NGL Energy Partners LP (NYSE: NGL) (“the Partnership” or “NGL”)
is providing an update to the following:
- Fiscal Year 2020 Guidance (for year ended March 31,
2020)
- Fiscal Year 2021 Forecast
- Recent Financial Initiatives
- Approved Distributions for quarter ended March 31,
2020
Fiscal Year 2020 Guidance and Fiscal Year
2021 Forecast
The Partnership is re-confirming its Fiscal Year 2020 Guidance
for Adjusted EBITDA from continuing operations and expects to be at
the higher end of the Partnership’s previously issued guidance
range of $565 million to $595 million. The Fiscal Year 2021
forecast (for the year ending March 31, 2021) has been approved by
the Board of Directors of the Partnership’s general partner (“the
Board”), with the following highlights:
- Adjusted EBITDA forecasted to be approximately $600
million
- Growth and Maintenance Capital Expenditures of approximately
$50 million each. Growth Capital Expenditures are expected to be
weighted to the first half of the fiscal year
- The Partnership anticipates being free cash flow positive in
Fiscal 2021 as Adjusted EBITDA is expected to exceed all fixed
charges, capital expenditures and distributions, as well as all of
the remaining deferred payments associated with the Mesquite
acquisition
- Improving leverage, increasing liquidity, optimizing assets,
and reducing costs without sacrificing safety, are key focus items
for the fiscal year
- Management will provide further details on its Fiscal 2020
year-end earnings call which is expected to occur in late May
2020
“We have developed the Fiscal 2021 Forecast using the most
recent data and relevant information we have available, including
updating our volumes and strategies in each of our business
segments. Our storage assets have benefited in recent weeks from
the contango markets, and we have worked closely with our producer
customers to refine our views on water volumes for the year.
However, like others, this uncertain environment presents
significant opportunities and challenges for our businesses that
are more difficult to predict, and which could impact our
performance,” stated Mike Krimbill, NGL’s CEO.
“We have invested significant capital into our business over the
past year, including the build-out of our fully integrated, large
diameter water distribution system in the Northern Delaware Basin,
which can transport and dispose of over three million barrels of
water per day,” added Krimbill. “We believe our existing footprint
has more than adequate disposal capacity to handle our producer
customers’ requirements for the next several years, allowing us to
obtain additional producer acreage dedications and continue to grow
our market share, with limited capital requirements.”
Recent Financial Initiatives
The Partnership initiated certain financial objectives,
including the sale of certain assets, to enhance liquidity and
accelerate de-leveraging of the balance sheet. The Partnership
recently amended its credit facility to re-allocate availability
between its revolving credit facilities, reducing its working
capital facility to $350 million and increasing its expansion
facility to $1.565 billion, noting no change in the overall $1.915
billion capacity of the facility. This re-allocation was driven by
the exit of the Mid-Continent and Gas Blending Refined Products
businesses during the Fiscal 2020 fourth quarter, which will reduce
working capital borrowing needs going forward. The Partnership
continues to evaluate and execute on financial strategies to meet
its objectives.
Partnership Distributions
Due to the current unprecedented market conditions, the Board
determined it was prudent to enhance NGL’s balance sheet while
maintaining a strong capital structure and liquidity. The Board has
declared a quarterly distribution of $0.20 per common unit, or
$0.80 per common unit on an annualized basis, for the quarter ended
March 31, 2020. This cash distribution is payable on May 15, 2020
to common unitholders of record at the close of business on May 7,
2020. The Board will, as it always does, continue to evaluate the
distribution on a quarterly basis going forward as this
approximately $100 million reduction on an annualized basis will be
used to increase liquidity and de-lever the balance sheet and is
expected to improve the Partnership’s common unit coverage ratio to
over 2.0x.
“Our decision to reduce the common unit distribution by 48.7%
was made based on NGL’s and the Board’s priorities of maintaining a
strong balance sheet and liquidity as we manage through these
uncertain times,” stated Krimbill. “This reduction was made despite
NGL’s strong distribution coverage for the quarter and expectations
for improved coverage going forward. We believe it is in the best
interest of all our stakeholders that during this period we enhance
our financial flexibility and preserve liquidity. Our objectives
are not achieved solely on the back of a distribution reduction. It
is a combination of initiatives, including limiting capital
expenditures, decreasing expenses and evaluating and executing on
other deleveraging transactions, both financial and asset-based,
that will accomplish our goals. In the meantime, we will continue
to take advantage of operational and capital market opportunities
resulting from current market dynamics to best position NGL going
forward.”
Additionally, the Board declared a Class D Preferred cash
distribution of $6.1 million, which amount represents 50% of the
Class D Distribution Amount, to be paid to the holders of the Class
D Preferred Units. The Class D Stated Value Units will also
automatically increase by the non-cash accretion amount of $6.1
million for the quarter ended March 31, 2020. The Class D Preferred
distribution will also be made on May 15, 2020.
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.
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.
Due to the impracticality of
predicting certain amounts required by GAAP such as unrealized
gains and losses on derivatives marked to market and potential
changes in estimates for certain contingent liabilities, NGL does
not calculate budgeted Net Income, the GAAP financial measure most
directly comparable to the non-GAAP financial measures of
Distributable Cash Flow and Adjusted EBITDA.
About NGL Energy Partners LP
NGL Energy Partners LP, a Delaware limited partnership, is a
diversified midstream energy company that transports, stores,
markets and provides other logistics services for crude oil,
natural gas liquids and other products and transports, treats and
disposes of produced water generated as part of the oil and natural
gas production process. For further information, visit the
Partnership’s website at www.nglenergypartners.com.
This release is a qualified notice under Treasury Regulation
Section 1.1446-4(b). Brokers and nominees should treat 100% of NGL
Energy Partner LP’s distributions to foreign investors as being
attributable to income that is effectively connected with a United
States trade or business. Therefore, distributions to foreign
investors are subject to federal income tax withholding at the
highest applicable effective tax rate.
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version on businesswire.com: https://www.businesswire.com/news/home/20200427005894/en/
NGL Energy Partners LP Trey Karlovich, 918.481.1119 Executive
Vice President and Chief Financial Officer Trey.Karlovich@nglep.com
or Linda Bridges, 918.481.1119 Senior Vice President – Finance and
Treasurer Linda.Bridges@nglep.com
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