NGL Energy Partners LP Announces Second Quarter Fiscal 2020 Financial Results

Date : 11/08/2019 @ 11:30AM
Source : Business Wire
Stock : NGL Energy Partners LP (NGL)
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NGL Energy Partners LP Announces Second Quarter Fiscal 2020 Financial Results

NGL Energy Partners (NYSE:NGL)
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NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported income from continuing operations for the quarter ended September 30, 2019 of $0.7 million, compared to a loss from continuing operations of $26.0 million for the quarter ended September 30, 2018. For the six months ended September 30, 2019, the Partnership reported a loss from continuing operations of $1.7 million, compared to a loss from continuing operations of $284.8 million for the six months ended September 30, 2018.

“We have accomplished a significant shift in our business over the past two years, culminating in the most recent quarter when we sold the majority of our refined products business, closed on the Mesquite acquisition and announced the acquisition of Hillstone,” stated Mike Krimbill, NGL’s CEO. “We have removed a significant amount of volatility and seasonality from our earnings, reduced leverage and simplified our business model. We have grown our water solutions infrastructure, increased our acreage dedications and minimum volume commitments and lengthened our average customer contract term as we have moved this segment to a true midstream model. Our quarterly results demonstrate some of these accomplishments, with others, including the continued ramp of volumes on Mesquite and our organic pipeline developments, the integration of Hillstone into our Delaware Basin gathering and disposal franchise and the further wind down of refined products with the corresponding reduction in working capital, expected to be completed during the second half of our fiscal year.”

Highlights for the quarter include:

  • Adjusted EBITDA from continuing operations for the second quarter of Fiscal 2020 of $119.0 million, compared to $91.7 million for the second quarter of Fiscal 2019
  • Acquisition of the assets of Mesquite Disposals Unlimited, LLC (“Mesquite”) on July 2, 2019 for a total purchase price of $885.3 million on a cash-free, debt-free basis, $200.0 million of which will be funded in deferred payments
  • Issuance of 9.00% Class D Preferred Units for gross proceeds of $400.0 million, 9.00% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units valued at approximately $100.0 million and entered into a $250 million Term Credit Agreement to fund the acquisition of Mesquite
  • Completion of the sale of a significant portion of the Partnership’s Refined Products business (“TPSL”) on September 30, 2019 for approximately $300.0 million, including the monetization of certain related hedge positions after the completion of the sale, with proceeds used to reduce indebtedness and improve leverage

Subsequent to the end of the quarter, the Partnership:

  • Completed the acquisition of Hillstone Environmental Partners, LLC (“Hillstone”) on October 31, 2019;
  • Issued 9.00% Class D Preferred Units for gross proceeds of $200.0 million to fund a portion of Hillstone; and
  • Amended the Partnership’s Credit Agreement to, among other things, adjust certain financial covenants and provide for up to $1.790 billion in aggregate commitments, consisting of (i) a $600 million Working Capital Facility for working capital requirements and other general corporate purposes and (ii) a $1.190 billion Expansion Capital Facility, for acquisitions, internal growth projects, other capital expenditures and general corporate purposes.

Quarterly Results of Operations

The following table summarizes operating income (loss) and Adjusted EBITDA from continuing operations by operating segment for the periods indicated:

 

 

Quarter Ended

 

 

September 30, 2019

 

September 30, 2018

 

 

Operating Income (Loss)

 

Adjusted EBITDA

 

Operating Income (Loss)

 

Adjusted EBITDA

 

 

(in thousands)

Crude Oil Logistics

 

$

38,520

 

 

$

54,632

 

 

$

31,022

 

 

$

48,477

 

Liquids

 

8,397

 

 

19,301

 

 

10,758

 

 

20,530

 

Water Solutions

 

21,274

 

 

56,879

 

 

9,770

 

 

38,813

 

Refined Products and Renewables

 

16,681

 

 

(517

)

 

(1,851

)

 

(6,095

)

Corporate and Other

 

(38,477

)

 

(11,318

)

 

(35,352

)

 

(10,063

)

Total

 

$

46,395

 

 

$

118,977

 

 

$

14,347

 

 

$

91,662

 

The tables included in this release reconcile operating income (loss) to Adjusted EBITDA from continuing operations, a non-GAAP financial measure, for each of our operating segments.

Crude Oil Logistics

The Partnership’s Crude Oil Logistics segment generated Adjusted EBITDA of $54.6 million during the quarter ended September 30, 2019, compared to $48.5 million during the quarter ended September 30, 2018. Results for the second quarter of Fiscal 2020 improved compared to the same quarter in Fiscal 2019 due to increased volumes on our Grand Mesa Pipeline as a result of increased production in the DJ Basin. During the three months ended September 30, 2019, financial volumes on the Grand Mesa Pipeline averaged approximately 128,000 barrels per day.

Liquids

The Partnership’s Liquids segment generated Adjusted EBITDA of $19.3 million during the quarter ended September 30, 2019, compared to $20.5 million during the quarter ended September 30, 2018. This decrease was largely driven by lower volumes and margins on propane sales. The decrease was offset by strong butane sales, including steady volumes at our Chesapeake, Virginia export terminal.

Total product margin per gallon was $0.045 for the quarter ended September 30, 2019, compared to $0.048 for the quarter ended September 30, 2018. This decrease was primarily the result of lower propane and other product margins.

Propane volumes decreased by approximately 4.5 million gallons, or 1.7%, during the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018. Butane volumes increased by approximately 38.7 million gallons, or 29.5%, during the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018. Other Liquids volumes decreased by approximately 0.3 million gallons, or 0.3%, during the quarter ended September 30, 2019 compared to the same period in the prior year.

Water Solutions

The Partnership’s Water Solutions segment generated Adjusted EBITDA of $56.9 million during the quarter ended September 30, 2019, compared to $38.8 million during the quarter ended September 30, 2018. The increase in Adjusted EBITDA is due to an increase in the volume of wastewater processed as well as higher disposal fees per barrel. The Partnership processed approximately 1,258,000 barrels of wastewater per day during the quarter ended September 30, 2019, a 24.9% increase when compared to approximately 1,008,000 barrels of wastewater per day during the quarter ended September 30, 2018. The increase in volumes is due to wastewater processed from the acquisition of Mesquite and other acquired and newly developed facilities, which was partially offset by wastewater volume reductions as a result of the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019.

Revenues from recovered hydrocarbons, including the impact from realized skim oil hedges, totaled $16.4 million for the quarter ended September 30, 2019, an increase of $3.5 million from the prior year period. The increase was primarily due to higher prices from our skim oil sales net of hedges, which were partially offset by lower skim oil volumes resulting from the sale of our Bakken and South Pecos water disposal businesses.

Refined Products and Renewables

The Partnership’s Refined Products and Renewables segment generated Adjusted EBITDA from continuing operations of $(0.5) million during the quarter ended September 30, 2019, compared to $(6.1) million during the quarter ended September 30, 2018. The results for the quarter ended September 30, 2019 were positively impacted by increased volumes due to continued demand for motor fuels and higher margins in West Coast markets, partially offset by lower inventory valuations resulting from lower Gulf Coast gasoline and diesel prices.

Refined product barrels sold during the quarter ended September 30, 2019 totaled approximately 41.8 million barrels, an increase of approximately 0.7 million barrels compared to the same period in the prior year due to an increase in bulk sales volumes. Renewables barrels sold during the quarter ended September 30, 2019 totaled approximately 0.6 million, which was slightly lower than the same period in the prior year.

The Partnership completed the sale of TPSL on September 30, 2019 for approximately $300.0 million, including the monetization of certain related hedge positions after the completion of the sale. The results from the business that was sold are included in discontinued operations in the Partnership’s financial statements.

Corporate and Other

Adjusted EBITDA for Corporate and Other was $(11.3) million during the quarter ended September 30, 2019, compared to $(10.1) million during the quarter ended September 30, 2018. The increase in expenses is primarily due to increased costs related to compensation, consulting services and insurance, partially offset by lower legal costs.

Capitalization and Liquidity

On October 30, 2019, the Partnership amended its Credit Agreement, to, among other things, adjust the allocation of the commitments of the lenders to make revolving loans thereunder and, effective with the fiscal quarter ending December 31, 2019, eliminate the leverage ratio financial covenant (as defined in the Credit Agreement) and adjust the senior secured leverage ratio (as defined in the Credit Agreement), interest coverage ratio (as defined in the Credit Agreement) and total leverage indebtedness ratio financial covenants (as defined in the Credit Agreement). As amended, the Credit Agreement provides for up to $1.790 billion in aggregate commitments, consisting of (i) a $600 million Working Capital Facility for working capital requirements and other general corporate purposes and (ii) a $1.190 billion Expansion Capital Facility for acquisitions, internal growth projects, other capital expenditures and general corporate purposes.

Total debt outstanding, including working capital borrowings, was $2.774 billion at September 30, 2019 compared to $2.161 billion at March 31, 2019, an increase of $613 million due primarily to the redemption of the Partnership’s Class A Preferred Units, the Mesquite acquisition and other growth capital expenditures during the period, which were partially offset by a reduction in working capital borrowings using proceeds from the sale of TPSL. The Partnership’s Leverage Ratio and Total Indebtedness Leverage Ratio (as defined in our Credit Agreement) were approximately 3.73x and 4.85x, respectively, at September 30, 2019.

Working capital borrowings totaled $643.0 million at September 30, 2019 compared to $896.0 million at March 31, 2019, a decrease of $253.0 million driven by the sale of TPSL and associated assets. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $503.5 million as of September 30, 2019.

Fiscal 2020 Guidance Update

For Fiscal 2020, the Partnership expects to generate adjusted EBITDA from continuing operations in a range for each of its operating segments as follows:

 

 

FY 2020 Adjusted EBITDA Ranges

 

 

Low

 

High

 

 

(in thousands)

Crude Oil Logistics

 

$

200,000

 

 

$

220,000

 

Water Solutions

 

270,000

 

 

300,000

 

Liquids

 

85,000

 

 

95,000

 

Refined Products and Renewables

 

15,000

 

 

30,000

 

Corporate and Other

 

(30,000

)

 

(30,000

)

Second Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled for 10:00 am Central Time on Friday, November 8, 2019. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 2980107. An archived audio replay of the conference call will be available for 7 days beginning at 1:00 pm Central Time on November 8, 2019, which can be accessed by dialing (855) 859-2056 and providing access code 2980107.

Non-GAAP Financial Measures

NGL defines EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. NGL defines 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 (loss) income, 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. NGL believes that EBITDA provides additional information to investors for evaluating NGL’s ability to make quarterly distributions to NGL’s unitholders and is presented solely as a supplemental measure. NGL believes that Adjusted EBITDA provides additional information to investors for evaluating NGL’s financial performance without regard to NGL’s financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as NGL defines them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities.

Other than for NGL’s Refined Products and Renewables segment, for purposes of the Adjusted EBITDA calculation, NGL makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, NGL records changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, NGL reverses the previously recorded unrealized gain or loss and records a realized gain or loss. NGL does not draw such a distinction between realized and unrealized gains and losses on derivatives of NGL’s Refined Products and Renewables segment. The primary hedging strategy of NGL’s 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 NGL’s 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. NGL includes 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.

Distributable Cash Flow is defined as Adjusted EBITDA minus maintenance capital expenditures, income tax expense, cash interest expense and other. Maintenance capital expenditures represent capital expenditures necessary to maintain the Partnership’s operating capacity. Distributable Cash Flow is a performance metric used by senior management to compare cash flows generated by the Partnership (excluding growth capital expenditures and prior to the establishment of any retained cash reserves by the Board of Directors) to the cash distributions expected to be paid to unitholders. Using this metric, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions. This financial measure also is important to investors as an indicator of whether the Partnership is generating cash flow at a level that can sustain, or support an increase in, quarterly distribution rates. Actual distribution amounts are set by the Board of Directors.

Forward-Looking Statements

This press release includes “forward-looking statements.” All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. While NGL believes such forward-looking statements are reasonable, NGL cannot assure they will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings with the Securities and Exchange Commission. Other factors that could impact any forward-looking statements are those risks described in NGL’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other public filings. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” NGL undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.

NGL provides Adjusted EBITDA guidance that does not include certain charges and costs, which in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as income taxes, interest and other non-operating items, depreciation and amortization, 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 and items that are unusual in nature or infrequently occurring. The exclusion of these charges and costs in future periods will have a significant impact on the Partnership’s Adjusted EBITDA, and the Partnership is not able to provide a reconciliation of its Adjusted EBITDA guidance to net income (loss) without unreasonable efforts due to the uncertainty and variability of the nature and amount of these future charges and costs and the Partnership believes that such reconciliation, if possible, would imply a degree of precision that would be potentially confusing or misleading to investors.

About NGL Energy Partners LP

NGL Energy Partners LP is a Delaware limited partnership. NGL owns and operates a vertically integrated energy business with four primary businesses: Crude Oil Logistics, Water Solutions, Liquids, and Refined Products and Renewables. NGL completed its initial public offering in May 2011. For further information, visit the Partnership’s website at www.nglenergypartners.com.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)

 

 

September 30, 2019

 

March 31, 2019

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

21,154

 

 

$

18,572

 

Accounts receivable-trade, net of allowance for doubtful accounts of $4,773 and $4,016, respectively

987,875

 

 

998,203

 

Accounts receivable-affiliates

14,374

 

 

12,867

 

Inventories

308,793

 

 

252,770

 

Prepaid expenses and other current assets

199,002

 

 

142,811

 

Assets held for sale

 

 

387,450

 

Total current assets

1,531,198

 

 

1,812,673

 

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $469,229 and $417,457, respectively

2,485,880

 

 

1,828,940

 

GOODWILL

1,176,042

 

 

1,113,149

 

INTANGIBLE ASSETS, net of accumulated amortization of $566,054 and $503,117, respectively

1,194,581

 

 

800,889

 

INVESTMENTS IN UNCONSOLIDATED ENTITIES

1,445

 

 

1,127

 

OPERATING LEASE RIGHT-OF-USE ASSETS

203,122

 

 

 

OTHER NONCURRENT ASSETS

71,755

 

 

113,857

 

ASSETS HELD FOR SALE

 

 

231,858

 

Total assets

$

6,664,023

 

 

$

5,902,493

 

LIABILITIES AND EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable-trade

$

842,064

 

 

$

879,063

 

Accounts payable-affiliates

24,542

 

 

28,469

 

Accrued expenses and other payables

336,126

 

 

191,731

 

Advance payments received from customers

27,045

 

 

8,461

 

Current maturities of long-term debt

649

 

 

648

 

Operating lease obligations

68,084

 

 

 

Liabilities held for sale

 

 

142,781

 

Total current liabilities

1,298,510

 

 

1,251,153

 

LONG-TERM DEBT, net of debt issuance costs of $20,581 and $12,008, respectively, and current maturities

2,773,235

 

 

2,160,133

 

OPERATING LEASE OBLIGATIONS

132,132

 

 

 

OTHER NONCURRENT LIABILITIES

64,487

 

 

63,575

 

 

 

 

 

CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 0 and 19,942,169 preferred units issued and outstanding, respectively

 

 

149,814

 

CLASS D 9.00% PREFERRED UNITS, 400,000 and 0 preferred units issued and outstanding, respectively

343,748

 

 

 

 

 

 

 

EQUITY:

 

 

 

General partner, representing a 0.1% interest, 128,169 and 124,633 notional units, respectively

(51,014

)

 

(50,603

)

Limited partners, representing a 99.9% interest, 128,040,420 and 124,508,497 common units issued and outstanding, respectively

1,697,015

 

 

2,067,197

 

Class B preferred limited partners, 12,585,642 and 8,400,000 preferred units issued and outstanding, respectively

305,488

 

 

202,731

 

Class C preferred limited partners, 1,800,000 and 0 preferred units issued and outstanding, respectively

42,905

 

 

 

Accumulated other comprehensive loss

(264

)

 

(255

)

Noncontrolling interests

57,781

 

 

58,748

 

Total equity

2,051,911

 

 

2,277,818

 

Total liabilities and equity

$

6,664,023

$

5,902,493

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)

 

 

 

Three Months Ended September 30,

 

Six Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

REVENUES:

 

 

 

 

 

 

 

 

Crude Oil Logistics

 

$

641,152

 

 

$

860,054

 

 

$

1,357,312

 

 

$

1,643,884

 

Water Solutions

 

101,249

 

 

79,764

 

 

173,032

 

 

155,909

 

Liquids

 

328,509

 

 

550,442

 

 

676,156

 

 

1,010,339

 

Refined Products and Renewables

 

3,218,162

 

 

3,625,123

 

 

7,248,742

 

 

6,564,168

 

Other

 

264

 

 

592

 

 

519

 

 

747

 

Total Revenues

 

4,289,336

 

 

5,115,975

 

 

9,455,761

 

 

9,375,047

 

COST OF SALES:

 

 

 

 

 

 

 

 

Crude Oil Logistics

 

569,699

 

 

792,735

 

 

1,218,939

 

 

1,540,980

 

Water Solutions

 

(6,496

)

 

7,892

 

 

(9,303

)

 

22,161

 

Liquids

 

296,246

 

 

520,944

 

 

613,598

 

 

961,459

 

Refined Products and Renewables

 

3,197,492

 

 

3,622,915

 

 

7,228,208

 

 

6,625,845

 

Other

 

435

 

 

718

 

 

900

 

 

987

 

Total Cost of Sales

 

4,057,376

 

 

4,945,204

 

 

9,052,342

 

 

9,151,432

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

Operating

 

75,433

 

 

58,510

 

 

137,529

 

 

112,977

 

General and administrative

 

43,908

 

 

39,328

 

 

64,250

 

 

61,669

 

Depreciation and amortization

 

63,113

 

 

52,598

 

 

116,867

 

 

104,490

 

Loss on disposal or impairment of assets, net

 

3,111

 

 

5,988

 

 

2,144

 

 

107,323

 

Revaluation of liabilities

 

 

 

 

 

 

 

800

 

Operating Income (Loss)

 

46,395

 

 

14,347

 

 

82,629

 

 

(163,644

)

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

(Loss) equity in earnings of unconsolidated entities

 

(265

)

 

379

 

 

(257

)

 

598

 

Interest expense

 

(45,016

)

 

(41,358

)

 

(84,910

)

 

(87,625

)

Loss on early extinguishment of liabilities, net

 

 

 

 

 

 

 

(137

)

Other income (expense), net

 

184

 

 

1,301

 

 

1,193

 

 

(32,602

)

Income (Loss) From Continuing Operations Before Income Taxes

 

1,298

 

 

(25,331

)

 

(1,345

)

 

(283,410

)

INCOME TAX EXPENSE

 

(640

)

 

(691

)

 

(319

)

 

(1,342

)

Income (Loss) From Continuing Operations

 

658

 

 

(26,022

)

 

(1,664

)

 

(284,752

)

(Loss) Income From Discontinued Operations, net of Tax

 

(202,024

)

 

380,961

 

 

(191,663

)

 

470,402

 

Net (Loss) Income

 

(201,366

)

 

354,939

 

 

(193,327

)

 

185,650

 

LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

129

 

 

518

 

 

397

 

 

863

 

LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS

 

 

 

48

 

 

 

 

446

 

NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP

 

$

(201,237

)

 

$

355,505

 

 

$

(192,930

)

 

$

186,959

 

NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

 

$

(16,295

)

 

$

(49,466

)

 

$

(147,714

)

 

$

(327,764

)

NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

 

$

(201,822

)

 

$

380,627

 

 

$

(191,471

)

 

$

470,377

 

NET (LOSS) INCOME ALLOCATED TO COMMON UNITHOLDERS

 

$

(218,117

)

 

$

331,161

 

 

$

(339,185

)

 

$

142,613

 

BASIC (LOSS) INCOME PER COMMON UNIT

 

 

 

 

 

 

 

 

Loss From Continuing Operations

 

$

(0.13

)

 

$

(0.40

)

 

$

(1.17

)

 

$

(2.69

)

(Loss) Income From Discontinued Operations, net of Tax

 

(1.59

)

 

3.10

 

 

(1.51

)

 

3.86

 

Net (Loss) Income

 

$

(1.72

)

 

$

2.70

 

 

$

(2.68

)

 

$

1.17

 

DILUTED (LOSS) INCOME PER COMMON UNIT

 

 

 

 

 

 

 

 

Loss From Continuing Operations

 

$

(0.13

)

 

$

(0.40

)

 

$

(1.17

)

 

$

(2.69

)

(Loss) Income From Discontinued Operations, net of Tax

 

(1.59

)

 

3.10

 

 

(1.51

)

 

3.86

 

Net (Loss) Income

 

$

(1.72

)

 

$

2.70

 

 

$

(2.68

)

 

$

1.17

 

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

 

126,979,034

 

 

122,380,197

 

 

126,435,870

 

 

121,964,593

 

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

126,979,034

122,380,197

126,435,870

121,964,593

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION

(Unaudited)

The following table reconciles NGL’s net (loss) income to NGL’s EBITDA, Adjusted EBITDA and Distributable Cash Flow:

 

 

 

Three Months Ended September 30,

 

Six Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands)

Net (loss) income

 

$

(201,366

)

 

$

354,939

 

 

$

(193,327

)

 

$

185,650

 

Less: Net loss attributable to noncontrolling interests

 

129

 

 

518

 

 

397

 

 

863

 

Less: Net loss attributable to redeemable noncontrolling interests

 

 

 

48

 

 

 

 

446

 

Net (loss) income attributable to NGL Energy Partners LP

 

(201,237

)

 

355,505

 

 

(192,930

)

 

186,959

 

Interest expense

 

45,113

 

 

41,367

 

 

85,023

 

 

87,779

 

Income tax expense

 

650

 

 

815

 

 

339

 

 

1,466

 

Depreciation and amortization

 

63,266

 

 

53,507

 

 

118,110

 

 

115,082

 

EBITDA

 

(92,208

)

 

451,194

 

 

10,542

 

 

391,286

 

Net unrealized (gains) losses on derivatives

 

(5,462

)

 

(1,893

)

 

(8,936

)

 

17,060

 

Inventory valuation adjustment (1)

 

(5,439

)

 

25,770

 

 

(25,185

)

 

1,168

 

Lower of cost or market adjustments

 

(901

)

 

 

 

(1,819

)

 

(413

)

Loss (gain) on disposal or impairment of assets, net

 

177,561

 

 

(403,185

)

 

176,594

 

 

(301,418

)

Loss on early extinguishment of liabilities, net

 

 

 

 

 

 

 

137

 

Equity-based compensation expense (2)

 

21,295

 

 

19,219

 

 

24,996

 

 

24,730

 

Acquisition expense (3)

 

5,085

 

 

2,863

 

 

7,176

 

 

4,115

 

Revaluation of liabilities (4)

 

 

 

 

 

 

 

800

 

Gavilon legal matter settlement (5)

 

 

 

 

 

 

 

35,000

 

Other (6)

 

3,332

 

 

1,402

 

 

6,655

 

 

3,219

 

Adjusted EBITDA

 

$

103,263

 

 

$

95,370

 

 

$

190,023

 

 

$

175,684

 

Adjusted EBITDA - Discontinued Operations

 

$

(15,714

)

 

$

3,708

 

 

$

(22,782

)

 

$

12,505

 

Adjusted EBITDA - Continuing Operations

 

$

118,977

 

 

$

91,662

 

 

$

212,805

 

 

$

163,179

 

Less: Cash interest expense (7)

 

42,742

 

 

38,891

 

 

80,503

 

 

82,722

 

Less: Income tax expense

 

640

 

 

689

 

 

319

 

 

1,340

 

Less: Maintenance capital expenditures

 

16,461

 

 

15,298

 

 

33,390

 

 

27,685

 

Less: Other (8)

 

127

 

 

309

 

 

127

 

 

309

 

Distributable Cash Flow - Continuing Operations

 

$

59,007

 

 

$

36,475

 

 

$

98,466

 

 

$

51,123

 

_________

(1)

Amount reflects the difference between the market value of the inventory of NGL’s 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” above for a further discussion.

(2)

Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in the footnotes 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 (as discussed in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019), 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 the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019). 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)

Amounts for the three months and six months ended September 30, 2019 and 2018 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations.

(7)

Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.

(8)

Amounts represents cash paid to settle asset retirement obligations.

ADJUSTED EBITDA RECONCILIATION BY SEGMENT

 

 

Three Months Ended September 30, 2019

 

Crude Oil Logistics

 

Water Solutions

 

Liquids

 

Refined Products and Renewables

 

Corporate and Other

 

Continuing Operations

 

Discontinued Operations (TPSL)

 

Consolidated

 

(in thousands)

Operating income (loss)

$

38,520

 

 

$

21,274

 

 

$

8,397

 

 

$

16,681

 

 

$

(38,477

)

 

$

46,395

 

 

$

 

 

$

46,395

 

Depreciation and amortization

17,693

 

 

37,921

 

 

6,611

 

 

125

 

 

763

 

 

63,113

 

 

 

 

63,113

 

Amortization recorded to cost of sales

 

 

 

 

23

 

 

65

 

 

 

 

88

 

 

 

 

88

 

Net unrealized (gains) losses on derivatives

(4,126

)

 

(5,870

)

 

4,534

 

 

 

 

 

 

(5,462

)

 

 

 

(5,462

)

Inventory valuation adjustment

 

 

 

 

 

 

(4,100

)

 

 

 

(4,100

)

 

 

 

(4,100

)

Lower of cost or market adjustments

 

 

 

 

 

 

(921

)

 

 

 

(921

)

 

 

 

(921

)

(Gain) loss on disposal or impairment of assets, net

(630

)

 

3,744

 

 

(4

)

 

 

 

1

 

 

3,111

 

 

 

 

3,111

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

21,295

 

 

21,295

 

 

 

 

21,295

 

Acquisition expense

 

 

 

 

 

 

 

 

5,085

 

 

5,085

 

 

 

 

5,085

 

Other income (expense), net

43

 

 

(2

)

 

32

 

 

(51

)

 

162

 

 

184

 

 

 

 

184

 

Adjusted EBITDA attributable to unconsolidated entities

 

 

 

 

(26

)

 

 

 

(147

)

 

(173

)

 

 

 

(173

)

Adjusted EBITDA attributable to noncontrolling interest

 

 

(319

)

 

(283

)

 

 

 

 

 

(602

)

 

 

 

(602

)

Intersegment transactions (1)

 

 

 

 

 

 

(12,368

)

 

 

 

(12,368

)

 

 

 

(12,368

)

Other

3,132

 

 

131

 

 

17

 

 

52

 

 

 

 

3,332

 

 

 

 

3,332

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

(15,714

)

 

(15,714

)

Adjusted EBITDA

$

54,632

 

 

$

56,879

 

 

$

19,301

 

 

$

(517

)

 

$

(11,318

)

 

$

118,977

 

 

$

(15,714

)

 

$

103,263

 

 

Three Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued Operations

 

 

 

Crude Oil Logistics

 

Water Solutions

 

Liquids

 

Refined Products and Renewables

 

Corporate and Other

 

Continuing Operations

 

TPSL

 

Retail Propane

 

Consolidated

 

(in thousands)

Operating income (loss)

$

31,022

 

 

$

9,770

 

 

$

10,758

 

 

$

(1,851

)

 

$

(35,352

)

 

$

14,347

 

 

$

 

 

$

 

 

$

14,347

 

Depreciation and amortization

18,870

 

 

26,342

 

 

6,459

 

 

168

 

 

759

 

 

52,598

 

 

 

 

 

 

52,598

 

Amortization recorded to cost of sales

 

 

 

 

36

 

 

65

 

 

 

 

101

 

 

 

 

 

 

101

 

Net unrealized (gains) losses on derivatives

(6,142

)

 

1,788

 

 

2,476

 

 

 

 

 

 

(1,878

)

 

 

 

 

 

(1,878

)

Inventory valuation adjustment

 

 

 

 

 

 

10,181

 

 

 

 

10,181

 

 

 

 

 

 

10,181

 

Lower of cost or market adjustments

 

 

 

 

 

 

53

 

 

 

 

53

 

 

 

 

 

 

53

 

Loss on disposal or impairment of assets, net

3,367

 

 

730

 

 

1,004

 

 

 

 

887

 

 

5,988

 

 

 

 

 

 

5,988

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

19,219

 

 

19,219

 

 

 

 

 

 

19,219

 

Acquisition expense

 

 

 

 

1

 

 

 

 

2,864

 

 

2,865

 

 

 

 

 

 

2,865

 

Other income (expense), net

9

 

 

(370

)

 

9

 

 

93

 

 

1,560

 

 

1,301

 

 

 

 

 

 

1,301

 

Adjusted EBITDA attributable to unconsolidated entities

 

 

423

 

 

 

 

 

 

 

 

423

 

 

 

 

 

 

423

 

Adjusted EBITDA attributable to noncontrolling interest

 

 

26

 

 

(229

)

 

 

 

 

 

(203

)

 

 

 

 

 

(203

)

Intersegment transactions (1)

 

 

 

 

 

 

(14,734

)

 

 

 

(14,734

)

 

 

 

 

 

(14,734

)

Other

1,351

 

 

104

 

 

16

 

 

(70

)

 

 

 

1,401

 

 

 

 

 

 

1,401

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

4,219

 

 

(511

)

 

3,708

 

Adjusted EBITDA

$

48,477

 

 

$

38,813

 

 

$

20,530

 

 

$

(6,095

)

 

$

(10,063

)

 

$

91,662

 

 

$

4,219

 

 

$

(511

)

 

$

95,370

 

 

Six Months Ended September 30, 2019

 

Crude Oil Logistics

 

Water Solutions

 

Liquids

 

Refined Products and Renewables

 

Corporate and Other

 

Continuing Operations

 

Discontinued Operations (TPSL)

 

Consolidated

 

(in thousands)

Operating income (loss)

$

72,322

 

 

$

34,963

 

 

$

16,881

 

 

$

12,282

 

 

$

(53,819

)

 

$

82,629

 

 

$

 

 

$

82,629

 

Depreciation and amortization

35,278

 

 

65,992

 

 

13,840

 

 

251

 

 

1,506

 

 

116,867

 

 

 

 

116,867

 

Amortization recorded to cost of sales

 

 

 

 

46

 

 

130

 

 

 

 

176

 

 

 

 

176

 

Net unrealized (gains) losses on derivatives

(5,984

)

 

(6,037

)

 

3,085

 

 

 

 

 

 

(8,936

)

 

 

 

(8,936

)

Inventory valuation adjustment

 

 

 

 

 

 

(15,650

)

 

 

 

(15,650

)

 

 

 

(15,650

)

Lower of cost or market adjustments

 

 

 

 

(1,508

)

 

419

 

 

 

 

(1,089

)

 

 

 

(1,089

)

(Gain) loss on disposal or impairment of assets, net

(1,246

)

 

3,155

 

 

(7

)

 

 

 

242

 

 

2,144

 

 

 

 

2,144

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

24,996

 

 

24,996

 

 

 

 

24,996

 

Acquisition expense

 

 

20

 

 

 

 

 

 

7,156

 

 

7,176

 

 

 

 

7,176

 

Other income (expense), net

39

 

 

(2

)

 

44

 

 

(44

)

 

1,156

 

 

1,193

 

 

 

 

1,193

 

Adjusted EBITDA attributable to unconsolidated entities

 

 

 

 

(22

)

 

 

 

(136

)

 

(158

)

 

 

 

(158

)

Adjusted EBITDA attributable to noncontrolling interest

 

 

(394

)

 

(680

)

 

 

 

 

 

(1,074

)

 

 

 

(1,074

)

Intersegment transactions (1)

 

 

 

 

 

 

(2,124

)

 

 

 

(2,124

)

 

 

 

(2,124

)

Other

6,297

 

 

271

 

 

35

 

 

52

 

 

 

 

6,655

 

 

 

 

6,655

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

(22,782

)

 

(22,782

)

Adjusted EBITDA

$

106,706

 

 

$

97,968

 

 

$

31,714

 

 

$

(4,684

)

 

$

(18,899

)

 

$

212,805

 

 

$

(22,782

)

 

$

190,023

 

 

Six Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued Operations

 

 

 

Crude Oil Logistics

 

Water Solutions

 

Liquids

 

Refined Products and Renewables

 

Corporate and Other

 

Continuing Operations

 

TPSL

 

Retail Propane

 

Consolidated

 

(in thousands)

Operating (loss) income

$

(68,716

)

 

$

10,739

 

 

$

13,381

 

 

$

(66,266

)

 

$

(52,782

)

 

$

(163,644

)

 

$

 

 

$

 

 

$

(163,644

)

Depreciation and amortization

38,099

 

 

51,651

 

 

12,927

 

 

336

 

 

1,477

 

 

104,490

 

 

 

 

 

 

104,490

 

Amortization recorded to cost of sales

80

 

 

 

 

73

 

 

130

 

 

 

 

283

 

 

 

 

 

 

283

 

Net unrealized losses on derivatives

1,270

 

 

10,898

 

 

4,813

 

 

 

 

 

 

16,981

 

 

 

 

 

 

16,981

 

Inventory valuation adjustment

 

 

 

 

 

 

1,555

 

 

 

 

1,555

 

 

 

 

 

 

1,555

 

Lower of cost or market adjustments

 

 

 

 

(504

)

 

89

 

 

 

 

(415

)

 

 

 

 

 

(415

)

Loss (gain) on disposal or impairment of assets, net

105,261

 

 

3,205

 

 

994

 

 

(3,026

)

 

889

 

 

107,323

 

 

 

 

 

 

107,323

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

24,730

 

 

24,730

 

 

 

 

 

 

24,730

 

Acquisition expense

 

 

 

 

161

 

 

 

 

4,000

 

 

4,161

 

 

 

 

 

 

4,161

 

Other income (expense), net

23

 

 

(370

)

 

44

 

 

(58

)

 

(32,241

)

 

(32,602

)

 

 

 

 

 

(32,602

)

Adjusted EBITDA attributable to unconsolidated entities

 

 

369

 

 

 

 

476

 

 

 

 

845

 

 

 

 

 

 

845

 

Adjusted EBITDA attributable to noncontrolling interest

 

 

(86

)

 

(551

)

 

 

 

 

 

(637

)

 

 

 

 

 

(637

)

Revaluation of liabilities

 

 

800

 

 

 

 

 

 

 

 

800

 

 

 

 

 

 

800

 

Gavilon legal matter settlement

 

 

 

 

 

 

 

 

35,000

 

 

35,000

 

 

 

 

 

 

35,000

 

Intersegment transactions (1)

 

 

 

 

 

 

61,091

 

 

 

 

61,091

 

 

 

 

 

 

61,091

 

Other

2,901

 

 

204

 

 

33

 

 

80

 

 

 

 

3,218

 

 

 

 

 

 

3,218

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

7,480

 

 

5,025

 

 

12,505

 

Adjusted EBITDA

$

78,918

 

 

$

77,410

 

 

$

31,371

 

 

$

(5,593

)

 

$

(18,927

)

 

$

163,179

 

 

$

7,480

 

 

$

5,025

 

 

$

175,684

 

_________

(1)

Amount reflects the intersegment transactions between the continuing businesses within the Refined Products and Renewables segment and TPSL that are eliminated in consolidation.

OPERATIONAL DATA

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

September 30,

 

September 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per day amounts)

Crude Oil Logistics:

 

 

 

 

 

 

 

Crude oil sold (barrels)

10,421

 

 

11,891

 

 

21,712

 

 

23,116

 

Crude oil transported on owned pipelines (barrels)

10,922

 

 

9,578

 

 

22,711

 

 

19,565

 

Crude oil storage capacity - owned and leased (barrels) (1)

 

 

 

 

5,232

 

 

7,287

 

Crude oil inventory (barrels) (1)

 

 

 

 

1,425

 

 

681

 

 

 

 

 

 

 

 

 

Water Solutions:

 

 

 

 

 

 

 

Wastewater processed (barrels per day)

 

 

 

 

 

 

 

Northern Delaware Basin

465,453

 

 

7,850

 

 

277,802

 

 

3,946

 

Permian Basin

332,925

 

 

482,011

 

 

322,291

 

 

451,939

 

Eagle Ford Basin

279,754

 

 

271,059

 

 

273,533

 

 

275,099

 

DJ Basin

169,485

 

 

166,152

 

 

169,552

 

 

151,216

 

Other Basins

10,736

 

 

80,577

 

 

11,561

 

 

81,801

 

Total

1,258,353

 

 

1,007,649

 

 

1,054,739

 

 

964,001

 

Solids processed (barrels per day)

5,759

 

 

6,995

 

 

5,601

 

 

6,450

 

Skim oil sold (barrels per day)

3,079

 

 

3,326

 

 

2,970

 

 

3,470

 

 

 

 

 

 

 

 

 

Liquids:

 

 

 

 

 

 

 

Propane sold (gallons)

262,183

 

 

266,654

 

 

507,450

 

 

500,440

 

Butane sold (gallons)

170,169

 

 

131,424

 

 

312,648

 

 

244,449

 

Other products sold (gallons)

124,614

 

 

124,935

 

 

243,872

 

 

241,920

 

Liquids storage capacity - owned and leased (gallons) (1)

 

 

 

 

397,343

 

 

399,967

 

Propane inventory (gallons) (1)

 

 

 

 

104,048

 

 

117,206

 

Butane inventory (gallons) (1)

 

 

 

 

80,839

 

 

67,448

 

Other products inventory (gallons) (1)

 

 

 

 

9,705

 

 

7,658

 

 

 

 

 

 

 

 

 

Refined Products and Renewables (continuing operations):

 

 

 

 

 

 

 

Gasoline sold (barrels)

33,182

 

 

33,719

 

 

72,992

 

 

60,334

 

Diesel sold (barrels)

8,611

 

 

7,388

 

 

18,357

 

 

14,580

 

Ethanol sold (barrels)

454

 

 

621

 

 

1,133

 

 

1,165

 

Biodiesel sold (barrels)

195

 

 

250

 

 

358

 

 

578

 

Refined Products and Renewables storage capacity - leased (barrels) (1)

 

 

 

 

4,474

 

 

3,773

 

Gasoline inventory (barrels) (1)

 

 

 

 

1,548

 

 

1,711

 

Diesel inventory (barrels) (1)

 

 

 

 

288

 

 

527

 

Ethanol inventory (barrels) (1)

 

 

 

 

1,087

 

 

1,072

 

Biodiesel inventory (barrels) (1)

 

 

 

 

406

 

 

942

 

_________

(1)

Information is presented as of September 30, 2019 and September 30, 2018, respectively.

 

NGL Energy Partners LP Trey Karlovich, 918-481-1119 Chief Financial Officer and Executive Vice President Trey.Karlovich@nglep.com

or

Linda Bridges, 918-481-1119 Senior Vice President - Finance and Treasurer Linda.Bridges@nglep.com

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