NGL Energy Partners Q4 Earnings Call Highlights

Key Points

• NGL Energy Partners reported fiscal 2026 adjusted EBITDA of about $660 million, with fourth-quarter adjusted EBITDA of roughly $176 million, and said the year reflected progress on simplifying its business mix and capital structure.
• Water Solutions was the standout segment, producing a record full-year adjusted EBITDA of about $603 million as volumes grew and more than 90% of volumes were supported by contractual commitments or acreage dedications.
• Management guided fiscal 2027 adjusted EBITDA to $715 million to $725 million, driven mainly by Water Solutions and the recently announced LEX2 expansion, while continuing to reduce preferred units and repurchase common units.

NGL Energy Partners NYSE: NGL reported a strong finish to fiscal 2026, with management highlighting record performance in its Water Solutions segment and continued progress toward simplifying the partnership’s business mix and capital structure.

Chief Financial Officer Brad Cooper said adjusted EBITDA from continuing operations was approximately $660 million for the full fiscal year, at the high end of the company’s guidance range and up year over year. Fourth-quarter adjusted EBITDA was approximately $176 million. Excluding a goodwill impairment charge, income from continuing operations was approximately $70 million.

Cooper said fiscal 2026 reflected execution across the partnership’s multi-year strategy, including the sale of its wholesale propane and rack marketing businesses, a refinancing transaction, preferred unit redemptions and common unit repurchases. He said the divestitures reduced volatility in quarterly EBITDA and eliminated working capital swings tied to those businesses.

Water Solutions Drives Growth

Water Solutions remained the company’s primary growth engine. Cooper said the segment generated adjusted EBITDA of approximately $153 million in the fourth quarter and approximately $603 million for the full year, marking another record year.

Produced water volumes averaged approximately 3 million barrels per day in the fourth quarter, up 10% from the prior-year quarter. Total volumes the company was paid on were approximately 3.1 million barrels per day in the quarter, compared with approximately 3 million barrels per day a year earlier. For the full year, disposal volumes averaged approximately 2.9 million barrels per day, an 11% increase from the prior year.

Cooper said operating expenses were $0.22 per barrel in the quarter, improving from the same period a year earlier due to efficiency gains and system optimization. He pointed to the scale of the company’s Delaware Basin system, customer activity from large investment-grade producers and fee-based contracts with minimum volume commitments and acreage dedications as key factors supporting performance.

The company said disposal volumes committed under volume commitments increased to 53% from 45% during the fiscal year. Cooper also noted that more than 90% of volumes are covered by contractual volume commitments or acreage dedications.

LEX2 Expansion Underpins Fiscal 2027 Outlook

Management said momentum from fiscal 2026 has continued into fiscal 2027. Cooper highlighted the May 7 announcement of an expansion of the LEX2 system, increasing capacity by 165,000 barrels per day and giving the system the ability to transport approximately 560,000 barrels of water per day. The expansion is backed by a long-term volume commitment contract that includes increased commitments and an additional four-township committed area in Eddy County. The system can be expanded further to as much as 650,000 barrels per day.

During the question-and-answer session, Doug White, executive vice president of NGL Water Solutions, said the LEX2 expansion involved an amendment and extension of an existing agreement with current customers, including longer terms, additional volume commitments and the four-township dedication. Asked about the potential need for further expansion, White said there is “an incredible amount of demand for additional capacity in the basin” and described demand as continuing to increase.

Chief Executive Officer Michael Krimbill said the company expects consolidated adjusted EBITDA of $715 million to $725 million in fiscal 2027, representing approximately 10% growth year over year at the high end of the guidance range. He said growth is expected to be driven primarily by continued expansion in Water Solutions, supported by already contracted projects.

Krimbill said the guidance does not include any new contracts entered into from this point forward or benefits from current crude oil price levels. The company expects approximately $200 million of growth capital and about $45 million of maintenance capital in fiscal 2027. Management said most of the growth capital is related to LEX2, with some incremental projects included, and that the LEX2-related capital is expected to be spent within the fiscal year, largely in the first two to three quarters.

Capital Structure Remains a Priority

Cooper said the partnership continued to reduce and simplify its capital structure during the year. NGL completed a $950 million refinancing transaction, extending maturities and providing cash to reduce Class D preferred units outstanding. Over the fiscal year, the company redeemed approximately 285,000 Class D preferred units, representing about 47% of the original amount.

Cooper said the partnership intends to continue reducing Class D preferred units through free cash flow and proceeds from non-core asset sales. He added that when leverage is at an appropriate level, NGL can access capital markets to further reduce the Class D securities. The company also remains opportunistic around repricing its term loan B debt to reduce interest expense.

NGL also repurchased 8.7 million common units under its buyback program at an average price of $5.72. Cooper said the board viewed the common units as the best return opportunity when it approved the $50 million program.

Other Segments and Business Mix

In Crude Oil Logistics, adjusted EBITDA was approximately $17 million in the fourth quarter. Grand Mesa pipeline volumes averaged approximately 78,000 barrels per day during the quarter and 72,000 barrels per day for the full year. Cooper said the company continues to work with producers and gatherers in the DJ Basin to contract more barrels onto the pipeline.

White said the company is seeing “very good activity” in the DJ Basin this year, including private equity-backed operators consolidating acreage and moving forward with more cohesive development plans. He said NGL is seeing an uptick in activity that it expects to continue into the current fiscal year and the next couple of fiscal years.

Liquids Logistics generated approximately $17 million of adjusted EBITDA in the fourth quarter. Cooper said the segment has been significantly streamlined following divestitures, including the wholesale propane business, and is now a smaller, less volatile business with reduced seasonality and lower capital requirements.

Longer-Term Water Opportunities

Asked about beneficial reuse, desalination and other next-generation water opportunities, White said the company continues to make progress on previously announced projects with Natura. He said NGL expects a draft permit from the Texas Commission on Environmental Quality “any day now” or within the next few weeks. White also said the company is making progress on an energy campus project that would include nuclear power, a potential data center addition and large-scale desalination.

Krimbill said NGL remains focused on accelerating its transition toward a pure-play water company by expanding water infrastructure and monetizing unrelated assets, continuing to strengthen the balance sheet and opportunistically repurchasing preferred and common equity when it creates value.

About NGL Energy Partners NYSE: NGL

NGL Energy Partners LP 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.

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