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NGL Energy Partners LP(NGL) - 2025 Q3 - Earnings Call Transcript
NGLNGL Energy Partners LP(NGL)2025-02-10 23:47

Financial Data and Key Metrics Changes - Consolidated adjusted EBITDA for Q3 2025 was 147.7million,downfrom147.7 million, down from 151.7 million in Q3 2024, primarily due to the winding down of the biodiesel business which negatively impacted adjusted EBITDA by 12.1million[14][15]−Excludingtheimpactofbiodiesel,adjustedEBITDAwasapproximately12.1 million [14][15] - Excluding the impact of biodiesel, adjusted EBITDA was approximately 160 million for the quarter, representing a 5% increase compared to the prior year [14][15] - The company anticipates total proceeds of approximately 95millionfromthesaleofnaturalgasliquidsterminals,expectedtoclosebyMarch31,2025[6][13]BusinessLineDataandKeyMetricsChanges−WaterSolutionsadjustedEBITDAincreasedto95 million from the sale of natural gas liquids terminals, expected to close by March 31, 2025 [6][13] Business Line Data and Key Metrics Changes - Water Solutions adjusted EBITDA increased to 132.7 million in Q3 2025 from 121.3millioninQ32024,withphysicalwaterdisposalvolumesrisingto2.62millionbarrelsperdayfrom2.38millionbarrelsperday[15][16]−CrudeOilLogisticsadjustedEBITDAwas121.3 million in Q3 2024, with physical water disposal volumes rising to 2.62 million barrels per day from 2.38 million barrels per day [15][16] - Crude Oil Logistics adjusted EBITDA was 17.4 million in Q3 2025, slightly up from 17millionintheprioryear,withaveragefiscalvolumesonGrandMesaatapproximately61,000barrelsperdaycomparedto70,000barrelsperdayinQ32024[17][18]−LiquidsLogisticsadjustedEBITDAdecreasedto17 million in the prior year, with average fiscal volumes on Grand Mesa at approximately 61,000 barrels per day compared to 70,000 barrels per day in Q3 2024 [17][18] - Liquids Logistics adjusted EBITDA decreased to 8.2 million from 26.3millionintheprioryear,withthewindingdownofbiodieselsignificantlyimpactingresults[18][19]MarketDataandKeyMetricsChanges−TotalvolumespaidfordisposalinWaterSolutionsincreasedby1226.3 million in the prior year, with the winding down of biodiesel significantly impacting results [18][19] Market Data and Key Metrics Changes - Total volumes paid for disposal in Water Solutions increased by 12% in Q3 2025 compared to Q3 2024, reaching 2.91 million barrels per day [15] - The company is experiencing a shift towards becoming a Water Solutions partnership with a focus on Crude Oil Logistics, aiming to improve cash flow repeatability and reduce seasonality [22][24] Company Strategy and Development Direction - The company is simplifying its asset base and reducing working capital needs by winding down non-core businesses, including biodiesel and wholesale propane, which is expected to reduce working capital by 60 million to 70millionannually[8][9]−TheLEXIIprojectcommencedoperationsinOctober2024andisperformingasexpected,contributingtothecompany′sstrategicfocusonenhancingprofitability[10][24]−Futureplansincludefurthernon−coreassetsalestoreducedebtandpotentiallyredeemClassDpreferredsharesonceleverageisreduced[24]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementacknowledgedperformancevolatilityinLiquidsLogisticsanddecliningvolumesontheGrandMesacrudeoilpipeline,butexpressedoptimismaboutnewcustomeradditionsenhancingfuturevolumesandprofitability[22][24]−Thecompanyisadjustingitsfull−yearEBITDAguidanceto70 million annually [8][9] - The LEX II project commenced operations in October 2024 and is performing as expected, contributing to the company's strategic focus on enhancing profitability [10][24] - Future plans include further non-core asset sales to reduce debt and potentially redeem Class D preferred shares once leverage is reduced [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged performance volatility in Liquids Logistics and declining volumes on the Grand Mesa crude oil pipeline, but expressed optimism about new customer additions enhancing future volumes and profitability [22][24] - The company is adjusting its full-year EBITDA guidance to 620 million, reflecting additional weakness in the liquids segment [20] Other Important Information - The company expects to liquidate all biodiesel inventory by the end of February 2025 and sublease remaining railcars by March 31, 2025 [12] - Year-to-date, the biodiesel segment generated negative adjusted EBITDA of $10.3 million [12] Q&A Session Summary Question: Annual run rate EBITDA of remaining assets and Liquids Logistics post transactions - Management indicated it is too early to provide specific numbers as they are still exploring additional opportunities [30][31] Question: Growth trajectory for Crude Oil Logistics to achieve 100,000 barrel mark - Management suggested waiting for fiscal 2026 guidance to quantify growth, indicating a potential 50% volume increase [32][33] Question: Use of asset sale proceeds and addressing Series D preferreds - Management confirmed that proceeds would primarily go towards paying down the ABL balance, with no specific metrics set for addressing preferred shares [36][37] Question: Remaining assets in Liquids Logistics post divestitures - Remaining assets include Ambassador, Chesapeake, Port Hudson, and West Point terminals, with wholesale propane being the only unit with hard assets [39][40] Question: Updated guidance for Water Solutions EBITDA - Management indicated that Water Solutions EBITDA would be below previously guided ranges but did not provide specific numbers [41][42] Question: Profitability of LEX II compared to existing assets - Management stated that LEX II is performing as expected, with no additional contracts signed yet [46][51] Question: Seasonal factors affecting logistics volumes - Management noted a slowdown in logistics volumes during the holiday season but observed a quick recovery in the first quarter of the year [60]