NGL Energy Partners (NYSE:NGL) Q2 2026 Earnings Call November 04, 2025 05:00 PM ET Speaker2Please continue to hold, ladies and gentlemen. Your conference will begin momentarily. Please continue to hold. Thank you for your patience. Greetings. Welcome to the NGL Energy Partners Q2 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star ...

Financial Data and Key Metrics Changes - In Q1 2025, the company increased revenue by 7%, adjusted EBITDA by 14%, and improved consolidated gross margins by one percentage point [7][19] - Net income grew by $12 million, while consolidated SG&A expenses decreased by 6% [7][19] - The company achieved strong revenue growth of 21% in Chemical Technologies and 8% in Water Services [7] Business Line Data and Key Metrics Changes - Water Infrastructure maintained a strong gross margin of 54%, despite a sequential revenue decline driven by reduced revenues from legacy freshwater pipeline assets [7][16] - Water Services saw an 8% sequential revenue increase, primarily due to improved activity levels [17] - Chemical Technology experienced a strong sequential revenue growth of 21%, exceeding expectations [18] Market Data and Key Metrics Changes - The Northern Delaware Basin now represents 54% of the company's total fixed recycling capacity, reflecting significant growth in contracted acreage [11] - The company has developed a leading water infrastructure network in the Northern Delaware Basin, with over 1 million acres under dedication or right of first refusal agreements [8][11] Company Strategy and Development Direction - The company is focused on expanding its water infrastructure and has secured several large contracts that enhance its long-term revenue potential [8][10] - The strategic location of new projects and partnerships with industry-leading E&P partners are expected to contribute significantly to future earnings [8][10] - The company is also pursuing growth opportunities in agricultural, industrial, and municipal water sectors [11][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience despite macroeconomic pressures and potential activity dislocations due to tariffs and trade uncertainties [9][14] - The company anticipates continued growth in consolidated adjusted EBITDA of 6% to 12% during Q2 2025, despite potential declines in activity levels later in the year [13][19] - Management highlighted the importance of maintaining a disciplined approach to leverage and capital allocation to support growth initiatives [15][21] Other Important Information - The company successfully implemented a new ERP system across all operations, which is expected to yield efficiencies over time [23] - The company has adjusted its free cash flow expectations for the year to a conversion rate of 5% to 15% relative to adjusted EBITDA [21] Q&A Session Summary Question: Activity pullback in growth areas - Management confirmed that there has not been a pullback in activity in the Permian Basin, indicating confidence in their asset positioning [26][27] Question: Upcoming catalysts for AV Farms project - Management is engaging stakeholders and has letters of intent with potential customers, indicating strong demand and optimism for future revenue generation [28][30] Question: Role of CNA companies in AB Farms project - Management stated that Select will eventually take over operational roles while collaborating with CNA for commercialization [39][41] Question: Impact of tariffs on water infrastructure contracts - Management indicated that tariffs are not expected to materially impact water infrastructure projects due to domestic supply chains [43] Question: Supply chain resilience in Chemical Technologies - Management highlighted efforts to localize the supply chain, reducing reliance on international sourcing, particularly from China [44][45] Question: Future growth in water infrastructure - Management expects to maintain a growth trajectory of around 15% into 2026, supported by new projects and existing contracts [52][53] Question: M&A opportunities in the current environment - Management noted that the current environment presents opportunities for strategic asset purchases, particularly in a down cycle [75][78]