NGL: NGL Energy Partners LP Announces Second Quarter Fiscal 2025 Financial Results

NGL Energy Partners LP (NYSE:NGL) ("NGL," "we," "us," "our," or the "Partnership") today reported its second quarter Fiscal 2025 financial results. Highlights include: Net income for the second quarter of Fiscal 2025 of $3.4 million, compared to net income of $28.3 million for the second quarter of Fiscal 2024 Adjusted EBITDA (1) for the second quarter of Fiscal 2025 of $147.3 million, compared to $176.2 million for the second quarter of Fiscal 2024 On August 5, 2024, we amended the Term Loan B agreement to reduce the SOFR margin from 4.50% to 3.75%. Highlights for the period subsequent to September 30, 2024: On November 1, 2024, we commenced operations on our expanded Lea County Express Pipeline system (LEX II). On November 11, 2024, we entered into an agreement to purchase 23,375,000 of our outstanding warrants for approximately $6.9 million. This transaction is expected to close on November 22, 2024. "We continue to grow our disposed water volumes with the current quarter volumes increasing by approximately 9% over the preceding quarter. As indicated previously, our capital expenditures for the year were front loaded with LEX II so the back half of the fiscal year will generate a majority of our free cash flow. We are on track for the first six months of the fiscal year but are lowering our full year consolidated Adjusted EBITDA (2) guidance to a range of $640 to $650 million, as a result of projected warmer weather, lower crude oil prices and other Liquids Logistics results," stated Mike Krimbill. "We are seeing continued demand for new water disposal capacity, and our conversations with producers to contract additional volumes on Grand Mesa are going well. We continue to work on additional non-core asset sales," he added. Quarterly Results of Operations The following table summarizes the unaudited operating income (loss) and Adjusted EBITDA (1) by reportable segment for the periods indicated: Quarter Ended September 30, 2024 September 30, 2023 Operating Income (Loss) Adjusted EBITDA (1) Operating Income (Loss) Adjusted EBITDA (1) (in thousands) Water Solutions $ 72,829 $ 128,862 $ 59,118 $ 140,389 Crude Oil Logistics 14,840 17,263 14,778 30,713 Liquids Logistics (1,133 ) 9,235 23,577 17,086 Corporate and Other (8,807 ) (8,090 ) (11,443 ) (11,974 ) Total $ 77,729 $ 147,270 $ 86,030 $ 176,214 ________________ (1) See the "Non-GAAP Financial Measures" section of this release for the definition of Adjusted EBITDA (as used herein) and a discussion of this non-GAAP financial measure. (2) Certain of the forward-looking financial measures are provided on a non-GAAP basis. A reconciliation of forward-looking financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP is potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant. Water Solutions Operating income for the Water Solutions segment increased by $13.7 million for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. The increase was due primarily to lower losses on the disposal or impairment of assets of $2.0 million in the current period compared to $23.6 million in the prior year period. Also contributing to the increase was an increase in net gains from derivatives. These increases were partially offset by lower disposal revenues due to the timing and recognition of payments made by certain producers for committed volumes not delivered and the prior year period including the acceleration of revenue from the termination of a water disposal contract with a minimum volume commitment. Excluding these items, disposal revenues increased due to an increase in produced water volumes processed on our system. The Partnership processed approximately 2.68 million barrels of produced water per day during the quarter ended September 30, 2024, a 9.8% increase when compared to approximately 2.44 million barrels of water per day processed during the quarter ended September 30, 2023. Revenues from recovered skim oil, including the impact from realized skim oil hedges, totaled $27.4 million for the quarter ended September 30, 2024, a decrease of $3.7 million from the prior year period. The decrease was due primarily to a decrease in skim oil barrels sold as a result of lower skim oil recovered as certain producers recycled their water for use in their operations, lower realized crude oil prices received from the sale of skim oil barrels and the sale during the prior year quarter of approximately 53,000 barrels of skim oil that were stored at June 30, 2023 due to tighter pipeline specifications. Operating expenses in the Water Solutions segment decreased $0.3 million for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023 due primarily to lower chemical expense due to purchasing fewer chemicals and using chemicals more efficiently, as well as lower repairs and maintenance expense due to the timing of repairs and tank cleaning. These decreases were partially offset by higher business insurance expense for remediation costs incurred, higher utilities expense due to increased produced water volumes processed and lower severance taxes in the prior year quarter as a result of a severance tax refund received in September 2023 that related to prior periods. Operating expense per produced barrel processed was $0.22 for the quarter ended September 30, 2024, compared to $0.24 in the comparative quarter last year. Crude Oil Logistics Operating income for the Crude Oil Logistics segment increased by $0.1 million for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. The increase was due to net gains on derivative contracts of $4.4 million in the current period compared to net losses of $15.4 million in the prior year period. This was offset by lower margins due to reduced sales volumes as a result of lower production on acreage dedicated to us in the DJ Basin. In addition, margin per barrel decreased due to the selling higher priced inventory into a market in which prices were declining. During the quarter ended September 30, 2024, physical volumes on the Grand Mesa Pipeline averaged approximately 63,000 barrels per day, compared to approximately 70,000 barrels per day for the quarter ended September 30, 2023. Liquids Logistics Operating income for the Liquids Logistics segment decreased by $24.7 million for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, primarily due to lower margins. Butane margins declined primarily due to an increase in derivative losses and the prior year period benefiting from a lower of cost or realizable value adjustment. Margins for propane declined due to lower contracted volumes due to reduced retail customer demand as a result of warmer weather, which was offset by an increase in derivative gains. Margins for refined products declined due to lower customer demand and aggressive pricing by some competitors in certain markets. Margins for other products declined primarily due to selling higher priced biodiesel inventory into a market in which prices were declining and lower derivative gains. In addition, a net gain of $6.9 million related to the sale of two propane terminals was realized in the prior year period. Corporate and Other The operating loss for Corporate and Other was lower by $2.6 million for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. General and administrative expenses decreased due to lower legal expenses as several large cases ended and the reimbursement of legal expenses relating to a dispute associated with commercial activities in prior periods and a decrease in business insurance. The results for the prior period included gains from derivatives of $3.4 million as we had entered into economic hedges to protect our liquidity positions and leverage from a significant increase in commodity prices. Capitalization and Liquidity Total liquidity (cash plus available capacity on our asset-based revolving credit facility ("ABL Facility")) was approximately $251.1 million as of September 30, 2024. Borrowings on the Partnership's ABL Facility totaled approximately $274.0 million as of September 30, 2024, as we funded certain capital projects and began to build inventory for the blending and heating seasons. The Partnership is in compliance with all of its debt covenants and has no upcoming debt maturities. Second Quarter Conference Call Information A conference call to discuss NGL's results of operations is scheduled for 4:00 pm Central Time on Tuesday, November 12, 2024. Analysts, investors, and other interested parties may join the webcast via the event link: https://www.webcaster4.com/Webcast/Page/2808/51470 or by dialing (877) 545-0523 and providing conference code: 395492. An archived audio replay of the call will be available for 14 days, which can be accessed by dialing (877) 481-4010 and providing replay passcode 51470. Non-GAAP Financial Measures We define EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, revaluation of liabilities and other. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, income 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 t