NGL Energy Partners LP Announces Record Third Quarter Fiscal 2020 Financial Results

NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported income from continuing operations for the quarter ended December 31, 2019 of $49.1 million, compared to income from continuing operations of $97.2 million for the quarter ended December 31, 2018. For the nine months ended December 31, 2019, the Partnership reported income from continuing operations of $42.5 million, compared to a loss from continuing operations of $137.3 million for the nine months ended December 31, 2018.

“Our transformation to a simpler business model with improved predictability of cash flows and reduced volatility in earnings is substantially complete,” stated Mike Krimbill, the Partnership’s CEO. “During this quarter, our Water Solutions segment closed the Hillstone acquisition, which added important long-term acreage dedications and minimum volume commitments with some of the highest quality producers in the Delaware Basin. Additionally, we exited another portion of our Refined Products and Renewables segment, further streamlining our business and reducing working capital debt. Overall, this was a tremendous quarter from an operating standpoint as we transported almost 1.6 million barrels per day of produced water on our systems and 134,000 barrels per day of crude oil on Grand Mesa Pipeline. Our Liquids segment had a particularly strong quarter as we optimized our expanded asset position, which includes 27 terminals and approximately 5,000 rail cars. Our results for the quarter illustrate the benefit of asset diversification across our three primary business units and we look forward to continuing to build each of these businesses in the coming quarters.”

Highlights for the quarter include:

Acquisition of Hillstone Environmental Partners, LLC (“Hillstone”) completed on October 31, 2019 for a total purchase price of $642.5 million; acquired assets include the following:
- Minimum volume commitments and long-term dedications covering over 110,000 contracted acres, including a 20-year Poker Lake acreage dedication with XTO Energy, a 10-year acreage dedication, including first call rights, with a leading independent exploration and production company, and multiple contracts with one of the largest crude oil and natural gas exploration and production companies in the United States;
- 19 saltwater disposal wells, representing approximately 580,000 barrels per day of permitted disposal capacity;
- A network of produced water pipelines with approximately 680,000 barrels per day of transportation capacity; and
- 22 permits to develop another 660,000 barrels per day of disposal capacity
Income from continuing operations for the third quarter of Fiscal 2020 of $49.1 million, compared to $97.2 million for the third quarter of Fiscal 2019
Adjusted EBITDA from continuing operations for the third quarter of Fiscal 2020 of $200.5 million, compared to $131.3 million for the third quarter of Fiscal 2019
Issued 9.00% Class D Preferred Units for gross proceeds of $200.0 million to fund a portion of the Hillstone acquisition

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

December 31, 2019

December 31, 2018

Operating Income (Loss)

Adjusted EBITDA

Operating Income (Loss)

Adjusted EBITDA

(in thousands)

Crude Oil Logistics

28,696

55,575

32,022

50,693

Liquids

64,084

69,129

21,532

26,992

Water Solutions

(583

)

62,214

86,737

48,250

Refined Products and Renewables

24,954

24,082

20,552

9,118

Corporate and Other

(20,756

)

(10,489

)

(16,394

)

(3,728

)

Total

96,395

200,511

144,449

131,325

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

Results for the third quarter of Fiscal 2020 improved compared to the same quarter in Fiscal 2019 primarily due to increased volumes on our Grand Mesa Pipeline as a result of additional volumes purchased from third parties and increased production in the DJ Basin. During the three months ended December 31, 2019, financial volumes on the Grand Mesa Pipeline averaged approximately 134,000 barrels per day.

Liquids

Total product margin per gallon was $0.098 for the quarter ended December 31, 2019, compared to $0.049 for the quarter ended December 31, 2018. This increase was primarily the result of higher propane, butane, and other product margins, driven primarily by strong butane sales and increased propane product margins as our inventory values aligned with reduced commodity prices.

Propane volumes increased by approximately 39.4 million gallons, or 9.2%, during the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018. Butane volumes increased by approximately 74.2 million gallons, or 36.7%, during the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018. Butane volumes were augmented by steady volumes at our Chesapeake, Virginia export terminal. Other Liquids volumes increased by approximately 3.0 million gallons, or 2.3%, during the quarter ended December 31, 2019 compared to the same period in the prior year.

Water Solutions

The Partnership processed approximately 1,585,000 barrels of produced water per day during the quarter ended December 31, 2019, a 58.8% increase when compared to approximately 999,000 barrels of produced water per day during the quarter ended December 31, 2018. Water Solutions revenue increased to $121.6 million for the quarter ended December 31, 2019, a 61.3% increase over the comparable prior year quarter as a result of the increase in volume, which was primarily driven by our acquisition of Mesquite Disposals Unlimited, LLC (“Mesquite”) and Hillstone. These increases were partially offset by 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 $17.8 million for the quarter ended December 31, 2019, a decrease of $5.5 million from the prior year period. The decrease was primarily due to realized gains on our derivatives of $1.3 million for the quarter ended December 31, 2019 compared to realized gains of $6.1 million for the quarter ended December 31, 2018, and lower skim oil volumes resulting from the sale of our Bakken and South Pecos water disposal businesses. Additionally, the percentage of recovered hydrocarbons per barrel of produced water processed decreased during the quarter ended December 31, 2019, when compared to the quarter ended December 31, 2018, due to an increase in produced water transported through pipelines (which contains less oil per barrel of produced water) and contract structures that allow producers to keep the skim oil recovered from produced water.

Refined Products and Renewables

The Partnership has announced its intention to divest its refined products marketing business in the mid-continent region of the United States (“Mid-Con”) and its gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”). The Partnership completed the sale of certain Mid-Con assets on January 3, 2020. The Partnership determined that these businesses were no longer core to the Partnership’s strategy. The operations of these businesses have been classified as discontinued operations as the exiting of these businesses, along with the sale of TransMontaigne Product Services, LLC (“TPSL”) on September 30, 2019, represent a strategic shift in the Partnership’s operations and will have a significant effect on its operations and financial results going forward. Certain assets and liabilities have also been classified as held for sale.

The results from the Refined Products and Renewables businesses being retained are included in continuing operations for the quarter ended December 31, 2019. These results were positively impacted by the biodiesel tax credit being reinstated in December 2019 for calendar years 2018 and 2019. The tax credit is now effective through December 31, 2022. The total amount of income recognized in earnings from continuing operations totaled $13.8 million during the quarter ended December 31, 2019. An additional amount of $17.3 million was recognized in discontinued operations.

Refined product barrels sold during the quarter ended December 31, 2019 totaled approximately 7.8 million barrels, which was slightly lower than the same period in the prior year. Renewables barrels sold during the quarter ended December 31, 2019 totaled approximately 0.9 million, which was slightly higher than the same period in the prior year.

Corporate and Other

Corporate and Other expenses primarily increased from the comparable prior year period due to costs related to compensation, consulting services and insurance costs as the Partnership has restructured its operations and completed certain acquisitions during this fiscal year.

Capitalization and Liquidity

On October 30, 2019, the Partnership amended its Credit Agreement to adjust the allocation of the commitments of the lenders to make revolving loans thereunder and amend the covenant package. During the quarter, the Partnership also utilized a portion of the accordion feature under its Credit Agreement, whereby two new lenders and one existing lender committed to provide an additional $150.0 million of commitments in total. The Credit Agreement now provides for up to $1.915 billion in aggregate commitments, consisting of (i) a $641.5 million Working Capital Facility for working capital requirements and other general corporate purposes and (ii) a $1.273 billion Expansion Capital Facility for acquisitions, internal growth projects, other capital expenditures and general corporate purposes. Working capital borrowings totaled $447.0 million at December 31, 2019 compared to $896.0 million at March 31, 2019, a decrease of $449.0 million. Expansion capital borrowings totaled $945.0 million, resulting in approximately $1.392 billion outstanding under the revolving credit facility at December 31, 2019.

Total debt outstanding was $3.073 billion at December 31, 2019 compared to $2.161 billion at March 31, 2019, an increase of $912 million due primarily to the redemption of the Partnership’s Class A Preferred Units, the Mesquite and Hillstone acquisitions and the funding of certain capital expenditures, which was partially offset by a reduction in working capital borrowings using proceeds from the sale of TPSL and decreased activity in the Gas Blending and Mid-Con businesses.

The Partnership’s Total Leverage Indebtedness Ratio (as defined in our Credit Agreement) was approximately 5.0x at December 31, 2019. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $417.9 million as of December 31, 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

215,000

220,000

Water Solutions

240,000

250,000

Liquids

115,000

120,000

Refined Products and Renewables

35,000

40,000

Corporate and Other

(40,000

)

(35,000

)

Total Guidance Range

565,000

595,000

Third Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled for 10:00 am Central Time on Thursday, February 6, 2020. 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 February 6, 2020, which can be accessed by dialing (855) 859-2056 and providing access code 4747666.

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. NGL also includes in Adjusted EBITDA certain inventory valuation adjustments related to its Refined Products and Renewables segment, as discussed below. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), income (loss) from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. 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, preferred unit distributions 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)

December 31, 2019

March 31, 2019

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

12,008

18,572

Accounts receivable-trade, net of allowance for doubtful accounts of $4,055 and $4,016, respectively

947,534

998,203

Accounts receivable-affiliates

12,445

12,867

Inventories

183,738

136,128

Prepaid expenses and other current assets

90,694

65,918

Assets held for sale

95,093

580,985

Total current assets

1,341,512

1,812,673

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $504,731 and $417,457, respectively

2,704,112

1,828,940

GOODWILL

1,307,055

1,110,456

INTANGIBLE ASSETS, net of accumulated amortization of $603,573 and $503,117, respectively

1,600,555

800,889

INVESTMENTS IN UNCONSOLIDATED ENTITIES

22,236

1,127

OPERATING LEASE RIGHT-OF-USE ASSETS

183,141

—

OTHER NONCURRENT ASSETS

83,944

113,857

ASSETS HELD FOR SALE

—

234,551

Total assets

7,242,555

5,902,493

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable-trade

846,767

879,063

Accounts payable-affiliates

29,374

28,469

Accrued expenses and other payables

352,848

107,759

Advance payments received from customers

29,993

8,461

Current maturities of long-term debt

4,835

648

Operating lease obligations

57,091

—

Liabilities held for sale

40,899

226,753

Total current liabilities

1,361,807

1,251,153

LONG-TERM DEBT, net of debt issuance costs of $20,263 and $12,008, respectively, and current maturities

3,068,205

2,160,133

OPERATING LEASE OBLIGATIONS

122,798

—

OTHER NONCURRENT LIABILITIES

104,060

63,542

NONCURRENT LIABILITIES HELD FOR SALE

—

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, 600,000 and 0 preferred units issued and outstanding, respectively

531,768

—

EQUITY:

General partner, representing a 0.1% interest, 128,477 and 124,633 notional units, respectively

(51,038

)

(50,603

)

Limited partners, representing a 99.9% interest, 128,348,906 and 124,508,497 common units issued and outstanding, respectively

1,682,071

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

(248

)

(255

)

Noncontrolling interests

74,739

58,748

Total equity

2,053,917

2,277,818

Total liabilities and equity

7,242,555

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 December 31,

Nine Months Ended December 31,

2019

2018

2019

2018

REVENUES:

Crude Oil Logistics

690,989

751,180

2,048,301

2,395,064

Water Solutions

121,607

75,458

294,639

231,367

Liquids

685,625

749,433

1,361,781

1,759,772

Refined Products and Renewables

728,028

718,979

2,197,236

2,178,734

Other

280

319

799

1,066

Total Revenues

2,226,529

2,295,369

5,902,756

6,566,003

COST OF SALES:

Crude Oil Logistics

628,443

685,417

1,847,382

2,226,397

Water Solutions

14,004

(39,470

)

4,701

(17,309

)

Liquids

592,340

707,187

1,205,938

1,668,646

Refined Products and Renewables

700,248

695,033

2,155,247

2,167,458

Other

437

494

1,337

1,481

Total Cost of Sales

1,935,472

2,048,661

5,214,605

6,046,673

OPERATING COSTS AND EXPENSES:

Operating

94,412

60,465

230,610

172,219

General and administrative

29,150

24,759

93,400

86,428

Depreciation and amortization

73,726

53,281

190,593

157,771

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

(12,626

)

(36,246

)

(10,482

)

71,077

Revaluation of liabilities

10,000

—

10,000

800

Operating Income

96,395

144,449

174,030

31,035

OTHER INCOME (EXPENSE):

Equity in earnings of unconsolidated entities

534

1,777

277

2,375

Interest expense

(46,920

)

(39,151

)

(131,814

)

(126,776

)

Loss on early extinguishment of liabilities, net

—

(10,083

)

—

(10,220

)

Other (expense) income, net

(226

)

1,187

967

(31,415

)

Income (Loss) From Continuing Operations Before Income Taxes

49,783

98,179

43,460

(135,001

)

INCOME TAX EXPENSE

(677

)

(980

)

(996

)

(2,322

)

Income (Loss) From Continuing Operations

49,106

97,199

42,464

(137,323

)

(Loss) Income From Discontinued Operations, net of Tax

(6,115

)

13,329

(192,800

)

433,501

Net Income (Loss)

42,991

110,528

(150,336

)

296,178

LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

166

307

563

1,170

LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS

—

446

NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP

43,157

110,835

(149,773

)

297,794

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

28,895

67,656

(123,792

)

(209,928

)

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

(6,109

)

13,316

(192,607

)

433,513

NET INCOME (LOSS) ALLOCATED TO COMMON UNITHOLDERS

22,786

80,972

(316,399

)

223,585

BASIC INCOME (LOSS) PER COMMON UNIT

Income (Loss) From Continuing Operations

0.23

0.54

(0.97

)

(1.71

)

(Loss) Income From Discontinued Operations, net of Tax

(0.05

)

0.11

(1.52

)

3.53

Net Income (Loss)

0.18

0.65

(2.49

)

1.82

DILUTED INCOME (LOSS) PER COMMON UNIT

Income (Loss) From Continuing Operations

0.22

0.53

(0.97

)

(1.71

)

(Loss) Income From Discontinued Operations, net of Tax

(0.05

)

0.11

(1.52

)

3.53

Net Income (Loss)

0.18

0.64

(2.49

)

1.82

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

128,201,369

123,892,680

127,026,510

122,609,625

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

129,358,590

125,959,751

127,026,510

122,609,625

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION

(Unaudited)

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

Three Months Ended December 31,

Nine Months Ended December 31,

2019

2018

2019

2018

(in thousands)

Net income (loss)

42,991

110,528

(150,336

)

296,178

Less: Net loss attributable to noncontrolling interests

166

307

563

1,170

Less: Net loss attributable to redeemable noncontrolling interests

—

446

Net income (loss) attributable to NGL Energy Partners LP

43,157

110,835

(149,773

)

297,794

Interest expense

46,946

39,151

131,969

126,930

Income tax expense

676

988

1,015

2,454

Depreciation and amortization

72,939

54,153

191,049

169,235

EBITDA

163,718

205,127

174,260

596,413

Net unrealized losses (gains) on derivatives

16,787

(47,909

)

7,851

(30,849

)

Inventory valuation adjustment (1)

(370

)

(61,665

)

(25,555

)

(60,497

)

Lower of cost or market adjustments

(646

)

48,198

(2,465

)

47,785

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

(4,837

)

(36,507

)

171,757

(337,925

)

Loss on early extinguishment of liabilities, net

—

10,083

—

10,220

Equity-based compensation expense (2)

2,213

7,845

27,209

32,575

Acquisition expense (3)

11,419

5,155

18,595

9,270

Revaluation of liabilities (4)

10,000

—

10,000

800

Gavilon legal matter settlement (5)

—

(212

)

—

34,788

Other (6)

4,026

2,475

10,681

5,694

Adjusted EBITDA

202,310

132,590

392,333

308,274

Adjusted EBITDA - Discontinued Operations

1,799

1,265

(35,362

)

3,839

Adjusted EBITDA - Continuing Operations

200,511

131,325

427,695

304,435

Less: Cash interest expense (7)

43,919

36,922

124,406

119,644

Less: Income tax expense

676

982

995

2,322

Less: Maintenance capital expenditures

16,964

9,521

50,354

33,457

Less: Preferred unit distributions

12,612

11,174

31,484

33,522

Less: Other (8)

515

237

642

546

Distributable Cash Flow - Continuing Operations

125,825

72,489

219,814

114,944

(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 December 31, 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 Mesquite and Hillstone, along with 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 December 31, 2019), partially offset by reimbursement for certain legal costs incurred in prior periods.

(4)

Amounts for the three months and nine months ended December 31, 2019 represent the non-cash valuation adjustment of our contingent consideration liability issued by us as part of our acquisition of Mesquite (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 December 31, 2019). Amount for the nine months ended December 31, 2018 represents 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 (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 December 31, 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 nine months ended December 31, 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 December 31, 2019

Crude Oil Logistics

Water Solutions

Liquids

Refined Products and Renewables

Corporate and Other

Continuing Operations

Discontinued Operations (TPSL, Mid-Con, Gas Blending)

Consolidated

(in thousands)

Operating income (loss)

28,696

(583

)

64,084

24,954

(20,756

)

96,395

—

96,395

Depreciation and amortization

17,950

48,074

6,811

132

759

73,726

—

73,726

Amortization recorded to cost of sales

—

Net unrealized losses (gains) on derivatives

6,060

11,924

(1,197

)

—

16,787

—

16,787

Inventory valuation adjustment

—

(2,099

)

—

(2,099

)

—

(2,099

)

Lower of cost or market adjustments

—

(18

)

—

(18

)

—

(18

)

Gain on disposal or impairment of assets, net

(182

)

(12,176

)

(26

)

—

(242

)

(12,626

)

—

(12,626

)

Equity-based compensation expense

—

2,213

—

2,213

Acquisition expense

—

3,967

—

7,452

11,419

—

11,419

Other income (expense), net

(450

)

119

(226

)

—

(226

)

Adjusted EBITDA attributable to unconsolidated entities

—

685

—

(34

)

668

—

668

Adjusted EBITDA attributable to noncontrolling interest

—

(203

)

(616

)

—

(819

)

—

(819

)

Revaluation of liabilities

—

10,000

—

10,000

—

10,000

Intersegment transactions (1)

—

979

—

979

—

979

Other

2,987

976

—

4,026

—

4,026

Discontinued operations

—

1,799

Adjusted EBITDA

55,575

62,214

69,129

24,082

(10,489

)

200,511

1,799

202,310

Three Months Ended December 31, 2018

Discontinued Operations

Crude Oil Logistics

Water Solutions

Liquids

Refined Products and Renewables

Corporate and Other

Continuing Operations

TPSL, Mid-Con, Gas Blending

Retail Propane

Consolidated

(in thousands)

Operating income (loss)

32,022

86,737

21,532

20,552

(16,394

)

144,449

—

144,449

Depreciation and amortization

18,387

27,561

6,412

168

753

53,281

—

53,281

Amortization recorded to cost of sales

—

101

—

101

Net unrealized gains on derivatives

(13,165

)

(34,114

)

(630

)

—

(47,909

)

—

(47,909

)

Inventory valuation adjustment

—

(2,881

)

—

(2,881

)

—

(2,881

)

Lower of cost or market adjustments

11,446

—

1,572

—

13,018

—

13,018

Gain on disposal or impairment of assets, net

(75

)

(36,171

)

—

(36,246

)

—

(36,246

)

Equity-based compensation expense

—

7,845

—

7,845

Acquisition expense

—

3,459

—

1,696

5,155

—

5,155

Other income (expense), net

(1,134

)

(285

)

2,584

1,187

—

1,187

Adjusted EBITDA attributable to unconsolidated entities

—

1,845

—

1,845

—

1,845

Adjusted EBITDA attributable to noncontrolling interest

—

(33

)

(394

)

—

(427

)

—

(427

)

Gavilon legal matter settlement

—

(212

)

(212

)

—

(212

)

Intersegment transactions (1)

—

(10,359

)

—

(10,359

)

—

(10,359

)

Other

2,075

100

287

—

2,478

—

2,478

Discontinued operations

—

1,423

(158

)

1,265

Adjusted EBITDA

50,693

48,250

26,992

9,118

(3,728

)

131,325

1,423

(158

)

132,590

Nine Months Ended December 31, 2019

Crude Oil Logistics

Water Solutions

Liquids

Refined Products and Renewables

Corporate and Other

Continuing Operations

Discontinued Operations (TPSL, Mid-Con, Gas Blending)

Consolidated

(in thousands)

Operating income (loss)

101,018

34,380

80,965

32,242

(74,575

)

174,030

—

174,030

Depreciation and amortization

53,228

114,066

20,651

383

2,265

190,593

—

190,593

Amortization recorded to cost of sales

—

195

—

262

—

262

Net unrealized losses on derivatives

5,887

1,888

—

7,851

—

7,851

Inventory valuation adjustment

—

(264

)

—

(264

)

—

(264

)

Lower of cost or market adjustments

—

(1,508

)

—

(1,489

)

—

(1,489

)

Gain on disposal or impairment of assets, net

(1,428

)

(9,021

)

(33

)

—

(10,482

)

—

(10,482

)

Equity-based compensation expense

—

27,209

—

27,209

Acquisition expense

—

3,987

—

14,608

18,595

—

18,595

Other income (expense), net

103

(452

)

(20

)

1,275

967

—

967

Adjusted EBITDA attributable to unconsolidated entities

—

685

)

—

(170

)

510

—

510

Adjusted EBITDA attributable to noncontrolling interest

—

(597

)

(1,296

)

—

(1,893

)

—

(1,893

)

Revaluation of liabilities

—

10,000

—

10,000

—

10,000

Intersegment transactions (1)

—

1,125

—

1,125

—

1,125

Other

9,284

1,247

—

10,681

—

10,681

Discontinued operations

—

(35,362

)

(35,362

)

Adjusted EBITDA

162,281

160,182

100,843

33,777

(29,388

)

427,695

(35,362

)

392,333

Nine Months Ended December 31, 2018

Discontinued Operations

Crude Oil Logistics

Water Solutions

Liquids

Refined Products and Renewables

Corporate and Other

Continuing Operations

TPSL, Mid-Con, Gas Blending

Retail Propane

Consolidated

(in thousands)

Operating (loss) income

(36,694

)

97,476

34,913

4,516

(69,176

)

31,035

—

31,035

Depreciation and amortization

56,486

79,212

19,339

504

2,230

157,771

—

157,771

Amortization recorded to cost of sales

—

110

195

—

385

—

385

Net unrealized (gains) losses on derivatives

(11,895

)

(23,216

)

4,183

—

(30,928

)

—

(30,928

)

Inventory valuation adjustment

—

(2,592

)

—

(2,592

)

—

(2,592

)

Lower of cost or market adjustments

11,446

—

(504

)

1,583

—

12,525

—

12,525

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

105,186

(32,966

)

994

(3,026

)

889

71,077

—

71,077

Equity-based compensation expense

—

32,575

—

32,575

Acquisition expense

—

3,459

161

—

5,696

9,316

—

9,316

Other income (expense), net

(1,504

)

(343

)

(29,657

)

(31,415

)

—

(31,415

)

Adjusted EBITDA attributable to unconsolidated entities

—

2,214

—

476

—

2,690

—

2,690

Adjusted EBITDA attributable to noncontrolling interest

—

(119

)

(945

)

—

(1,064

)

—

(1,064

)

Revaluation of liabilities

—

800

—

800

—

800

Gavilon legal matter settlement

—

34,788

—

34,788

Intersegment transactions (1)

—

11,778

—

11,778

—

11,778

Other

4,976

304

365

—

5,694

—

5,694

Discontinued operations

—

(1,028

)

4,867

3,839

Adjusted EBITDA

129,611

125,660

58,363

13,456

(22,655

)

304,435

(1,028

)

4,867

308,274

(1)

Amount reflects the intersegment transactions between the continuing businesses within the Refined Products and Renewables segment and TPSL, Mid-Con and Gas Blending that are eliminated in consolidation.

OPERATIONAL DATA

(Unaudited)

Three Months Ended

Nine Months Ended

December 31,

2019

2018

2019

2018

(in thousands, except per day amounts)

Crude Oil Logistics:

Crude oil sold (barrels)

11,217

12,333

32,929

35,449

Crude oil transported on owned pipelines (barrels)

12,202

11,820

34,913

31,385

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

5,362

Crude oil inventory (barrels) (1)

866

1,204

Water Solutions:

Produced water processed (barrels per day)

Northern Delaware Basin (2)

845,817

36,147

788,630

14,719

Permian Basin

325,061

461,722

323,217

455,211

Eagle Ford Basin

242,238

282,070

263,064

277,431

DJ Basin

162,456

177,412

167,178

159,980

Other Basins

9,813

41,173

10,976

68,209

Total

1,585,385

998,524

1,553,065

975,550

Solids processed (barrels per day)

6,132

7,284

5,779

6,728

Skim oil sold (barrels per day)

3,429

3,609

3,124

3,516

Liquids:

Propane sold (gallons)

468,332

428,961

975,782

929,401

Butane sold (gallons)

276,046

201,891

588,694

446,340

Other products sold (gallons)

133,392

130,362

377,264

372,282

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

397,343

399,757

Propane inventory (gallons) (1)

123,265

120,239

Butane inventory (gallons) (1)

50,867

34,488

Other products inventory (gallons) (1)

15,858

8,367

Refined Products and Renewables (continuing operations):

Gasoline sold (barrels)

2,994

3,031

8,978

8,129

Diesel sold (barrels)

4,790

4,818

14,365

14,045

Ethanol sold (barrels)

640

592

1,773

1,757

Biodiesel sold (barrels)

210

237

568

815

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

189

Diesel inventory (barrels) (1)

124

162

Ethanol inventory (barrels) (1)

592

Biodiesel inventory (barrels) (1)

134

100

(1)

Information is presented as of December 31, 2019 and December 31, 2018, respectively.

(2)

Barrels per day of wastewater processed by the assets acquired in the Mesquite and Hillstone transaction are calculated by the number of days in which we owned the assets for the periods presented.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200206005306/en/

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

NGL Energy Partners (NYSE:NGL)
Historical Stock Chart
From Mar 2024 to Apr 2024