NGL Energy Partners LP(NGL) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated adjusted EBITDA for Q3 2025 was $147.7 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 $12.1 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 $95 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 $121.3 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 $17 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 $26.3 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 $70 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]