NGL Energy Partners LP(NGL) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA from continuing operations for the quarter was $172.5 million, a 9.2% increase from $158 million a year ago [2] - Operating expenses for the quarter were $0.18 per barrel due to non-recurring expense reductions [6] - Full-year EBITDA guidance remains in the range of $650 million to $660 million [4] Business Line Data and Key Metrics Changes - Water Solutions segment generated Adjusted EBITDA of $154.5 million, up 16.5% from $132.7 million in the prior year [5] - Physical disposal volume reached a record of approximately 3.07 million barrels per day, an increase of 17.1% from 2.6 million barrels per day in the prior year [5] - Crude Oil Logistics Adjusted EBITDA was $15.4 million, down from $17.3 million in the prior year [6] - Liquids Logistics Adjusted EBITDA was $15.2 million, down from $18.6 million in the prior year [7] Market Data and Key Metrics Changes - The company achieved a record daily disposal volume of approximately 3.5 million barrels on January 16 [9] - The Grand Mesa Pipeline physical volumes averaged approximately 85,000 barrels per day, up from 61,000 barrels per day in the prior year [6] Company Strategy and Development Direction - The company is transitioning towards a predominantly water solutions business, shedding non-water assets to improve cash flow consistency [12] - Capital allocation priorities include financing internal growth projects and redeeming Class D preferred units [13] - The company is pursuing large-scale produced water treatment strategies, including a partnership with Natura Resources for thermal desalination technology [10][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of growth projects despite crude price volatility, noting that long-term volume commitments remain firm [18] - The company anticipates a strong start to fiscal 2027, projecting to exceed $700 million of EBITDA for the first time [5] - Management highlighted the importance of AI and machine learning in improving operational efficiencies and reducing expenses [10][27] Other Important Information - The company has redeemed approximately 15% of the original Class D preferred units and repurchased about 7% of outstanding common units [3][14] - The company is focused on eliminating dilution of common equity, having reduced it by approximately 25% [14] Q&A Session Summary Question: Can you speak to the firmness of the growth projects given the volatility in crude prices? - Management indicated that completed projects come with long-term volume commitments, which remain financially firm despite fluctuations in oil prices [18][19] Question: How would you characterize the water treatment opportunity in volume and values? - Management emphasized the importance of produced water volumes and available energy sources for economic-scale desalination projects, highlighting the MOU with Natura [21][22] Question: What is the current CapEx obligation for the water treatment project? - Management stated that there is no immediate CapEx demand from NGL for the nuclear side of the project, and the CapEx forecast remains unchanged [23] Question: Can you speak to the value recovered from AI and machine learning initiatives? - Management noted improvements in operational expenses and efficiencies but refrained from quantifying the exact dollar amount or percentage of value recovered at this time [25][27]