November 24, 2020

Nynas Nytex BT22 | FLD Top Leaderboard | 600×75

NGL Energy Partners LP Announces Second Quarter Fiscal 2021 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported its second quarter fiscal 2021 results. Highlights for the quarter include: Income from continuing operations for the second quarter of Fiscal 2021 of $6.0 million, compared to a loss from continuing operations of $15.6 million for the second quarter of Fiscal 2020 Adjusted EBITDA from continuing operations for the second quarter of Fiscal 2021 of $138.0 million, compared to $123.5 million for the second quarter of Fiscal 2020 Successful completion of our Poker Lake pipeline, which has an initial capacity of over 350,000 barrels per day and connects into our integrated Delaware Basin produced water pipeline infrastructure network New, long-term acreage dedications for water disposal services and a long-term extension and expansion to an existing acreage dedication with leading independent and super major producers in the Delaware Basin “Our second quarter results reflect the expected increase in Adjusted EBITDA related to the sale of crude oil stored for contango, as well as the sale of skim oil barrels we held during our first fiscal quarter. Our second quarter earnings also reflect the full benefit of reduced operating expenses in the Water Solutions segment, with operating expense averaging $0.27 per barrel, compared to $0.32 per barrel during the first quarter of this fiscal year and $0.40 per barrel during Fiscal 2020. This decrease in expenses is significant as it represents approximately $50 - $60 million in annual cost savings based on average volumes for the quarter,” stated Mike Krimbill, NGL’s CEO. “Additionally during the quarter, we were able to enter into several new, long-term water disposal contracts, as well as extend and expand certain other water disposal contracts, in the Delaware Basin with both high quality, independent and super major producers. Our Crude Logistics segment continued to perform despite the noise around the Extraction bankruptcy process and averaged approximately 123,000 barrels per day on Grand Mesa Pipeline. As previously stated, NGL will continue to vigorously defend the value of its contracts with Extraction and remains amenable to resolving the dispute through commercial considerations. Finally, the Liquids and Refined Products segment is heading into its peak earning season with strong inventory positions and we are looking forward to a successful year in this segment. In addition to maximizing results from operations, we are focused on reducing indebtedness and our bank commitments. We are reducing capital expenditures, further cutting costs and have decreased the common unit distribution, all of which increase our free cash flow. We are also evaluating assets sales and joint venture opportunities. These remain challenging times; however, we continue to manage the things we can control and focus on the future to create value for our stakeholders,” Krimbill concluded. Quarterly Results of Operations The following table summarizes operating income (loss) and Adjusted EBITDA from continuing operations by reportable segment for the periods indicated: Quarter Ended September 30, 2020 September 30, 2019 Operating Income (Loss) Adjusted EBITDA Operating Income (Loss) Adjusted EBITDA (in thousands) Crude Oil Logistics $ 48,239 $ 65,181 $ 38,520 $ 54,632 Liquids and Refined Products 14,338 21,257 8,798 23,273 Water Solutions (13,277 ) 61,047 21,274 56,879 Corporate and Other (12,984 ) (9,514 ) (38,477 ) (11,318 ) Total $ 36,316 $ 137,971 $ 30,115 $ 123,466 The tables included in this release reconcile operating income (loss) to Adjusted EBITDA from continuing operations, a non-GAAP financial measure, on a consolidated basis and for each of the Partnership’s reportable segments. Crude Oil Logistics Operating income for the second quarter of Fiscal 2021 increased compared to the second quarter of Fiscal 2020 primarily due to increased margins. The increased margin realized during the current quarter was due primarily to the sale of inventory that was purchased at lower prices and held during the three months ended June 30, 2020. During the three months ended September 30, 2020, financial volumes on the Grand Mesa Pipeline averaged approximately 123,000 barrels per day. In June 2020, Extraction Oil & Gas, Inc. (“Extraction”), a significant shipper on the Grand Mesa Pipeline, filed a petition for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Extraction has transportation contracts pursuant to which it has committed to ship crude oil on the pipeline through October 2026. As part of the bankruptcy filing, Extraction filed a motion requesting that the court authorize it to reject these transportation contracts, to which the Partnership filed an objection and took various other legal steps within the bankruptcy to protect the value of the contracts. On November 2, 2020, the bankruptcy court issued a bench ruling granting the motion to reject the transportation contracts effective as of June 14, 2020. As a result, we intend to appeal the bankruptcy court’s ruling and raise what we respectfully believe are numerous infirmities with the ruling. Liquids and Refined Products Total product margin per gallon, excluding the impact of derivatives, was $0.036 for the quarter ended September 30, 2020, compared to $0.031 for the quarter ended September 30, 2019. This increase was primarily due to propane inventory values aligning with increased commodity prices. This increase was partially offset by lower margins for butane and refined products due to lower demand resulting from the COVID-19 pandemic. Refined products volumes decreased by approximately 111.7 million gallons, or 33.6%, during the quarter ended September 30, 2020 compared to the quarter ended September 30, 2019. Propane volumes decreased by approximately 9.5 million gallons, or 3.6%, and butane volumes decreased by approximately 26.8 million gallons, or 15.7%, when compared to the quarter ended September 30, 2019. Other product volumes decreased by approximately 37.1 million gallons, or 24.5%, during the quarter ended September 30, 2020 compared to the same period in the prior year. The decrease in refined products, propane, butane and other product volumes was also primarily due to the continued lower demand as a result of the COVID-19 pandemic. Water Solutions The Partnership processed approximately 1.28 million barrels of water per day during the quarter ended September 30, 2020, a 1.9% increase when compared to produced water processed per day during the quarter ended September 30, 2019. This increase was primarily driven by our acquisition of Hillstone Environmental Partners, LLC in November 2019 in the Delaware Basin and was offset by lower disposal volumes in all other basins during the period resulting from lower crude oil prices, drilling activity and production volumes. Revenues from recovered crude oil, including the impact from realized skim oil hedges, totaled $12.5 million for the quarter ended September 30, 2020, a decrease of $3.9 million from the prior year period. This decrease was the result of lower volumes and lower crude oil prices. The percentage of recovered crude oil per barrel of produced water processed has declined over the past several periods due to an increase in produced water transported through pipelines (which contains less oil per barrel of produced water) and the addition of contract structures that allow producers to keep the skim oil recovered from produced water. This decrease was partially offset by the sale of crude oil during the three months ended September 30, 2020, that we stored as of June 30, 2020 due to the lower crude oil prices. Operating expenses in the Water Solutions segment decreased to $0.27 per barrel compared to $0.38 per barrel in the comparative quarter last year. The Partnership has taken significant steps to reduce operating costs and continues to evaluate cost saving initiatives in the current environment. In October 2020, the Partnership successfully completed its Poker Lake pipeline and tie-ins, which has an initial capacity of over 350,000 barrels per day and connects into its integrated Delaware Basin produced water pipeline infrastructure network. NGL began receiving produced water volumes from Exxon’s Poker Lake Development. Additionally, the Partnership recently announced new agreements, including acreage dedications, water transportation and disposal agreements, and water supply agreements, with leading super major producers and other key producers in the Delaware Basin. The Partnership expects to service these customers’ produced water needs with its existing infrastructure with minimal capital expenditure requirements in the foreseeable future. Corporate and Other Corporate and Other expenses decreased from the comparable prior year period primarily due to lower compensation expense, in particular cash and non-cash incentive compensation, and a reduction in acquisition related expenses. These decreases were partially offset by legal costs incurred for defending the rejection of our transportation contracts in Extraction bankruptcy proceedings. Capitalization and Liquidity Total debt outstanding was $3.29 billion at September 30, 2020 compared to $3.15 billion at March 31, 2020, an increase of $139 million due primarily to the funding of certain capital expenditures incurred prior to and accrued on March 31, 2020 and $83.1 million of the remaining $100.0 million deferred purchase price of Mesquite Disposals Unlimited, LLC (“Mesquite”). Capital expenditures incurred totaled $24.4 million during the second quarter (including $6.8 million in maintenance expenditures) and $54.4 million year-to-date. These expenditures are expected to continue to decrease throughout Fiscal 2021 with full year expectations totaling $100 million or less for both growth and maintenance capital expenditures combined. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $122.1 million as of September 30, 2020 and the Partnership is in compliance with all of its debt covenants. The Partnership is currently working with the syndicate of lenders that are a party to its revolving credit facility to extend the maturity of the facility by at least one year. The Partnership’s proposal was submitted to all of the syndicate lenders in October 2020, and remains subject to approval by each lender. Second Quarter Conference Call Information A conference call to discuss NGL’s results of operations is scheduled for 4:00 pm Central Time on Monday, November 9, 2020. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 8880357. An archived audio replay of the conference call will be available for 7 days beginning at 1:00 pm Central Time on November 10, 2020, which can be accessed by dialing (855) 859-2056 and providing access code 8880357. 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 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, acquisition expense, revaluation of liabilities, certain legal settlements and other. NGL also includes in Adjusted EBITDA certain inventory valuation adjustments related to TransMontaigne Product Services, LLC (“TPSL”), our refined products business in the mid-continent region of the United States (“Mid-Con”) and our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”), which are included in discontinued operations, and certain refined products businesses within NGL’s Liquids and Refined Products 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 the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL’s Liquids and Refined Products 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 record a realized gain or loss. NGL does not draw such a distinction between realized and unrealized gains and losses on derivatives of the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL’s Liquids and Refined Products segment. The primary hedging strategy of these businesses 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 cover extended periods of time. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of these businesses 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. 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. NGL provides Adjusted EBITDA guidance that does not include certain charges and costs, which in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as income taxes, interest and other non-operating items, depreciation and amortization, 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, acquisition expense, revaluation of liabilities and items that are unusual in nature or infrequently occurring. The exclusion of these charges and costs in future periods will have a significant impact on the Partnership’s Adjusted EBITDA, and the Partnership is not able to provide a reconciliation of its Adjusted EBITDA guidance to net income (loss) without unreasonable efforts due to the uncertainty and variability of the nature and amount of these future charges and costs and the Partnership believes that such reconciliation, if possible, would imply a degree of precision that would be potentially confusing or misleading to investors. 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. NGL ENERGY PARTNERS LP AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (in Thousands, except unit amounts) September 30, 2020 March 31, 2020 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 16,912 $ 22,704 Accounts receivable-trade, net of allowance for expected credit losses of $3,399 and $4,540, respectively 439,889 566,834 Accounts receivable-affiliates 14,904 12,934 Inventories 182,859 69,634 Prepaid expenses and other current assets 74,150 101,981 Total current assets 728,714 774,087 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $619,820 and $529,068, respectively 2,799,725 2,851,555 GOODWILL 982,239 993,587 INTANGIBLE ASSETS, net of accumulated amortization of $706,259 and $631,449, respectively 1,538,417 1,612,480 INVESTMENTS IN UNCONSOLIDATED ENTITIES 21,215 23,182 OPERATING LEASE RIGHT-OF-USE ASSETS 168,349 180,708 OTHER NONCURRENT ASSETS 47,752 63,137 Total assets $ 6,286,411 $ 6,498,736 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable-trade $ 379,420 $ 515,049 Accounts payable-affiliates 23,985 17,717 Accrued expenses and other payables 138,572 232,062 Advance payments received from customers 24,143 19,536 Current maturities of long-term debt 13,123 4,683 Operating lease obligations 50,709 56,776 Total current liabilities 629,952 845,823 LONG-TERM DEBT, net of debt issuance costs of $22,267 and $19,795, respectively, and current maturities 3,275,166 3,144,848 OPERATING LEASE OBLIGATIONS 114,833 121,013 OTHER NONCURRENT LIABILITIES 105,835 114,079 CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively 551,097 537,283 EQUITY: General partner, representing a 0.1% interest, 128,901 and 128,901 notional units, respectively (51,518 ) (51,390 ) Limited partners, representing a 99.9% interest, 128,771,715 and 128,771,715 common units issued and outstanding, respectively 1,242,676 1,366,152 Class B preferred limited partners, 12,585,642 and 12,585,642 preferred units issued and outstanding, respectively 305,468 305,468 Class C preferred limited partners, 1,800,000 and 1,800,000 preferred units issued and outstanding, respectively 42,891 42,891 Accumulated other comprehensive loss (307 ) (385 ) Noncontrolling interests 70,318 72,954 Total equity 1,609,528 1,735,690 Total liabilities and equity $ 6,286,411 $ 6,498,736 NGL ENERGY PARTNERS LP AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Operations (in Thousands, except unit and per unit amounts) Three Months Ended September 30, Six Months Ended September 30, 2020 2019 2020 2019 REVENUES: Crude Oil Logistics $ 466,841 $ 641,152 $ 742,880 $ 1,357,312 Water Solutions 88,678 101,249 176,743 173,032 Liquids and Refined Products 612,324 1,061,671 1,092,322 2,145,364 Other 315 264 628 519 Total Revenues 1,168,158 1,804,336 2,012,573 3,676,227 COST OF SALES: Crude Oil Logistics 386,771 569,699 604,328 1,218,939 Water Solutions 579 (6,496 ) 5,279 (9,303 ) Liquids and Refined Products 577,086 1,025,565 1,031,422 2,068,597 Other 454 435 908 900 Total Cost of Sales 964,890 1,589,203 1,641,937 3,279,133 OPERATING COSTS AND EXPENSES: Operating 56,054 74,886 121,041 136,198 General and administrative 17,475 43,908 34,633 64,250 Depreciation and amortization 87,469 63,113 171,455 116,867 Loss on disposal or impairment of assets, net 5,954 3,111 17,976 2,144 Operating Income 36,316 30,115 25,531 77,635 OTHER INCOME (EXPENSE): Equity in earnings (loss) of unconsolidated entities 501 (265 ) 790 (257 ) Interest expense (46,935 ) (45,017 ) (90,896 ) (84,894 ) Gain on early extinguishment of liabilities, net 13,747 — 33,102 — Other income, net 1,585 183 2,620 1,193 Income (Loss) From Continuing Operations Before Income Taxes 5,214 (14,984 ) (28,853 ) (6,323 ) INCOME TAX BENEFIT (EXPENSE) 774 (640 ) 1,075 (319 ) Income (Loss) From Continuing Operations 5,988 (15,624 ) (27,778 ) (6,642 ) Loss From Discontinued Operations, net of Tax (153 ) (185,742 ) (1,639 ) (186,685 ) Net Income (Loss) 5,835 (201,366 ) (29,417 ) (193,327 ) LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (168 ) 129 (219 ) 397 NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP $ 5,667 $ (201,237 ) $ (29,636 ) $ (192,930 ) NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS $ (17,933 ) $ (32,561 ) $ (73,748 ) $ (152,687 ) NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS $ (152 ) $ (185,556 ) $ (1,637 ) $ (186,498 ) NET LOSS ALLOCATED TO COMMON UNITHOLDERS $ (18,085 ) $ (218,117 ) $ (75,385 ) $ (339,185 ) BASIC LOSS PER COMMON UNIT Loss From Continuing Operations $ (0.14 ) $ (0.26 ) $ (0.57 ) $ (1.21 ) Loss From Discontinued Operations, net of Tax $ — $ (1.46 ) $ (0.01 ) $ (1.47 ) Net Loss $ (0.14 ) $ (1.72 ) $ (0.58 ) $ (2.68 ) DILUTED LOSS PER COMMON UNIT Loss From Continuing Operations $ (0.14 ) $ (0.26 ) $ (0.57 ) $ (1.21 ) Loss From Discontinued Operations, net of Tax $ — $ (1.46 ) $ (0.01 ) $ (1.47 ) Net Loss $ (0.14 ) $ (1.72 ) $ (0.58 ) $ (2.68 ) BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 128,771,715 126,979,034 128,771,715 126,435,870 DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 128,771,715 126,979,034 128,771,715 126,435,870 Contacts NGL Energy Partners LP Trey Karlovich, 918-481-1119 Chief Financial Officer and Executive Vice President [email protected] or Linda Bridges, 918-481-1119 Senior Vice President - Finance and Treasurer [email protected] Read full story here

TULSA, Okla.–(BUSINESS WIRE)–NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported its second quarter fiscal 2021 results. Highlights for the quarter include:

  • Income from continuing operations for the second quarter of Fiscal 2021 of $6.0 million, compared to a loss from continuing operations of $15.6 million for the second quarter of Fiscal 2020
  • Adjusted EBITDA from continuing operations for the second quarter of Fiscal 2021 of $138.0 million, compared to $123.5 million for the second quarter of Fiscal 2020
  • Successful completion of our Poker Lake pipeline, which has an initial capacity of over 350,000 barrels per day and connects into our integrated Delaware Basin produced water pipeline infrastructure network
  • New, long-term acreage dedications for water disposal services and a long-term extension and expansion to an existing acreage dedication with leading independent and super major producers in the Delaware Basin

“Our second quarter results reflect the expected increase in Adjusted EBITDA related to the sale of crude oil stored for contango, as well as the sale of skim oil barrels we held during our first fiscal quarter. Our second quarter earnings also reflect the full benefit of reduced operating expenses in the Water Solutions segment, with operating expense averaging $0.27 per barrel, compared to $0.32 per barrel during the first quarter of this fiscal year and $0.40 per barrel during Fiscal 2020. This decrease in expenses is significant as it represents approximately $50 – $60 million in annual cost savings based on average volumes for the quarter,” stated Mike Krimbill, NGL’s CEO. “Additionally during the quarter, we were able to enter into several new, long-term water disposal contracts, as well as extend and expand certain other water disposal contracts, in the Delaware Basin with both high quality, independent and super major producers. Our Crude Logistics segment continued to perform despite the noise around the Extraction bankruptcy process and averaged approximately 123,000 barrels per day on Grand Mesa Pipeline. As previously stated, NGL will continue to vigorously defend the value of its contracts with Extraction and remains amenable to resolving the dispute through commercial considerations. Finally, the Liquids and Refined Products segment is heading into its peak earning season with strong inventory positions and we are looking forward to a successful year in this segment. In addition to maximizing results from operations, we are focused on reducing indebtedness and our bank commitments. We are reducing capital expenditures, further cutting costs and have decreased the common unit distribution, all of which increase our free cash flow. We are also evaluating assets sales and joint venture opportunities. These remain challenging times; however, we continue to manage the things we can control and focus on the future to create value for our stakeholders,” Krimbill concluded.

Quarterly Results of Operations

The following table summarizes operating income (loss) and Adjusted EBITDA from continuing operations by reportable segment for the periods indicated:

Quarter Ended

September 30, 2020

September 30, 2019

Operating

Income (Loss)

Adjusted

EBITDA

Operating

Income (Loss)

Adjusted

EBITDA

(in thousands)

Crude Oil Logistics

$

48,239

$

65,181

$

38,520

$

54,632

Liquids and Refined Products

14,338

21,257

8,798

23,273

Water Solutions

(13,277

)

61,047

21,274

56,879

Corporate and Other

(12,984

)

(9,514

)

(38,477

)

(11,318

)

Total

$

36,316

$

137,971

$

30,115

$

123,466

The tables included in this release reconcile operating income (loss) to Adjusted EBITDA from continuing operations, a non-GAAP financial measure, on a consolidated basis and for each of the Partnership’s reportable segments.

Crude Oil Logistics

Operating income for the second quarter of Fiscal 2021 increased compared to the second quarter of Fiscal 2020 primarily due to increased margins. The increased margin realized during the current quarter was due primarily to the sale of inventory that was purchased at lower prices and held during the three months ended June 30, 2020. During the three months ended September 30, 2020, financial volumes on the Grand Mesa Pipeline averaged approximately 123,000 barrels per day.

In June 2020, Extraction Oil & Gas, Inc. (“Extraction”), a significant shipper on the Grand Mesa Pipeline, filed a petition for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Extraction has transportation contracts pursuant to which it has committed to ship crude oil on the pipeline through October 2026. As part of the bankruptcy filing, Extraction filed a motion requesting that the court authorize it to reject these transportation contracts, to which the Partnership filed an objection and took various other legal steps within the bankruptcy to protect the value of the contracts. On November 2, 2020, the bankruptcy court issued a bench ruling granting the motion to reject the transportation contracts effective as of June 14, 2020. As a result, we intend to appeal the bankruptcy court’s ruling and raise what we respectfully believe are numerous infirmities with the ruling.

Liquids and Refined Products

Total product margin per gallon, excluding the impact of derivatives, was $0.036 for the quarter ended September 30, 2020, compared to $0.031 for the quarter ended September 30, 2019. This increase was primarily due to propane inventory values aligning with increased commodity prices. This increase was partially offset by lower margins for butane and refined products due to lower demand resulting from the COVID-19 pandemic.

Refined products volumes decreased by approximately 111.7 million gallons, or 33.6%, during the quarter ended September 30, 2020 compared to the quarter ended September 30, 2019. Propane volumes decreased by approximately 9.5 million gallons, or 3.6%, and butane volumes decreased by approximately 26.8 million gallons, or 15.7%, when compared to the quarter ended September 30, 2019. Other product volumes decreased by approximately 37.1 million gallons, or 24.5%, during the quarter ended September 30, 2020 compared to the same period in the prior year. The decrease in refined products, propane, butane and other product volumes was also primarily due to the continued lower demand as a result of the COVID-19 pandemic.

Water Solutions

The Partnership processed approximately 1.28 million barrels of water per day during the quarter ended September 30, 2020, a 1.9% increase when compared to produced water processed per day during the quarter ended September 30, 2019. This increase was primarily driven by our acquisition of Hillstone Environmental Partners, LLC in November 2019 in the Delaware Basin and was offset by lower disposal volumes in all other basins during the period resulting from lower crude oil prices, drilling activity and production volumes.

Revenues from recovered crude oil, including the impact from realized skim oil hedges, totaled $12.5 million for the quarter ended September 30, 2020, a decrease of $3.9 million from the prior year period. This decrease was the result of lower volumes and lower crude oil prices. The percentage of recovered crude oil per barrel of produced water processed has declined over the past several periods due to an increase in produced water transported through pipelines (which contains less oil per barrel of produced water) and the addition of contract structures that allow producers to keep the skim oil recovered from produced water. This decrease was partially offset by the sale of crude oil during the three months ended September 30, 2020, that we stored as of June 30, 2020 due to the lower crude oil prices.

Operating expenses in the Water Solutions segment decreased to $0.27 per barrel compared to $0.38 per barrel in the comparative quarter last year. The Partnership has taken significant steps to reduce operating costs and continues to evaluate cost saving initiatives in the current environment.

In October 2020, the Partnership successfully completed its Poker Lake pipeline and tie-ins, which has an initial capacity of over 350,000 barrels per day and connects into its integrated Delaware Basin produced water pipeline infrastructure network. NGL began receiving produced water volumes from Exxon’s Poker Lake Development. Additionally, the Partnership recently announced new agreements, including acreage dedications, water transportation and disposal agreements, and water supply agreements, with leading super major producers and other key producers in the Delaware Basin. The Partnership expects to service these customers’ produced water needs with its existing infrastructure with minimal capital expenditure requirements in the foreseeable future.

Corporate and Other

Corporate and Other expenses decreased from the comparable prior year period primarily due to lower compensation expense, in particular cash and non-cash incentive compensation, and a reduction in acquisition related expenses. These decreases were partially offset by legal costs incurred for defending the rejection of our transportation contracts in Extraction bankruptcy proceedings.

Capitalization and Liquidity

Total debt outstanding was $3.29 billion at September 30, 2020 compared to $3.15 billion at March 31, 2020, an increase of $139 million due primarily to the funding of certain capital expenditures incurred prior to and accrued on March 31, 2020 and $83.1 million of the remaining $100.0 million deferred purchase price of Mesquite Disposals Unlimited, LLC (“Mesquite”). Capital expenditures incurred totaled $24.4 million during the second quarter (including $6.8 million in maintenance expenditures) and $54.4 million year-to-date. These expenditures are expected to continue to decrease throughout Fiscal 2021 with full year expectations totaling $100 million or less for both growth and maintenance capital expenditures combined. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $122.1 million as of September 30, 2020 and the Partnership is in compliance with all of its debt covenants.

The Partnership is currently working with the syndicate of lenders that are a party to its revolving credit facility to extend the maturity of the facility by at least one year. The Partnership’s proposal was submitted to all of the syndicate lenders in October 2020, and remains subject to approval by each lender.

Second Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled for 4:00 pm Central Time on Monday, November 9, 2020. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 8880357. An archived audio replay of the conference call will be available for 7 days beginning at 1:00 pm Central Time on November 10, 2020, which can be accessed by dialing (855) 859-2056 and providing access code 8880357.

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 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, acquisition expense, revaluation of liabilities, certain legal settlements and other. NGL also includes in Adjusted EBITDA certain inventory valuation adjustments related to TransMontaigne Product Services, LLC (“TPSL”), our refined products business in the mid-continent region of the United States (“Mid-Con”) and our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”), which are included in discontinued operations, and certain refined products businesses within NGL’s Liquids and Refined Products 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 the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL’s Liquids and Refined Products 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 record a realized gain or loss. NGL does not draw such a distinction between realized and unrealized gains and losses on derivatives of the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL’s Liquids and Refined Products segment. The primary hedging strategy of these businesses 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 cover extended periods of time. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of these businesses 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.

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.

NGL provides Adjusted EBITDA guidance that does not include certain charges and costs, which in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as income taxes, interest and other non-operating items, depreciation and amortization, 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, acquisition expense, revaluation of liabilities and items that are unusual in nature or infrequently occurring. The exclusion of these charges and costs in future periods will have a significant impact on the Partnership’s Adjusted EBITDA, and the Partnership is not able to provide a reconciliation of its Adjusted EBITDA guidance to net income (loss) without unreasonable efforts due to the uncertainty and variability of the nature and amount of these future charges and costs and the Partnership believes that such reconciliation, if possible, would imply a degree of precision that would be potentially confusing or misleading to investors.

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.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)

September 30, 2020

March 31, 2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

16,912

$

22,704

Accounts receivable-trade, net of allowance for expected credit losses of $3,399 and $4,540, respectively

439,889

566,834

Accounts receivable-affiliates

14,904

12,934

Inventories

182,859

69,634

Prepaid expenses and other current assets

74,150

101,981

Total current assets

728,714

774,087

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $619,820 and $529,068, respectively

2,799,725

2,851,555

GOODWILL

982,239

993,587

INTANGIBLE ASSETS, net of accumulated amortization of $706,259 and $631,449, respectively

1,538,417

1,612,480

INVESTMENTS IN UNCONSOLIDATED ENTITIES

21,215

23,182

OPERATING LEASE RIGHT-OF-USE ASSETS

168,349

180,708

OTHER NONCURRENT ASSETS

47,752

63,137

Total assets

$

6,286,411

$

6,498,736

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable-trade

$

379,420

$

515,049

Accounts payable-affiliates

23,985

17,717

Accrued expenses and other payables

138,572

232,062

Advance payments received from customers

24,143

19,536

Current maturities of long-term debt

13,123

4,683

Operating lease obligations

50,709

56,776

Total current liabilities

629,952

845,823

LONG-TERM DEBT, net of debt issuance costs of $22,267 and $19,795, respectively, and current maturities

3,275,166

3,144,848

OPERATING LEASE OBLIGATIONS

114,833

121,013

OTHER NONCURRENT LIABILITIES

105,835

114,079

CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively

551,097

537,283

EQUITY:

General partner, representing a 0.1% interest, 128,901 and 128,901 notional units, respectively

(51,518

)

(51,390

)

Limited partners, representing a 99.9% interest, 128,771,715 and 128,771,715 common units issued and outstanding, respectively

1,242,676

1,366,152

Class B preferred limited partners, 12,585,642 and 12,585,642 preferred units issued and outstanding, respectively

305,468

305,468

Class C preferred limited partners, 1,800,000 and 1,800,000 preferred units issued and outstanding, respectively

42,891

42,891

Accumulated other comprehensive loss

(307

)

(385

)

Noncontrolling interests

70,318

72,954

Total equity

1,609,528

1,735,690

Total liabilities and equity

$

6,286,411

$

6,498,736

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)

Three Months Ended September 30,

Six Months Ended September 30,

2020

2019

2020

2019

REVENUES:

Crude Oil Logistics

$

466,841

$

641,152

$

742,880

$

1,357,312

Water Solutions

88,678

101,249

176,743

173,032

Liquids and Refined Products

612,324

1,061,671

1,092,322

2,145,364

Other

315

264

628

519

Total Revenues

1,168,158

1,804,336

2,012,573

3,676,227

COST OF SALES:

Crude Oil Logistics

386,771

569,699

604,328

1,218,939

Water Solutions

579

(6,496

)

5,279

(9,303

)

Liquids and Refined Products

577,086

1,025,565

1,031,422

2,068,597

Other

454

435

908

900

Total Cost of Sales

964,890

1,589,203

1,641,937

3,279,133

OPERATING COSTS AND EXPENSES:

Operating

56,054

74,886

121,041

136,198

General and administrative

17,475

43,908

34,633

64,250

Depreciation and amortization

87,469

63,113

171,455

116,867

Loss on disposal or impairment of assets, net

5,954

3,111

17,976

2,144

Operating Income

36,316

30,115

25,531

77,635

OTHER INCOME (EXPENSE):

Equity in earnings (loss) of unconsolidated entities

501

(265

)

790

(257

)

Interest expense

(46,935

)

(45,017

)

(90,896

)

(84,894

)

Gain on early extinguishment of liabilities, net

13,747

33,102

Other income, net

1,585

183

2,620

1,193

Income (Loss) From Continuing Operations Before Income Taxes

5,214

(14,984

)

(28,853

)

(6,323

)

INCOME TAX BENEFIT (EXPENSE)

774

(640

)

1,075

(319

)

Income (Loss) From Continuing Operations

5,988

(15,624

)

(27,778

)

(6,642

)

Loss From Discontinued Operations, net of Tax

(153

)

(185,742

)

(1,639

)

(186,685

)

Net Income (Loss)

5,835

(201,366

)

(29,417

)

(193,327

)

LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(168

)

129

(219

)

397

NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP

$

5,667

$

(201,237

)

$

(29,636

)

$

(192,930

)

NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

$

(17,933

)

$

(32,561

)

$

(73,748

)

$

(152,687

)

NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

$

(152

)

$

(185,556

)

$

(1,637

)

$

(186,498

)

NET LOSS ALLOCATED TO COMMON UNITHOLDERS

$

(18,085

)

$

(218,117

)

$

(75,385

)

$

(339,185

)

BASIC LOSS PER COMMON UNIT

Loss From Continuing Operations

$

(0.14

)

$

(0.26

)

$

(0.57

)

$

(1.21

)

Loss From Discontinued Operations, net of Tax

$

$

(1.46

)

$

(0.01

)

$

(1.47

)

Net Loss

$

(0.14

)

$

(1.72

)

$

(0.58

)

$

(2.68

)

DILUTED LOSS PER COMMON UNIT

Loss From Continuing Operations

$

(0.14

)

$

(0.26

)

$

(0.57

)

$

(1.21

)

Loss From Discontinued Operations, net of Tax

$

$

(1.46

)

$

(0.01

)

$

(1.47

)

Net Loss

$

(0.14

)

$

(1.72

)

$

(0.58

)

$

(2.68

)

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

128,771,715

126,979,034

128,771,715

126,435,870

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

128,771,715

126,979,034

128,771,715

126,435,870

Contacts

NGL Energy Partners LP

Trey Karlovich, 918-481-1119

Chief Financial Officer and Executive Vice President

[email protected]

or

Linda Bridges, 918-481-1119

Senior Vice President – Finance and Treasurer

[email protected]

Read full story here

< Previous

SEE Announces Upcoming Event with the Financial Community

MGE Energy to Present at EEI Financial Conference