Release Date: June 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NGL Energy Partners LP (NGL, Financial) achieved record full-year adjusted EBITDA of $508.3 million in the Water Solutions segment, a 10% increase over the prior year.
- The company successfully completed a global refinancing, including $2.2 billion of senior secured notes and a $700 million term loan B facility, providing more operational flexibility.
- NGL Energy Partners LP (NGL) is current on all preferred classes as of April 25, 2024, which exceeded internal and external expectations.
- The company announced the LEX II project, which is underwritten by a minimum volume commitment with an investment-grade counterparty, expected to be in service by October 2024.
- NGL Energy Partners LP (NGL) launched a common unit repurchase program of up to $50 million, indicating confidence in the company's undervalued unit price.
Negative Points
- Full-year adjusted EBITDA for fiscal 2024 was $610 million, which lagged behind the company's guidance for the year.
- The Liquid Logistics segment's full-year adjusted EBITDA was $70 million, impacted by warmer-than-normal winters and the closure and sale of several terminals.
- Crude Oil Logistics full-year adjusted EBITDA was $86.9 million, driven by lower volume shipped and sold on the Grand Mesa Pipeline and wider-than-expected differentials.
- Revenue per barrel in the Water Solutions segment was lower during the quarter due to rate changes for certain existing contracts and the expiration of higher fee per barrel contracts.
- The Liquid Logistics segment experienced a decrease in adjusted EBITDA in the fourth quarter due to lower propane margins and a decrease in volumes.
Q & A Highlights
Q: On the common unit repurchase program, how are you thinking about the timing of using it? Is it something you plan to use now or keep in place for future opportunities?
A: (H. Michael Krimbill, CEO) Depending on the unit price, we could use it right away.
Q: Regarding Grand Mesa, what are the potential opportunities to increase volumes over the next few months? How do you see the exit volumes on Grand Mesa year-end '25 versus year-end '24?
A: (H. Michael Krimbill, CEO) We are currently in the 70,000 barrel a day range and see potential to increase to 100,000-115,000 barrels per day over the next 6 to 12 months.
Q: On the liquids business, are you considering acquisitions, divestitures, or joint ventures?
A: (H. Michael Krimbill, CEO) We are more focused on divestitures. We have assets that could fetch a nice multiple for the right buyer.
Q: Can you remind us about the preferred payments and leverage guidance?
A: (Bradley Cooper, CFO) We are current on preferred payments as of April 25. We will manage to the leverage targets discussed publicly and with bondholders during the refinance.
Q: What is the underlying volume growth assumption for water solutions excluding LEX II? How does LEX II layer in?
A: (H. Michael Krimbill, CEO) Excluding LEX II, we expect 10% growth. LEX II adds 200,000 barrels per day starting in October, further derisking our adjusted EBITDA growth.
Q: What is driving the significant volume increases at Grand Mesa?
A: (H. Michael Krimbill, CEO) The basin's production is back to about 500,000 barrels a day, coupled with increased interest from producers.
Q: On the water solutions business, what caused the sequential decline from third to fourth quarter?
A: (H. Michael Krimbill, CEO) The decline is due to the same issues as before, primarily related to total volumes disposed and paid.
Q: Does exiting parts of the liquids business come with meaningful amounts of working capital release?
A: (H. Michael Krimbill, CEO) Yes, it does.
Q: Is M&A something you focus on for water solutions, or is growth primarily driven by organic investments?
A: (H. Michael Krimbill, CEO) We prioritize organic growth opportunities like LEX II. M&A will be considered in the future.
Q: Is the $0.23 to $0.24 per barrel operating expense for water sustainable going forward?
A: (H. Michael Krimbill, CEO) Yes, it is sustainable. We have managed to keep it within this range despite inflation impacts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
