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] 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 third quarter [5] - Crude Oil Logistics Adjusted EBITDA was $15.4 million, down from $17.3 million in the prior-year's third quarter [6] - Liquids Logistics Adjusted EBITDA was $15.2 million, down from $18.6 million in the prior-year's third quarter [7] Market Data and Key Metrics Changes - Physical disposal volume record processing was approximately 3.07 million barrels per day, an increase of 17.1% from 2.6 million barrels per day in the prior-year third quarter [5] - Total volumes paid for disposal were up approximately 7% in the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025 [6] Company Strategy and Development Direction - The company is transitioning towards a predominantly water solutions company, aiming to eliminate seasonality in cash flows and improve consistency [12] - Capital allocation priorities include financing internal growth projects, redeeming Class D preferred units, and opportunistically purchasing common 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 achieving a strong close to fiscal 2026 and projected EBITDA exceeding $700 million for fiscal 2027 [4][5] - The company is optimistic about securing additional disposal contracts and improving operational efficiencies through AI and machine learning projects [9][10] Other Important Information - The company redeemed an additional 18,506 Class D Preferred Units, totaling 88,506 redeemed, which is about 15% of the original Class D outstanding [3] - The company has repurchased approximately 8.7 million common units since the program's inception, nearly 7% of the outstanding units [3] 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 came with long-term volume commitments and have remained financially firm despite fluctuations in oil prices [18][19] Question: How would you characterize the water treatment opportunity in volume and values? - Management highlighted the importance of produced water volumes and available energy sources for economic-scale desalination projects, emphasizing the potential of the partnership with Natura [21][22] Question: What is the current CapEx obligation for the water treatment project? - Management stated that there would be no CapEx demand from NGL on the nuclear side, 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]