NGL Energy Partners Q1 2025 Earnings Report

NGL Energy Partners EPS Results

• Actual EPS: -$0.14
• Consensus EPS: $0.13
• Beat/Miss: Missed by -$0.27
• One Year Ago EPS: -$0.11

NGL Energy Partners Revenue Results

• Actual Revenue: $1.39 billion
• Expected Revenue: $1.44 billion
• Beat/Miss: Missed by -$48.05 million
• YoY Revenue Growth: N/A

NGL Energy Partners Announcement Details

• Quarter: Q1 2025
• Date: 8/8/2024
• Time: After Market Closes
• Conference Call Date: Thursday, August 8, 2024
• Conference Call Time: 5:00PM ET

NGL Energy Partners (NYSE:NGL) is a publicly traded master limited partnership that provides midstream infrastructure and marketing services for the energy industry. The company focuses on the transportation, storage, fractionation and marketing of natural gas liquids (NGLs) and refined petroleum products. Through its integrated operations, NGL Energy Partners serves producers, processors, refiners and industrial customers across key U.S. energy-producing regions.

The partnership’s asset base includes pipelines, storage terminals, fractionation plants, and distribution facilities. Its logistics network comprises marine docks, truck and rail loading terminals, and extensive pipeline connections that span the Gulf Coast, Mid-Continent, Permian Basin and Northeast markets. These assets support continuous flow and optimal blending of NGL streams such as propane, butane and natural gasoline.

In addition to its core midstream activities, NGL Energy Partners operates marketing and distribution platforms for refined fuels, renewable fuels and anhydrous ammonia. The company distributes motor fuels and renewable products to retail, commercial and industrial end-users, and participates in a joint venture for ammonia production and logistics. This diversified approach helps stabilize cash flows by balancing commodity exposure across multiple product lines.

Headquartered in Houston, Texas, NGL Energy Partners LP was formed in 2014 and is managed by NGL Energy Holdings LP. Its executive team brings decades of industry experience in operations, finance and regulatory compliance. The partnership remains focused on asset optimization, safety performance and disciplined growth to support its midstream footprint and customer base.

NGL Energy Partners Q1 2025 Earnings Call Transcript

Key Takeaways

• Consolidated adjusted EBITDA was $144.3 million in Q1, with all three business units meeting or beating internal expectations, and the partnership reaffirmed full-year EBITDA guidance of $665 million (Water Solutions: $550–560 million).
• The Water Solutions segment delivered Q1 adjusted EBITDA of $125.6 million (up from $123.2 million) on average physical disposal volumes of 2.47 million bbl/d (2.59 million including deficiency), with July volumes rising to ~2.7 million bbl/d (paid on ~3.0 million), and the LEX II pipeline remains on schedule for October in-service.
• NGL achieved several non-operational milestones, including the sale of two ranches for ~$70 million, becoming current on all preferred Class B/C/D arrearages with recent quarterly distributions declared, authorizing a $50 million common unit repurchase program, and repricing its Term Loan B to SOFR+3.75 bps—saving ~$5.3 million annually.
• The Crude Oil Logistics segment reported Q1 adjusted EBITDA of $18.6 million (down from $23.8 million) primarily due to lower DJ Basin volumes, partially offset by a new shipper on the Grand Mesa Pipeline and higher quality differentials, with average pipeline volumes at ~63,000 bbl/d.
• The Liquids Logistics segment achieved Q1 adjusted EBITDA of $11.5 million (versus $4.7 million prior) thanks to stronger butane blending margins and volumes, despite refined products margins normalizing, marking a solid performance in the seasonally low quarter.

Presentation

[Operator]

Thank you for standing by. My name is Max, and I will be your conference operator for today. At this time, I would like to welcome everyone to NGL Energy Partners first Q1 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. Thank you. I would now like to turn the call over to Brad Cooper, CFO. Please go ahead.

[Brad Cooper, CFO at NGL Energy Partners]

Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts, and estimates that are forward-looking statements under the U.S. securities laws. These comments are subject to assumptions, risks, and uncertainties that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials. Let's get into the quarterly results. Our results for the quarter were strong across all three business units. Water Solutions, Crude Oil Logistics, and Liquids Logistics all met or beat our internal expectations. Consolidated Adjusted EBITDA for the quarter came in at $144.3 million in the first quarter. I'm happy to report the performance from the first quarter has carried over to the start of our second quarter.

[Brad Cooper, CFO at NGL Energy Partners]

The butane blending season will begin soon, while wholesale propane is dependent on winter weather and heating demand, as you are very well aware. The Water Solutions segment continues to perform quite well, with physical disposal volumes averaging approximately 2.7 million barrels per day in the month of July. When you include deficiency volumes in July, we will be paid on approximately 3 million barrels per day. As mentioned on our year-end call in early June, we also achieved other non-operational milestones during the quarter. First, we announced the sale of two ranches in Eddy and Lea counties for a total of approximately $70 million. Second, on April 25, we made our last arrearage payment on the preferred Class B, C, and Ds. This made us current on all preferred classes.

[Brad Cooper, CFO at NGL Energy Partners]

On June 21st, the board of directors of our general partner declared a quarterly distribution for the preferred Class B, C, and Ds that was paid on July 15th. Third, on June 5th, the board of directors authorized a common unit repurchase program, which allows us to repurchase up to $50 million of our outstanding units. This program does not have a fixed expiration date. Currently, we have not purchased any common units under this program, as we have been managing the LEX II spend as well as our seasonal liquids inventory builds. Fourth, after the quarter ending June 30th, and under the terms of the Term Loan B agreement, we repriced and amended the SOFR margin from 450 basis points to 375 basis points, which reduces our interest expense by $5.25 million per year.

[Brad Cooper, CFO at NGL Energy Partners]

We closed the repricing earlier this week on August 5. Water Solutions Adjusted EBITDA was $125.6 million in the first quarter versus $123.2 million in the prior first Q1. Physical water disposal volumes were 2.47 million barrels per day in the first Q1 versus 2.46 million barrels per day in the prior first Q1. Total volumes we were paid to dispose, that includes deficiency volumes, were 2.59 million barrels per day in the first Q1 versus 2.49 million barrels per day in the prior first Q1. So total volumes we were paid to dispose of were up 4%, first Q1 of fiscal 2025 over first Q1 of fiscal 2024. The team continues to find ways to keep operating expenses low in the face of rising costs.

[Brad Cooper, CFO at NGL Energy Partners]

Operating expenses in Water Solutions should be $0.14, compared to $0.25 for the same Q1 one year ago. The LEX II water pipeline project, with initial capacity of 200,000 barrels per day, that is expandable to 500,000 barrels per day, is on schedule with an in-service date in October. Crude Oil Logistics Adjusted EBITDA was $18.6 million in the first Q1 of fiscal 2025 versus $23.8 million in the prior year's first Q1. Crude oil margins were lower, 1Q over 1Q, primarily due to lower volumes from production on acreage dedicated in the DJ Basin. This was partially offset by higher tariff revenue on the Grand Mesa Pipeline from signing up a new shipper during the open season that ended on January 5, 2024, as well as higher quality differentials realized in the current quarter.

[Brad Cooper, CFO at NGL Energy Partners]

Physical volumes on the Grand Mesa Pipeline averaged approximately 63,000 barrels per day, compared to approximately 72,000 barrels per day for the same quarter in fiscal 2024. Liquids Logistics Adjusted EBITDA was $11.5 million in the first Q1 versus $4.7 million in the prior first Q1. Butane blending margins and volumes were stronger than our expectations for the Q1. This has set the butane business up for a nice fiscal 2025. Product margins, excluding derivatives for refined products, were lower as the supply issues seen in certain markets in the prior year, resulting in higher margins, were resolved and supply and demand was more in balance. The first Q1 is typically the low point of the EBITDA stream for the liquid segment, so it's nice to see a strong first quarter from this business unit.

[Brad Cooper, CFO at NGL Energy Partners]

I would just like to summarize how you should think, how you should think about our first quarter results before I turn it over to Mike. All three segments exceeded our expectations for the quarter. LEX II construction is on track and is expected to go in service as planned. We are managing our balance sheet during our butane and propane build season and during the build-out of the LEX II pipeline, have opportunistically reduced interest expense on the Term Loan B. We are reaffirming our full-year guide of $665 million of EBITDA for the partnership and $550 million-$560 million for Water Solutions. With that, I would now like to turn the call over to our CEO, Mike Krimbill. Mike?

[H. Michael Krimbill, CEO at NGL Energy Partners]

... Thanks, Brad. Good afternoon, everyone. We are pleased with this quarter and off to a good start this new fiscal year. That said, we do not manage NGL on a quarterly short-term basis. As you would expect, we are looking out over multiyear periods of time. For instance, in the Water Solutions business, we see positive trends for the short, medium, and long term. We have this year's EBITDA guidance above last year actual, but quarterly, it is impacted by customer recycling, drilling programs, and completion schedules. Medium and long term, we are seeing the Delaware Basin expanding north in Lea County, which will bring additional produced water volumes in the future. We are working on continued expense reductions and new revenue streams, but do not announce them until proven to generate EBITDA.

[H. Michael Krimbill, CEO at NGL Energy Partners]

With respect to crude oil logistics in the DJ Basin, we see positive signs for the short and medium terms. It appears that volumes produced and are flowing into the basin could be increasing. The long term is still influenced by politics, environmental, and regulatory factors. We have not been willing to contract our Grand Mesa capacity at rates below $1-$1.25 per barrel before expenses. We do believe that we are close to or at the bottom of the cycle for this segment. Regarding liquids logistics, this is our most volatile segment, especially with a portion being dependent on normal to cold winter weather, which hasn't shown up for several years. This is not a business we anticipate expanding, nor do we expect significant growth, but we do have some internal growth opportunities.

[H. Michael Krimbill, CEO at NGL Energy Partners]

We continue to focus on the balance sheet, debt reduction, and internal growth at attractive multiples. Remember that reduced leverage is a function of both lower debt balances and increased EBITDA. So operator, with that, please open up the line for Q&A.

[Operator]

We'll now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from Sunil Sibal with Seaport Research Partners. Please go ahead.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

Yes. Hi, good afternoon, everybody. So I just wanted to start off on the water side of the business. Seems like, you know, your volumes versus fee per barrel handled has been, especially the fee, has been moving around a bit. Could you talk a little bit about, you know, some of the moving parts there? And more importantly, I think you talked about next quarter, your fee-based volumes seems like will be pretty strong, but how should we think about per barrel fee number going forward?

[Brad Cooper, CFO at NGL Energy Partners]

I had a little hard time hearing the question. I think it was around revenue per barrel for the quarter, which I think we're off about $0.01, I think, from the previous year's quarter. You know, I think. We've been very clear in how we contract. As we contract on the water side of the world, you know, we're obviously looking for MVCs and acreage dedication. You know, those MVCs, we're willing to give a little bit, I guess, on rate to get a longer-term contract with an MVC. We did have, you know, recall the Poker Lake step-up, January 1, 2024, another 100,000 barrels. That rate's probably a little bit lighter relative to other contracts in the portfolio.

[Brad Cooper, CFO at NGL Energy Partners]

So it's really a little bit hard to truly reconcile to the penny. But you know, yeah, volumes are starting off really strong for the second quarter. Q1, probably a little bit impacted by recycling, but the start of Q2, July looks really strong.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

Okay, thanks for that. And then since you mentioned that, you know, your MVCs are at probably a higher percentage of the total volumes, how should we think about the average remaining length on the contracts that you have for, with the MVCs?

[Brad Cooper, CFO at NGL Energy Partners]

Yeah, I think it's in the presentation materials, I believe. It's, what, roughly 9 years, I think, on contract life.

[H. Michael Krimbill, CEO at NGL Energy Partners]

Yes, yes. This is David Sullivan. Yes, we have the MVCs. The percentage of MVC volumes we'll have in the water disposal will go up. We'll be about 40%-45% once the LEX II project comes on. That's where we'll be as far as percentage of our volumes that are MVC related. It'll be some, so.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

Okay, thanks for that. I'll turn it over.

[Operator]

All right, your next question comes from the line of Patrick Fitzgerald with Baird.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

Hi, thank you for taking the questions. Congrats on getting caught up with the preferred, but those are pretty expensive instruments at this point. Could you talk about your plan to deal with those going forward? And, you know, in particular, the Class D, you know, what would it cost to take those out? And would you consider doing something with debt to take those out potentially? Thanks.

[Brad Cooper, CFO at NGL Energy Partners]

... You bet. Yeah, the way that, you know, our free cash flow builds through the year, it's really back-end loaded. So a bulk of our free cash flow comes in in Q3, Q4. Obviously, with the LEX II project this year, you know, heavy capital burden the first couple of quarters. But as we see the free cash flow unwinding or coming to us, I guess, in Q3 and Q4, and the working capital unwinding the back end of the fiscal year, our plan would be to utilize those, those dollars to start making redemption payments on, on the Class Ds. You know, our, I think our free cash flow over the next couple of years can comfortably address the Class Ds.

[Brad Cooper, CFO at NGL Energy Partners]

You know, if there was a market opportunity, I guess, to take out some debt to look at additionally knocking down the Ds, we would consider it. But I think for us right now, just being very, very pragmatic with how we spend our free cash flow and attack the Ds through free cash flow and asset sales.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

Okay, but you have nothing on the horizon in terms of, like, big asset sales to. So you're gonna be paying those for, you know, and all your preferreds for a while, I guess, is the, until, you know, free cash flow is generating enough to take them out?

[Brad Cooper, CFO at NGL Energy Partners]

That's correct. Yeah.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

Okay.

[Brad Cooper, CFO at NGL Energy Partners]

That's our current base plan.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

Okay. Could you just talk about the step-up to 2.7 million barrels a day in July from, you know, the average in the fiscal first quarter? And then, you know, you're getting paid on 3 million barrels a day. What did you get paid on in the first quarter, I guess, would be the question. And then why did it step up so significantly? Thanks.

[Brad Cooper, CFO at NGL Energy Partners]

Yeah. Yeah, really, first quarter, I think, as I mentioned earlier, impacted by recycling. So as producers are using water on location to frack wells, at some point, that flush water production is gonna come our way. That's what we're seeing at the start of the second quarter. That's what—You know, I think Mike hit on in his comments, we will see some lumpiness in volumes day to day, month to month, as a result of producers and their completion cadence.

[Company Representative at NGL Energy Partners]

Sorry, what were we on?

[Brad Cooper, CFO at NGL Energy Partners]

For the Q1?

[Company Representative at NGL Energy Partners]

First Q1.

[Brad Cooper, CFO at NGL Energy Partners]

Yeah, for the Q1, we got paid on about almost 2.6 million barrels, 2.59.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

All right. Thank you. And then, I guess, you talked about this last Q1, you talked about this, the Q1 , but, like, why do you think we're at the bottom here for crude logistics in the DJ?

[Brad Cooper, CFO at NGL Energy Partners]

I just think that producers are starting to. It's more efficient to add rigs. We are anticipating an increase in the volume.

[Patrick Fitzgerald, Managing Director Analyst at Baird]

All right. Thanks a lot, guys.

[Brad Cooper, CFO at NGL Energy Partners]

You bet.

[Operator]

Our last question comes from the line of Jason Mandel with RBC Capital Markets. Please go ahead.

[Jason Mendel, Managing Director at RBC Capital Markets]

Hi, good afternoon, and thanks for taking the question. Just wanted to follow up from a comment, I think, from the last conference call about exploring strategic alternatives on a portion of the liquids business. Any updates to that? It sounds like you may be thinking about some asset sales, but not the whole business. So just, you know, any clarity would be helpful. Thank you.

[Brad Cooper, CFO at NGL Energy Partners]

Yeah, no updates at this time. Yeah, I think we'll just continue to look at opportunities that come our way, but no updates on that, on that business at this point in time.

[Jason Mendel, Managing Director at RBC Capital Markets]

Okay. Thank you for your help.

[Brad Cooper, CFO at NGL Energy Partners]

You bet. Thank you.

[Operator]

Questions? I will now turn the conference back over to Brad Cooper for closing remarks.

[Brad Cooper, CFO at NGL Energy Partners]

Thanks, everyone, for your interest in NGL. We look forward to catching up with everyone in a couple of months on the fiscal 2025 second quarter call. Thanks, and have a nice weekend.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Brad Cooper, CFO
• H. Michael Krimbill, CEO
• Company Representative

Analysts

• Jason Mendel, Managing Director at RBC Capital Markets
• Patrick Fitzgerald, Managing Director Analyst at Baird