NGL Energy Partners LP(NGL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Water Solutions' adjusted EBITDA was $121.3 million in Q3 2024, slightly down from$121.7 million in the prior year [10] - Liquids logistics adjusted EBITDA increased to $22.4 million from$20.5 million year-over-year, driven by higher margins and demand for butane blending [12] - Crude Oil Logistics adjusted EBITDA decreased to $17 million from$33.3 million in the prior year, primarily due to lower crude sales margins and decreased volumes [32] - Corporate adjusted EBITDA showed a loss of $11.9 million compared to income of$19.5 million in the prior year, impacted by previous year's other income [33] Business Line Data and Key Metrics Changes - Water disposal volumes were 2.38 million barrels per day in Q3 2024, down from 2.43 million barrels per day in the prior quarter, attributed to producers retaining water for completion activities [10] - Operating expenses for Water Solutions remained at $0.25 per barrel, the best in the industry, due to lower chemical and utility expenses [11] - Liquids logistics experienced higher demand for butane blending, although propane margins and volumes were negatively affected by warmer weather [12] Market Data and Key Metrics Changes - The company closed a$2.9 billion refinancing, extending the weighted average maturity of its debt by approximately three years [26] - Rating agencies upgraded the corporate credit rating to single B, reflecting improved financial stability [27] Company Strategy and Development Direction - The company is focusing on internal growth opportunities supported by minimum volume commitments (MVCs) and plans to address preferred arrearages [35] - Future growth will be driven by the Delaware Water Solutions business, with adjusted EBITDA guidance of $500 million plus for water and$645 million for the partnership [36] - The company aims to reduce leverage and improve credit ratings while pursuing organic growth opportunities [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in catching up on preferred arrearages quicker than anticipated, with plans to make the remaining payments soon [8][34] - The company is optimistic about future EBITDA growth, particularly from the Delaware Water Solutions business [36] - Management highlighted the importance of maintaining flexibility in capital structure and addressing debt maturities [9][28] Other Important Information - The company announced the expansion of the LEX produced water pipeline system, increasing capacity from 140,000 barrels per day to 340,000 barrels per day [4][5] - A new five-year MVC was established with a counterparty, releasing $18 million to$20 million in working capital [3] Q&A Session Summary Question: What is the expected working capital change for the fourth quarter? - Management anticipates a working capital number around $40 million to$50 million by March 31 [19] Question: Can you provide an update on the ABL balance? - The ABL balance is expected to be around $50 million for the fourth quarter [39] Question: What are the priorities between paying off preferreds and common distributions? - Management indicated a commitment to addressing preferred arrearages while also pursuing growth projects, ensuring both can be managed simultaneously [44] Question: Will oil skimming daily volumes grow in fiscal '25? - Management confirmed that the relationship between skim and disposal volumes should hold for fiscal '25 [45] Question: Can you provide details on the new pipeline expansion's MVC length and returns? - The new MVC is a five-year commitment, and while specific returns cannot be disclosed, management expressed confidence in attractive returns due to existing right-of-way advantages [74]