NGL Energy Partners LP(NGL) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated adjusted EBITDA for Q1 2025 was $144.3 million, showing strong performance across all business units [3] - Water Solutions adjusted EBITDA increased to$ 125.6 million from $123.2 million year-over-year [6] - Crude Oil Logistics adjusted EBITDA decreased to$ 18.6 million from $23.8 million in the prior year [7] - Liquids Logistics adjusted EBITDA improved significantly to$ 11.5 million from $4.7 million year-over-year [8] Business Line Data and Key Metrics Changes - Water Solutions physical disposal volumes averaged approximately 2.7 million barrels per day in July, with total volumes paid for disposal up 4% year-over-year [3][6] - Crude Oil Logistics physical volumes on the Grand Mesa pipeline averaged approximately 63,000 barrels per day, down from 72,000 barrels per day in the prior year [7] - Liquids Logistics experienced stronger butane lending margins and volumes, setting up for a favorable fiscal year [8] Market Data and Key Metrics Changes - The Water Solutions segment is expected to benefit from the expansion in the Delaware Basin, which will increase water volumes [10] - Crude Oil Logistics is seeing potential increases in production volumes in the DJ Basin, although long-term factors remain uncertain [10] - Liquids Logistics remains volatile, heavily influenced by winter weather patterns [11] Company Strategy and Development Direction - The company is focused on managing its balance sheet and reducing debt while pursuing internal growth opportunities [11] - The LEX II water pipeline project is on schedule for an October in-service date, with an initial capacity of 200,000 barrels per day expandable to 500,000 barrels per day [6][9] - The company is reaffirming its full-year EBITDA guidance of$ 665 million for the partnership and $550 million to$ 560 million for Water Solutions [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the short, medium, and long-term trends in the Water Solutions business, despite quarterly fluctuations [10] - The company anticipates an increase in crude oil volumes in the DJ Basin, indicating a potential bottoming out of the cycle [10][22] - Liquids Logistics is not expected to expand significantly, but internal growth opportunities are being explored [11] Other Important Information - The company completed the sale of two ranches for approximately $70 million and made its last arrearage payment on preferred shares [4] - A common unit repurchase program was authorized for up to$ 50 million, although no units have been repurchased yet [5] - The company successfully repriced its Term Loan B agreement, reducing interest expenses by $5.25 million annually [5] Q&A Session Summary Question: Water business volume and fee per barrel - Management noted that revenue per barrel increased slightly and that volumes are starting strong for the second quarter, impacted by recycling in Q1 [12][13] Question: Plans for preferred shares - Management plans to utilize free cash flow in Q3 and Q4 to address Class D preferred shares, with no immediate asset sales planned [17][19] Question: Step-up in disposal volumes - The increase in disposal volumes in July was attributed to producers using water for fracking, leading to higher volumes coming in [20][21] Question: Bottoming out of crude logistics - Management believes that increased efficiency in production and rig additions indicate a potential increase in volumes [22] Question: Strategic alternatives for Liquids business - No updates were provided on exploring strategic alternatives for the Liquids business at this time [24]