NGL Energy Partners LP(NGL) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 2024 was $176.2 million, up from$142.2 million in Q2 2023, driven largely by strong performance in Water Solutions [4] - The company is reaffirming full-year consolidated adjusted EBITDA guidance of over $645 million [6] Business Line Data and Key Metrics Changes - Water Solutions generated adjusted EBITDA of$140.4 million, a 34% increase compared to the same quarter in fiscal 2023, processing 2.44 million barrels per day, which is a 7.7% increase from the prior year [11] - Liquids Logistics adjusted EBITDA was $17.1 million for the quarter, compared to$16.5 million in Q2 2023, with strong butane blending season performance [18] - Crude Logistics adjusted EBITDA was $30.7 million, down from$32.9 million in Q2 2023, with average Grand Mesa volumes at 70,000 barrels per day [19] Market Data and Key Metrics Changes - The company has seen commodity price volatility and has entered into crude oil costless collars to hedge against oil price swings [4] - Propane volumes were impacted by lower demand due to warmer weather last year, but strong margins have been locked in for the winter months [10] Company Strategy and Development Direction - The company is increasing growth capital expenditures to $100 million from a previous guidance of$65 million, focusing on growth opportunities in the Delaware for Water Solutions [15] - The strategy to reduce absolute debt and leverage continues, with leverage decreasing from 6.11 times to 4.14 times year-over-year [16] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the DJ Basin's growth over the next 12 to 24 months, benefiting from the Grand Mesa Pipeline [5] - The company anticipates paying off the 25 unsecured notes by March 31, 2024, and expects to maintain strong liquidity entering the peak inventory build season for butane and propane [8][17] Other Important Information - The company has reduced absolute debt by approximately $680 million over the last 12 months [16] - Free cash flow will be directed to the balance sheet, with no expectation to reinstate dividends in the current fiscal year [22] Q&A Session Summary Question: Can you break out a sense for the improvement in water EBITDA over the next couple of quarters between volume and margin, specifically about margins? - Management indicated that while average volume remained flat, margins were strong compared to the first quarter, driven by decreasing operational expenses and increased fees based on demand, especially in the Delaware [30][31]