Quarterly Report (10-q)

Date : 08/09/2019 @ 10:04AM
Source : Edgar (US Regulatory)
Stock : NGL Energy Partners LP (NGL)
Quote : 10.79  0.12 (1.12%) @ 10:15PM
After Hours
Last Trade
Last $ 10.79 ◊ 0.00 (0.00%)

Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM  10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-35172

NGL Energy Partners LP
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
27-3427920
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
6120 South Yale Avenue, Suite 805
 
 
Tulsa,
Oklahoma
 
74136
(Address of Principal Executive Offices)
 
(Zip Code)
(918) 481-1119
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
 
Smaller reporting company
Emerging growth company
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbols
 
Name of Each Exchange on Which Registered
Common units representing Limited Partner Interests
 
NGL
 
New York Stock Exchange
Fixed-to-floating rate cumulative redeemable perpetual preferred units
 
NGL-PB
 
New York Stock Exchange
Fixed-to-floating rate cumulative redeemable perpetual preferred units
 
NGL-PC
 
New York Stock Exchange

At August 5, 2019 , there were 126,198,168 common units issued and outstanding.




TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 


i


Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains various forward-looking statements and information that are based on our beliefs and those of our general partner, as well as assumptions made by and information currently available to us. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Certain words in this Quarterly Report such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “will,” and similar expressions and statements regarding our plans and objectives for future operations, identify forward-looking statements. Although we and our general partner believe such forward-looking statements are reasonable, neither we nor our general partner can assure they will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected. Among the key risk factors that may affect our consolidated financial position and results of operations are:

the prices of crude oil, natural gas liquids, gasoline, diesel, ethanol, and biodiesel;
energy prices generally;
the general level of crude oil, natural gas, and natural gas liquids production;
the general level of demand, and the availability of supply, for crude oil, natural gas liquids, gasoline, diesel, ethanol, and biodiesel;
the level of crude oil and natural gas drilling and production in areas where we have water treatment and disposal facilities;
the price of gasoline relative to the price of corn, which affects the price of ethanol;
the ability to obtain adequate supplies of products if an interruption in supply or transportation occurs and the availability of capacity to transport products to market areas;
actions taken by foreign oil and gas producing nations;
the political and economic stability of foreign oil and gas producing nations;
the effect of weather conditions on supply and demand for crude oil, natural gas liquids, gasoline, diesel, ethanol, and biodiesel;
the effect of natural disasters, lightning strikes, or other significant weather events;
the availability of local, intrastate, and interstate transportation infrastructure with respect to our truck, railcar, and barge transportation services;
the availability, price, and marketing of competing fuels;
the effect of energy conservation efforts on product demand;
energy efficiencies and technological trends;
changes in applicable laws and regulations, including tax, environmental, transportation, and employment regulations, or new interpretations by regulatory agencies concerning such laws and regulations and the effect of such laws and regulations (now existing or in the future) on our business operations;
the effect of legislative and regulatory actions on hydraulic fracturing, wastewater disposal, and the treatment of flowback and produced water;
hazards or operating risks related to transporting and distributing petroleum products that may not be fully covered by insurance;
the maturity of the crude oil, natural gas liquids, and refined products industries and competition from other marketers;
loss of key personnel;
the ability to renew contracts with key customers;
the ability to maintain or increase the margins we realize for our terminal, barging, trucking, wastewater disposal, recycling, and discharge services;
the ability to renew leases for our leased equipment and storage facilities;

1


the nonpayment or nonperformance by our counterparties;
the availability and cost of capital and our ability to access certain capital sources;
a deterioration of the credit and capital markets;
the ability to successfully identify and complete accretive acquisitions, and integrate acquired assets and businesses;
changes in the volume of hydrocarbons recovered during the wastewater treatment process;
changes in the financial condition and results of operations of entities in which we own noncontrolling equity interests;
the costs and effects of legal and administrative proceedings;
any reduction or the elimination of the federal Renewable Fuel Standard; and
changes in the jurisdictional characteristics of, or the applicable regulatory policies with respect to, our pipeline assets.

You should not put undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this Quarterly Report. Except as may be required by state and federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events, or otherwise. When considering forward-looking statements, please review the risks discussed under Part I, Item 1A–“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 .

2


PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements


3


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.

4


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.

5


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.

6


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.

7


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.







8


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.

9

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

10

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.


11

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 .


12

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.


13

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




14

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.


15

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.


16

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.


17

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 ).


18

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 .

19

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