomes of future events, and changes in these accounting policies, could have a material effect on our consolidated financial statements. There have been no material changes in the critical accounting policies previously disclosed in our Annual Report.