NGL Energy Partners Q4 2025 Earnings Call Transcript

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May 29, 2025
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Operator

Greetings. Welcome to the NGL Energy Partners 4Q twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

Operator

I will now turn the conference over to your host, Brad Cooper, CFO. You may begin.

Brad Cooper
Brad Cooper
EVP & 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 law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward looking statements.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials. Before I start discussing our fourth quarter and full year results, I would like to thank the NGL employees for executing on our strategic initiatives and executing on the non core asset sales that have positioned the Partnership quite well heading into fiscal twenty twenty six. As we announced in the May 5 press release, we closed on the sale of the 18 natural gas liquids terminals, including Green Bay. In addition to closing these previously announced asset sales, we monetized our Rack Marketing refined products business, our Limestone Ranch ownership and most of our crude oil railcar fleet. The total asset sale proceeds, inclusive of working capital, were monetized for a double digit multiple.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Also, we completed the full wind down of the biodiesel business, completing our final deliveries in the fiscal fourth quarter. These non core asset sales will allow us to focus on our core assets. Additionally, these asset sales reduce our volatility and seasonality of our adjusted EBITDA. The wind down and divesting of these businesses eliminates on average $75,000,000 of working capital, and at the peak over $100,000,000 of working capital based on the prior twelve months of activity. The elimination of this working capital and earnings volatility will allow us to be less leveraged as we continue to further address our capital structure and specifically the Class D Preferred Units.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Proceeds from these sales have allowed us to pay off the entirety of the outstanding indebtedness on our ABL. Also, we purchased 20,000 units of the Class D Preferreds in the open market at a discount. As discussed on previous earnings calls, we will continue to right size the portfolio and organization and will look for opportunities to further reduce the asset footprint within the LiquidsLogistics segment. Let's get into the quarterly results. Consolidated adjusted EBITDA from continuing operations for the quarter came in at $176,800,000 in the fourth quarter versus $147,900,000 the prior year fourth quarter, or approximately 20% higher than the prior fourth quarter.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

The increase was primarily driven by the performance of our Water Solutions business segment. Our full year adjusted EBITDA from continuing operations was $622,900,000 which exceeds our previous guidance of $620,000,000 Water Solutions adjusted EBITDA was $154,900,000 in the fourth quarter, each of the $123,400,000 in the prior fourth quarter. Physical water disposal volumes were 2,730,000 barrels per day in the fourth quarter versus 2,390,000 barrels per day in the prior year fourth quarter. Total volumes we were paid to dispose that includes deficiency volumes were 2,890,000 barrels per day in the fourth quarter versus 2,600,000 barrels per day in the prior year fourth quarter. So total volumes we were paid to dispose of were up eleven percent fourth quarter of fiscal twenty twenty five over fourth quarter of fiscal twenty twenty four.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

The increased EBITDA in Water Solutions is due to overall higher disposal revenues from higher disposal volumes as well as higher fees charged for interruptible spot volumes. We also received a full quarter of the LEX II pipeline contribution that was put in service during our third fiscal quarter. The Water Solutions team continues to drive operating expense per barrel lower. Operating cost per barrel was $0.22 for fiscal twenty twenty five versus $0.24 per barrel for fiscal twenty twenty four. For the quarter ended 03/31/2025, operating cost per barrel was $0.23 The Water Solutions segment is off to a good start for fiscal twenty twenty six as volumes continue to exceed internal expectations.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

With the current market sentiment and oil price uncertainty, we have not seen any drop off in activity from our customers in the Corita Basin. We will continue to monitor activity levels and the impacts that commodity prices and tariffs could have on our Water Solutions segment. We are well positioned with 90% of our volumes committed through acreage dedications and MVCs. Recall, 80% of our total volumes are with investment grade counterparties. Crude Oil Logistics adjusted EBITDA was $13,100,000 in the fourth quarter of fiscal twenty twenty five versus $15,300,000 in the prior year's fourth quarter.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

During the quarter, volumes on the Grand Mesa pipeline averaged approximately 56,000 barrels per day compared to 67,000 barrels per day for the fourth quarter of twenty twenty four. The reduction in EBITDA for the quarter compared to the same quarter from the previous year is predominantly driven by lower volumes on Grand Mesa. As previously discussed, we signed a contract with Prairie Operating where NGL Crude Marketing will ship their production. We anticipate our first tranche of new volumes on Grand Mesa in early July from this new contract. Liquids Logistics adjusted EBITDA was 17,700,000 in the fourth quarter versus $22,200,000 in the prior fourth quarter.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Margins for product sales decreased by about $7,100,000 as butane margins declined due to a weak gasoline blending season. Propane margins were essentially flat quarter over quarter. Expenses decreased in the fourth quarter of fiscal twenty twenty five due to reduced compensation. For fiscal twenty twenty six, we are guiding EBITDA of $615,000,000 to $625,000,000 with total capital expenditures of $105,000,000 Of the $105,000,000 in total capital expenditures, $60,000,000 will be spent on growth projects in the Water Solutions segment. As I mentioned earlier, water disposal volumes are ahead of our internal expectations and we are off to a nice start for fiscal twenty twenty six.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

With that, I would now like to turn the call over to our CEO, Mike Krimbold.

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

Thanks Brad and good afternoon everyone. I think many analysts and investors seem to be focused on quarterly results and may overlook the progress that NGL is making. I would like to look back over the last fourteen months to review our accomplishments. In February 2024, we began paying off the dividend arrearages on all three classes of our outstanding preferred units. It required three months and $475,000,000 to complete this effort, such that we are now and have been current on our preferred equity financial obligations.

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

At the same time, we continued to grow our water solutions business. We entered into a five year two hundred thousand barrel per day MVC contract that allowed us to construct the Lex two water pipeline. This pipeline was placed into service in November of twenty twenty four contributing five months activity to fiscal twenty twenty five. We now have two large diameter pipelines with total capacity expandable to 500,000 per day, taking water east into Andrews County. Meanwhile, we continue to grow our water solutions business.

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

In the fiscal year '20 '20 '5 just ended, we achieved both record water disposal volumes and adjusted EBITDA. Through the first two months of this quarter, we are exceeding, as Brad said, the total water disposal volumes projected in our 2026 guidance, so we're off to a good start. Strategically, we have been streamlining our business over the last couple of years. During that time, we have experienced significant volatility and somewhat disappointing results in several of our liquids logistics businesses. Very recently, we sold those businesses as well as other non core assets to raise $270,000,000 We are becoming more of a water solutions business with approximately 85% of our adjusted EBITDA to be generated by this segment.

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

And now for the first time we have purchased and retired class D preferred equity. This is a significant milestone as it is necessary to achieve our goal of a simplified capital structure and increasing our free cash flow. Previously, we had purchased and retired over 23,000,000 long term warrants representing common units, significantly reducing potential dilution of our common equity in the future. Earlier, Brad provided our adjusted EBITDA guidance for fiscal year twenty twenty six. At first glance, the $620,000,000 midpoint approximates our actual results for fiscal year twenty twenty five and appears to suggest no growth.

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

In reality, our guidance makes up for a $20,000,000 decline in skim oil revenues due to a lower crude price compared to the prior year actual and the reduction of another 20,000,000 in adjusted EBITDA associated with asset sales included in the prior year action. So going forward is now quite simple. We will continue lowering leverage, continue to improve the capital structure by reducing the highest cost of capital, the Class D preferreds, and increased adjusted EBITDA through growth in our water solutions segment. So with that, operator, please open up the line for Q and A.

Operator

Certainly. At this time, we will be conducting a question and answer you. Our first question comes from Derrick Whitfield with Texas Capital. Please proceed.

Derrick Whitfield
Derrick Whitfield
Managing Director at Texas Capital

Good afternoon all and congrats on a strong year end and your progress with the asset sales. Mike, perhaps starting where you ended in your commentary, your guidance is quite strong when you think about the headwinds that you guys are overcoming both with asset sales and crude prices. With respect to your 2026 guidance, could you offer some more color on your expectations by business or maybe speak to some of the operating assumptions for the Water and Crude Logistics segments?

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Yeah, Brett, why don't you address the guidance on water? Yeah, so Derek, the water guide in that 06/20 midpoint of water guides and implied number of about five sixty million. Recall Mike's comments, we do have a little bit of a pullback in oil prices for FY twenty six relative to what we realized in FY twenty five that accounted for accounts for about $20,000,000 of EBITDA, and then we had a little bit less than $10,000,000 in asset sales that we won't have in the EBITDA stream going forward that we're in FY '20 '5.

Derrick Whitfield
Derrick Whitfield
Managing Director at Texas Capital

Terrific. And then for my follow-up, maybe shifting over to water macro. It appears three larger pipeline projects are moving forward based on the Waterbridge, Western, and Eris announcements. While fundamentals remain tight in the Delaware, to your point, I mean, are seeing lower prices and would expect lower activity at some point. I guess, could you guys offer some color around the conversations you're having with customers and if you see opportunities for growth beyond the current announced projects?

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

I think we'll have Doug answer that question. He's on the line. What are the three projects that the Water Bridge, the Western Western and Eric.

Derrick Whitfield
Derrick Whitfield
Managing Director at Texas Capital

Eric is the last.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

Hey, Derek. This is Yes, sir. So we've been busy recontracting our closest expiration long term contracts, and there are only a couple. We have one of those fully executed with a new long extension, and then we're in the process of extending another. Our focus has been on our base wedge of business.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

And then when we look at growth, we're seeing we've seen growth through our existing agreements, and obviously the new LEX2 agreement comes with the growth as well. When we look forward to these other options, we were the first mover on the out of basin with LEX II. We have in this past year, we have firmed up our further out of basin acreage to be able to develop for growth. But right now, in this fiscal year with while we see no slowdown in volumes, we are on forecast. And as Mike said, we're a little ahead forecast of this in this first quarter.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

We're really focused on preparing for future growth opportunities with our core customers, of which we have had interest. Now that interest may be somewhat delayed until everyone gets a good firm feel on where oil prices land this year. But when you bring up these three pipelines, I know we've seen what was public on those. I will be curious to see if those get off the ground and if those actually develop and are constructed this year based on maybe a little bit of trepidation by the producers to really grow. We have seen movement back to the core acreage.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

That's where our really our large contracts are, are focused, are the really good core acreage there in Central Lee County and somewhat into Eddy County. But when we talk, we look at growth, we're looking at opportunities of growth under our current long term contracts, which average almost ten years on our current long term contracts and the growth within those. So I guess to answer your question on, hey, there's three pipeline spec, the Western pipeline is down in Loving County, really not that's focused on long term, obviously, with legacy Anadarko, Oxy Water, that piece of the pie has been with Western for a long time. That really does not impact anything around our business. And then if you go to the other two mentioned in Northern Lea County, You know, we'll I guess it's TBD to see, you know, how much growth is there to support those projects actually getting off the ground in 2025.

Derrick Whitfield
Derrick Whitfield
Managing Director at Texas Capital

Great color. One last, if I can only because we've received several inbounds on it. Regarding the the May 16 Railroad Commission announcement on enhanced guidelines for Permian Water disposal, what level of impact will this have with your business as you guys see it today?

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

Well, fortunately for us, we're always planning out three to five years ahead. These new guidelines are focused on new permits and new permit applications. We have almost 30 legacy permits in the Reeves and Loving area. We still have opportunities there to go drill those permits. And then, as you know, we've been focused on really out of Basin Andrews County growth. That's really where our future growth will be. And we have procured almost 25 pre guidelines, valid permits, legacy permits of the 30,000 to 35,000 barrels per day, half PSI per foot. So we beat that timeline on any additional obligations within that new notice to operators that came out recently. So we really are in a great position for our future growth for the next several years.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

So to answer your question, that really does not impact NGL from a new permit or permit opportunities perspective.

Derrick Whitfield
Derrick Whitfield
Managing Director at Texas Capital

Great update. I'll turn it back to the operator.

Operator

The next question comes from Tarek Hamed with JPMorgan. Please proceed.

Nevin Mathew
Nevin Mathew
High Yield Credit Research Associate at JP Morgan

Hi, this is Nevan on for Tarek. You had mentioned that there was some delay in terms of growth opportunities for people to get a feel where oil prices land in the context where their projects are pushed out of fiscal year twenty twenty six. How much lower could you flex capital spending down? I know it's already low just a little above $100,000,000 Is there room to go lower or is there if oil prices firm up is there a room for CapEx to go higher?

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

I mean, on the growth, we're down to 60. So, you know, I'm not sure. Can you squeeze more out? Maybe, but it's not going to make a difference. And I think on the maintenance capital, it's predominantly water.

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

I think that's probably a pretty low number already. I really don't see us being able to take it down much.

Nevin Mathew
Nevin Mathew
High Yield Credit Research Associate at JP Morgan

Yeah, I definitely understand that. Just was looking to see if there is room to go through lower. It's already very low point, so understandable. Thank you.

Operator

The next question comes from Greg Brody with Bank of America. Please proceed.

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Good morning, guys. I'm sorry, good afternoon. As you give the guidance that you put out there, just help us think about how you think about your low and your your high range there on volumes and what's what drives that variability? It's it's definitely in the water.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Just having some feedback. Greg, could you maybe speak a little louder and repeat the question?

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Yeah. Hold on one second. Can I hear you now?

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Yes. Thank you.

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Yeah. That's that's better. Just trying to understand that when you think about the water business sort of a low to the high side for this year, how are you thinking about volumes and help us think about how you're coming up with that?

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Doug, do you want to take that?

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

Sure. As I think everyone has learned over the last few years with the recycling coming to be such a large part of the business, which is real positive, the midstream water business is really the backstop to those peaks. And then the producers really benefit on the valleys when they get to recycle their own water. Meanwhile, we're maintaining capacity as a backstop when the flowbacks happen. So that has continued.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

As I talked about earlier, we have such a good wedge of base water within the portfolio. Our swings, we might swing 500,000 barrels day to day based on whether the recycling is hitting or the peaks are hitting us. So that will continue. That's a normal part of the business at this point. Where we see variation maybe from a budget perspective is that sometimes we will have forecasted directly from our customers.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

And if several of the customers for some reason push their completions into one quarter to the next, you know, we'll see those quarterly fluctuations. An example is this first fiscal quarter, started in April, what do we look like through, I guess, we're almost through May. We're looking quite above budget for this first quarter on volumes. Why is that? Volumes have been very strong and actually they're outpacing forecasts because there really has been a little bit less recycling based on timing.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

We might come into July and be a little bit under budget. But we have a pretty good band and pretty good understanding of how to forecast that and when those are going to hit. But it's a base part of the business. We have a very strong wedge. You look at our wedge and we're 2,500,000 barrels a day very consistently in the portfolio, and we've peaked and hit records in fiscal quarter, you know, 3,000,000, three point one, three point two million some days.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

So it's just, like I said, it's part of the business. And as our base wedge grows and grows, that really, that 500,000 barrel per day swing is pretty normal for us.

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Just based on what you've heard from your customers and maybe what you've heard on the calls if they haven't communicated with you clearly, what do you think that means for volumes next year just based in this market today? Is it flat? Is it up slightly? Up slightly? How should we think about it?

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Just obviously, know it's things can change. I'm just trying to get a sense of how to think about what happens.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

Sure. Sure. So, you know, everyone's been asking, you know, what what's gonna what's happening? Are we seeing changes? We're seeing some of the rigs, you know, being laid down that we have not seen or been informed by our customers that the volumes are changing on the water side.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

You know, I think everyone can has been hearing that a production will be at least held flat. There may not be a lot of growth. You know, one of the positive things about recycling is when completions slow down from the growth side, that water doesn't go to recycle, it goes to disposal. A certain percentage of that does. So we expect we have some growth in this year in our forecast and we expect that to be on.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

We've not heard anything different. That's the alternate aspect to the recycling is that there's in any one day, there's twenty, thirty million barrels of water sitting on the surface. If there are any completions that are pushed or delayed into the next, be it quarter or next year, that water comes off the table and our core business is disposal, and we get the benefit of that in our volumes. To answer the question is, we have not been apprised of any volumetric changes from our customers. And with their endeavor to hold production at least flat, we're still on pace.

Doug White
Doug White
EVP - Water Solutions at NGL Energy Partners

We're glad to have this be quite a bit ahead in this first fiscal quarter. That obviously helps us throughout the full fiscal year.

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Great. And just one more question for you unrelated to your volumes. I noticed in the 10 ks you had as part of your business strategy, you pointed out continuing to reduce the nines of the Class D preferred units. And you also mentioned something about reinstating the common unit distribution. I think in the past you've said that's also financing growth projects.

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

In the past you've said that's a possibility, but you may look at other things like instead just focusing on share repurchases. Is that still the case? Or am I reading this too literally to say that now the goal is to come reinstate distributions?

H. Michael Krimbill
H. Michael Krimbill
CEO at NGL Energy Partners

Near term, we don't see cognitive distribution. We're happy to start attacking these Class Ds, so that'll be our focus. And at the same time, trying to reduce leverage. We'd like to get that under four times. So I wouldn't be looking for a distribution increase in the next few quarters. No. Or reinstatement.

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Gotcha. And then in terms of buying back shares, is that is that possibility or is that that's it's now focused on the preferred? I know you've focused on the warrants before.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Yeah. Think, Greg, I think it's class b's, and then, you know, we'll be opportunistic with with the capital structure. There could be some comments sprinkled in there, but Class Ds are our priority. I think you've heard it in my comments, you heard it in Mike's comments and hearing Q and A. That's the next piece of the capital structure we need to tackle and we'll get after it this fiscal year.

Gregg Brody
Gregg Brody
High Yield Research Analyst at Bank of America Merrill Lynch

Thanks for the time, guys.

Operator

We have reached the end of the question and answer session and I will now turn the call over to Brad Cooper for closing remarks.

Brad Cooper
Brad Cooper
EVP & CFO at NGL Energy Partners

Thanks everyone for your interest in NGL. We are well positioned heading into fiscal twenty twenty six. Look forward to catching up with everyone in August during our first quarter call for 2026. Thank you.

Operator

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

Executives
    • Brad Cooper
      Brad Cooper
      EVP & CFO
    • H. Michael Krimbill
      H. Michael Krimbill
      CEO
    • Doug White
      Doug White
      EVP - Water Solutions
Analysts
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Key Takeaways

  • Completed the sale of non-core assets—including 18 NGL terminals, refined products business and biodiesel operations—monetized for a double-digit multiple, using proceeds to pay off all ABL debt and repurchase Class D preferred units to sharpen focus on core businesses.
  • Consolidated Q4 adjusted EBITDA rose by 20% year-over-year to $176.8 million, driven by stronger Water Solutions volumes and improved cost efficiency with per-barrel operating costs down from $0.24 to $0.22.
  • For FY 2026, management guided to $615 million–$625 million of adjusted EBITDA and $105 million of total capex, including $60 million dedicated to Water Solutions growth projects, reflecting a stable outlook amid lower oil prices and asset-sale headwinds.
  • Crude Oil Logistics and Liquids Logistics segments saw Q4 EBITDA declines—down to $13.1 million and $17.7 million, respectively—due to reduced pipeline volumes and weaker butane margins, highlighting ongoing challenges in these areas.
  • The Water Solutions segment benefits from ~90% of volumes under acreage dedications or MVCs and 80% with investment-grade counterparties, providing revenue visibility and insulation from commodity volatility.
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Earnings Conference Call
NGL Energy Partners Q4 2025
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