NGL Energy Partners LP

11/08/2019 | Press release | Distributed by Public on 11/08/2019 05:35

NGL Energy Partners LP Announces Second Quarter Fiscal 2020 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--Nov. 8, 2019-- NGL Energy Partners LP (NYSE:NGL) ('NGL,' 'our,' 'we,' or the 'Partnership') today reported income from continuing operations for the quarter ended September 30, 2019 of $0.7 million, compared to a loss from continuing operations of $26.0 million for the quarter ended September 30, 2018. For the six months ended September 30, 2019, the Partnership reported a loss from continuing operations of $1.7 million, compared to a loss from continuing operations of $284.8 million for the six months ended September 30, 2018.

'We have accomplished a significant shift in our business over the past two years, culminating in the most recent quarter when we sold the majority of our refined products business, closed on the Mesquite acquisition and announced the acquisition of Hillstone,' stated Mike Krimbill, NGL's CEO. 'We have removed a significant amount of volatility and seasonality from our earnings, reduced leverage and simplified our business model. We have grown our water solutions infrastructure, increased our acreage dedications and minimum volume commitments and lengthened our average customer contract term as we have moved this segment to a true midstream model. Our quarterly results demonstrate some of these accomplishments, with others, including the continued ramp of volumes on Mesquite and our organic pipeline developments, the integration of Hillstone into our Delaware Basin gathering and disposal franchise and the further wind down of refined products with the corresponding reduction in working capital, expected to be completed during the second half of our fiscal year.'

Highlights for the quarter include:

  • Adjusted EBITDA from continuing operations for the second quarter of Fiscal 2020 of $119.0 million, compared to $91.7 million for the second quarter of Fiscal 2019
  • Acquisition of the assets of Mesquite Disposals Unlimited, LLC ('Mesquite') on July 2, 2019 for a total purchase price of $885.3 million on a cash-free, debt-free basis, $200.0 million of which will be funded in deferred payments
  • Issuance of 9.00% Class D Preferred Units for gross proceeds of $400.0 million, 9.00% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units valued at approximately $100.0 million and entered into a $250 million Term Credit Agreement to fund the acquisition of Mesquite
  • Completion of the sale of a significant portion of the Partnership's Refined Products business ('TPSL') on September 30, 2019 for approximately $300.0 million, including the monetization of certain related hedge positions after the completion of the sale, with proceeds used to reduce indebtedness and improve leverage

Subsequent to the end of the quarter, the Partnership:

  • Completed the acquisition of Hillstone Environmental Partners, LLC ('Hillstone') on October 31, 2019;
  • Issued 9.00% Class D Preferred Units for gross proceeds of $200.0 million to fund a portion of Hillstone; and
  • Amended the Partnership's Credit Agreement to, among other things, adjust certain financial covenants and provide for up to $1.790 billion in aggregate commitments, consisting of (i) a $600 million Working Capital Facility for working capital requirements and other general corporate purposes and (ii) a $1.190 billion Expansion Capital Facility, for acquisitions, internal growth projects, other capital expenditures and general corporate purposes.

Quarterly Results of Operations

The following table summarizes operating income (loss) and Adjusted EBITDA from continuing operations by operating segment for the periods indicated:

Quarter Ended

September 30, 2019

September 30, 2018

Operating
Income (Loss)

Adjusted
EBITDA

Operating
Income (Loss)

Adjusted
EBITDA

(in thousands)

Crude Oil Logistics

$

38,520

$

54,632

$

31,022

$

48,477

Liquids

8,397

19,301

10,758

20,530

Water Solutions

21,274

56,879

9,770

38,813

Refined Products and Renewables

16,681

(517

)

(1,851

)

(6,095

)

Corporate and Other

(38,477

)

(11,318

)

(35,352

)

(10,063

)

Total

$

46,395

$

118,977

$

14,347

$

91,662

The tables included in this release reconcile operating income (loss) to Adjusted EBITDA from continuing operations, a non-GAAP financial measure, for each of our operating segments.

Crude Oil Logistics

The Partnership's Crude Oil Logistics segment generated Adjusted EBITDA of $54.6 million during the quarter ended September 30, 2019, compared to $48.5 million during the quarter ended September 30, 2018. Results for the second quarter of Fiscal 2020 improved compared to the same quarter in Fiscal 2019 due to increased volumes on our Grand Mesa Pipeline as a result of increased production in the DJ Basin. During the three months ended September 30, 2019, financial volumes on the Grand Mesa Pipeline averaged approximately 128,000 barrels per day.

Liquids

The Partnership's Liquids segment generated Adjusted EBITDA of $19.3 million during the quarter ended September 30, 2019, compared to $20.5 million during the quarter ended September 30, 2018. This decrease was largely driven by lower volumes and margins on propane sales. The decrease was offset by strong butane sales, including steady volumes at our Chesapeake, Virginia export terminal.

Total product margin per gallon was $0.045 for the quarter ended September 30, 2019, compared to $0.048 for the quarter ended September 30, 2018. This decrease was primarily the result of lower propane and other product margins.

Propane volumes decreased by approximately 4.5 million gallons, or 1.7%, during the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018. Butane volumes increased by approximately 38.7 million gallons, or 29.5%, during the quarter ended September 30, 2019 compared to the quarter ended September 30, 2018. Other Liquids volumes decreased by approximately 0.3 million gallons, or 0.3%, during the quarter ended September 30, 2019 compared to the same period in the prior year.

Water Solutions

The Partnership's Water Solutions segment generated Adjusted EBITDA of $56.9 million during the quarter ended September 30, 2019, compared to $38.8 million during the quarter ended September 30, 2018. The increase in Adjusted EBITDA is due to an increase in the volume of wastewater processed as well as higher disposal fees per barrel. The Partnership processed approximately 1,258,000 barrels of wastewater per day during the quarter ended September 30, 2019, a 24.9% increase when compared to approximately 1,008,000 barrels of wastewater per day during the quarter ended September 30, 2018. The increase in volumes is due to wastewater processed from the acquisition of Mesquite and other acquired and newly developed facilities, which was partially offset by wastewater volume reductions as a result of the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019.

Revenues from recovered hydrocarbons, including the impact from realized skim oil hedges, totaled $16.4 million for the quarter ended September 30, 2019, an increase of $3.5 million from the prior year period. The increase was primarily due to higher prices from our skim oil sales net of hedges, which were partially offset by lower skim oil volumes resulting from the sale of our Bakken and South Pecos water disposal businesses.

Refined Products and Renewables

The Partnership's Refined Products and Renewables segment generated Adjusted EBITDA from continuing operations of $(0.5) million during the quarter ended September 30, 2019, compared to $(6.1) million during the quarter ended September 30, 2018. The results for the quarter ended September 30, 2019 were positively impacted by increased volumes due to continued demand for motor fuels and higher margins in West Coast markets, partially offset by lower inventory valuations resulting from lower Gulf Coast gasoline and diesel prices.

Refined product barrels sold during the quarter ended September 30, 2019 totaled approximately 41.8 million barrels, an increase of approximately 0.7 million barrels compared to the same period in the prior year due to an increase in bulk sales volumes. Renewables barrels sold during the quarter ended September 30, 2019 totaled approximately 0.6 million, which was slightly lower than the same period in the prior year.

The Partnership completed the sale of TPSL on September 30, 2019 for approximately $300.0 million, including the monetization of certain related hedge positions after the completion of the sale. The results from the business that was sold are included in discontinued operations in the Partnership's financial statements.

Corporate and Other

Adjusted EBITDA for Corporate and Other was $(11.3) million during the quarter ended September 30, 2019, compared to $(10.1) million during the quarter ended September 30, 2018. The increase in expenses is primarily due to increased costs related to compensation, consulting services and insurance, partially offset by lower legal costs.

Capitalization and Liquidity

On October 30, 2019, the Partnership amended its Credit Agreement, to, among other things, adjust the allocation of the commitments of the lenders to make revolving loans thereunder and, effective with the fiscal quarter ending December 31, 2019, eliminate the leverage ratio financial covenant (as defined in the Credit Agreement) and adjust the senior secured leverage ratio (as defined in the Credit Agreement), interest coverage ratio (as defined in the Credit Agreement) and total leverage indebtedness ratio financial covenants (as defined in the Credit Agreement). As amended, the Credit Agreement provides for up to $1.790 billion in aggregate commitments, consisting of (i) a $600 million Working Capital Facility for working capital requirements and other general corporate purposes and (ii) a $1.190 billion Expansion Capital Facility for acquisitions, internal growth projects, other capital expenditures and general corporate purposes.

Total debt outstanding, including working capital borrowings, was $2.774 billion at September 30, 2019 compared to $2.161 billion at March 31, 2019, an increase of $613 million due primarily to the redemption of the Partnership's Class A Preferred Units, the Mesquite acquisition and other growth capital expenditures during the period, which were partially offset by a reduction in working capital borrowings using proceeds from the sale of TPSL. The Partnership's Leverage Ratio and Total Indebtedness Leverage Ratio (as defined in our Credit Agreement) were approximately 3.73x and 4.85x, respectively, at September 30, 2019.

Working capital borrowings totaled $643.0 million at September 30, 2019 compared to $896.0 million at March 31, 2019, a decrease of $253.0 million driven by the sale of TPSL and associated assets. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $503.5 million as of September 30, 2019.

Fiscal 2020 Guidance Update

For Fiscal 2020, the Partnership expects to generate adjusted EBITDA from continuing operations in a range for each of its operating segments as follows:

FY 2020 Adjusted EBITDA Ranges

Low

High

(in thousands)

Crude Oil Logistics

$

200,000

$

220,000

Water Solutions

270,000

300,000

Liquids

85,000

95,000

Refined Products and Renewables

15,000

30,000

Corporate and Other

(30,000

)

(30,000

)

Second Quarter Conference Call Information

A conference call to discuss NGL's results of operations is scheduled for 10:00 am Central Time on Friday, November 8, 2019. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 2980107. An archived audio replay of the conference call will be available for 7 days beginning at 1:00 pm Central Time on November 8, 2019, which can be accessed by dialing (855) 859-2056 and providing access code 2980107.

Non-GAAP Financial Measures

NGL defines EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. NGL defines Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or market adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other. We also include in Adjusted EBITDA certain inventory valuation adjustments related to our Refined Products and Renewables segment, as discussed below. EBITDA and Adjusted EBITDA should not be considered as alternatives to net (loss) income, income (loss) from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. NGL believes that EBITDA provides additional information to investors for evaluating NGL's ability to make quarterly distributions to NGL's unitholders and is presented solely as a supplemental measure. NGL believes that Adjusted EBITDA provides additional information to investors for evaluating NGL's financial performance without regard to NGL's financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as NGL defines them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities.

Other than for NGL's Refined Products and Renewables segment, for purposes of the Adjusted EBITDA calculation, NGL makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, NGL records changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, NGL reverses the previously recorded unrealized gain or loss and records a realized gain or loss. NGL does not draw such a distinction between realized and unrealized gains and losses on derivatives of NGL's Refined Products and Renewables segment. The primary hedging strategy of NGL's Refined Products and Renewables segment is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges are six months to one year in duration at inception. The 'inventory valuation adjustment' row in the reconciliation table reflects the difference between the market value of the inventory of NGL's Refined Products and Renewables segment at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. NGL includes this in Adjusted EBITDA because the unrealized gains and losses associated with derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA.

Distributable Cash Flow is defined as Adjusted EBITDA minus maintenance capital expenditures, income tax expense, cash interest expense and other. Maintenance capital expenditures represent capital expenditures necessary to maintain the Partnership's operating capacity. Distributable Cash Flow is a performance metric used by senior management to compare cash flows generated by the Partnership (excluding growth capital expenditures and prior to the establishment of any retained cash reserves by the Board of Directors) to the cash distributions expected to be paid to unitholders. Using this metric, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions. This financial measure also is important to investors as an indicator of whether the Partnership is generating cash flow at a level that can sustain, or support an increase in, quarterly distribution rates. Actual distribution amounts are set by the Board of Directors.

Forward-Looking Statements

This press release includes 'forward-looking statements.' All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. While NGL believes such forward-looking statements are reasonable, NGL cannot assure they will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings with the Securities and Exchange Commission. Other factors that could impact any forward-looking statements are those risks described in NGL's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other public filings. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading 'Risk Factors.' NGL undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.

NGL provides Adjusted EBITDA guidance that does not include certain charges and costs, which in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as income taxes, interest and other non-operating items, depreciation and amortization, net unrealized gains and losses on derivatives, lower of cost or market adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities and items that are unusual in nature or infrequently occurring. The exclusion of these charges and costs in future periods will have a significant impact on the Partnership's Adjusted EBITDA, and the Partnership is not able to provide a reconciliation of its Adjusted EBITDA guidance to net income (loss) without unreasonable efforts due to the uncertainty and variability of the nature and amount of these future charges and costs and the Partnership believes that such reconciliation, if possible, would imply a degree of precision that would be potentially confusing or misleading to investors.

About NGL Energy Partners LP

NGL Energy Partners LP is a Delaware limited partnership. NGL owns and operates a vertically integrated energy business with four primary businesses: Crude Oil Logistics, Water Solutions, Liquids, and Refined Products and Renewables. NGL completed its initial public offering in May 2011. For further information, visit the Partnership's website at www.nglenergypartners.com.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)

September 30, 2019

March 31, 2019

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

21,154

$

18,572

Accounts receivable-trade, net of allowance for doubtful accounts of $4,773 and $4,016, respectively

987,875

998,203

Accounts receivable-affiliates

14,374

12,867

Inventories

308,793

252,770

Prepaid expenses and other current assets

199,002

142,811

Assets held for sale

-

387,450

Total current assets

1,531,198

1,812,673

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $469,229 and $417,457, respectively

2,485,880

1,828,940

GOODWILL

1,176,042

1,113,149

INTANGIBLE ASSETS, net of accumulated amortization of $566,054 and $503,117, respectively

1,194,581

800,889

INVESTMENTS IN UNCONSOLIDATED ENTITIES

1,445

1,127

OPERATING LEASE RIGHT-OF-USE ASSETS

203,122

-

OTHER NONCURRENT ASSETS

71,755

113,857

ASSETS HELD FOR SALE

-

231,858

Total assets

$

6,664,023

$

5,902,493

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable-trade

$

842,064

$

879,063

Accounts payable-affiliates

24,542

28,469

Accrued expenses and other payables

336,126

191,731

Advance payments received from customers

27,045

8,461

Current maturities of long-term debt

649

648

Operating lease obligations

68,084

-

Liabilities held for sale

-

142,781

Total current liabilities

1,298,510

1,251,153

LONG-TERM DEBT, net of debt issuance costs of $20,581 and $12,008, respectively, and current maturities

2,773,235

2,160,133

OPERATING LEASE OBLIGATIONS

132,132

-

OTHER NONCURRENT LIABILITIES

64,487

63,575

CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 0 and 19,942,169 preferred units issued and outstanding, respectively

-

149,814

CLASS D 9.00% PREFERRED UNITS, 400,000 and 0 preferred units issued and outstanding, respectively

343,748

-

EQUITY:

General partner, representing a 0.1% interest, 128,169 and 124,633 notional units, respectively

(51,014

)

(50,603

)

Limited partners, representing a 99.9% interest, 128,040,420 and 124,508,497 common units issued and outstanding, respectively

1,697,015

2,067,197

Class B preferred limited partners, 12,585,642 and 8,400,000 preferred units issued and outstanding, respectively

305,488

202,731

Class C preferred limited partners, 1,800,000 and 0 preferred units issued and outstanding, respectively

42,905

-

Accumulated other comprehensive loss

(264

)

(255

)

Noncontrolling interests

57,781

58,748

Total equity

2,051,911

2,277,818

Total liabilities and equity

$

6,664,023

$

5,902,493

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)

Three Months Ended September 30,

Six Months Ended September 30,

2019

2018

2019

2018

REVENUES:

Crude Oil Logistics

$

641,152

$

860,054

$

1,357,312

$

1,643,884

Water Solutions

101,249

79,764

173,032

155,909

Liquids

328,509

550,442

676,156

1,010,339

Refined Products and Renewables

3,218,162

3,625,123

7,248,742

6,564,168

Other

264

592

519

747

Total Revenues

4,289,336

5,115,975

9,455,761

9,375,047

COST OF SALES:

Crude Oil Logistics

569,699

792,735

1,218,939

1,540,980

Water Solutions

(6,496

)

7,892

(9,303

)

22,161

Liquids

296,246

520,944

613,598

961,459

Refined Products and Renewables

3,197,492

3,622,915

7,228,208

6,625,845

Other

435

718

900

987

Total Cost of Sales

4,057,376

4,945,204

9,052,342

9,151,432

OPERATING COSTS AND EXPENSES:

Operating

75,433

58,510

137,529

112,977

General and administrative

43,908

39,328

64,250

61,669

Depreciation and amortization

63,113

52,598

116,867

104,490

Loss on disposal or impairment of assets, net

3,111

5,988

2,144

107,323

Revaluation of liabilities

-

-

-

800

Operating Income (Loss)

46,395

14,347

82,629

(163,644

)

OTHER INCOME (EXPENSE):

(Loss) equity in earnings of unconsolidated entities

(265

)

379

(257

)

598

Interest expense

(45,016

)

(41,358

)

(84,910

)

(87,625

)

Loss on early extinguishment of liabilities, net

-

-

-

(137

)

Other income (expense), net

184

1,301

1,193

(32,602

)

Income (Loss) From Continuing Operations Before Income Taxes

1,298

(25,331

)

(1,345

)

(283,410

)

INCOME TAX EXPENSE

(640

)

(691

)

(319

)

(1,342

)

Income (Loss) From Continuing Operations

658

(26,022

)

(1,664

)

(284,752

)

(Loss) Income From Discontinued Operations, net of Tax

(202,024

)

380,961

(191,663

)

470,402

Net (Loss) Income

(201,366

)

354,939

(193,327

)

185,650

LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

129

518

397

863

LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS

-

48

-

446

NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP

$

(201,237

)

$

355,505

$

(192,930

)

$

186,959

NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

$

(16,295

)

$

(49,466

)

$

(147,714

)

$

(327,764

)

NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

$

(201,822

)

$

380,627

$

(191,471

)

$

470,377

NET (LOSS) INCOME ALLOCATED TO COMMON UNITHOLDERS

$

(218,117

)

$

331,161

$

(339,185

)

$

142,613

BASIC (LOSS) INCOME PER COMMON UNIT

Loss From Continuing Operations

$

(0.13

)

$

(0.40

)

$

(1.17

)

$

(2.69

)

(Loss) Income From Discontinued Operations, net of Tax

(1.59

)

3.10

(1.51

)

3.86

Net (Loss) Income

$

(1.72

)

$

2.70

$

(2.68

)

$

1.17

DILUTED (LOSS) INCOME PER COMMON UNIT

Loss From Continuing Operations

$

(0.13

)

$

(0.40

)

$

(1.17

)

$

(2.69

)

(Loss) Income From Discontinued Operations, net of Tax

(1.59

)

3.10

(1.51

)

3.86

Net (Loss) Income

$

(1.72

)

$

2.70

$

(2.68

)

$

1.17

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

126,979,034

122,380,197

126,435,870

121,964,593

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

126,979,034

122,380,197

126,435,870

121,964,593

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION

(Unaudited)

The following table reconciles NGL's net (loss) income to NGL's EBITDA, Adjusted EBITDA and Distributable Cash Flow:

Three Months Ended September 30,

Six Months Ended September 30,

2019

2018

2019

2018

(in thousands)

Net (loss) income

$

(201,366

)

$

354,939

$

(193,327

)

$

185,650

Less: Net loss attributable to noncontrolling interests

129

518

397

863

Less: Net loss attributable to redeemable noncontrolling interests

-

48

-

446

Net (loss) income attributable to NGL Energy Partners LP

(201,237

)

355,505

(192,930

)

186,959

Interest expense

45,113

41,367

85,023

87,779

Income tax expense

650

815

339

1,466

Depreciation and amortization

63,266

53,507

118,110

115,082

EBITDA

(92,208

)

451,194

10,542

391,286

Net unrealized (gains) losses on derivatives

(5,462

)

(1,893

)

(8,936

)

17,060

Inventory valuation adjustment (1)

(5,439

)

25,770

(25,185

)

1,168

Lower of cost or market adjustments

(901

)

-

(1,819

)

(413

)

Loss (gain) on disposal or impairment of assets, net

177,561

(403,185

)

176,594

(301,418

)

Loss on early extinguishment of liabilities, net

-

-

-

137

Equity-based compensation expense (2)

21,295

19,219

24,996

24,730

Acquisition expense (3)

5,085

2,863

7,176

4,115

Revaluation of liabilities (4)

-

-

-

800

Gavilon legal matter settlement (5)

-

-

-

35,000

Other (6)

3,332

1,402

6,655

3,219

Adjusted EBITDA

$

103,263

$

95,370

$

190,023

$

175,684

Adjusted EBITDA - Discontinued Operations

$

(15,714

)

$

3,708

$

(22,782

)

$

12,505

Adjusted EBITDA - Continuing Operations

$

118,977

$

91,662

$

212,805

$

163,179

Less: Cash interest expense (7)

42,742

38,891

80,503

82,722

Less: Income tax expense

640

689

319

1,340

Less: Maintenance capital expenditures

16,461

15,298

33,390

27,685

Less: Other (8)

127

309

127

309

Distributable Cash Flow - Continuing Operations

$

59,007

$

36,475

$

98,466

$

51,123

_________

(1)

Amount reflects the difference between the market value of the inventory of NGL's Refined Products and Renewables segment at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. See 'Non-GAAP Financial Measures' above for a further discussion.

(2)

Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in the footnotes to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.

(3)

Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including amounts accrued related to the LCT Capital, LLC legal matter (as discussed in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019), partially offset by reimbursement for certain legal costs incurred in prior periods.

(4)

Amounts represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.

(5)

Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see the footnotes to our unaudited condensed consolidated financial statements included in the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019). We have excluded this amount from Adjusted EBITDA as it relates to transactions that occurred prior to our acquisition of Gavilon LLC in December 2013.

(6)

Amounts for the three months and six months ended September 30, 2019 and 2018 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations.

(7)

Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.

(8)

Amounts represents cash paid to settle asset retirement obligations.

ADJUSTED EBITDA RECONCILIATION BY SEGMENT

Three Months Ended September 30, 2019

Crude
Oil
Logistics

Water
Solutions

Liquids

Refined
Products
and
Renewables

Corporate
and
Other

Continuing
Operations

Discontinued
Operations
(TPSL)

Consolidated

(in thousands)

Operating income (loss)

$

38,520

$

21,274

$

8,397

$

16,681

$

(38,477

)

$

46,395

$

-

$

46,395

Depreciation and amortization

17,693

37,921

6,611

125

763

63,113

-

63,113

Amortization recorded to cost of sales

-

-

23

65

-

88

-

88

Net unrealized (gains) losses on derivatives

(4,126

)

(5,870

)

4,534

-

-

(5,462

)

-

(5,462

)

Inventory valuation adjustment

-

-

-

(4,100

)

-

(4,100

)

-

(4,100

)

Lower of cost or market adjustments

-

-

-

(921

)

-

(921

)

-

(921

)

(Gain) loss on disposal or impairment of assets, net

(630

)

3,744

(4

)

-

1

3,111

-

3,111

Equity-based compensation expense

-

-

-

-

21,295

21,295

-

21,295

Acquisition expense

-

-

-

-

5,085

5,085

-

5,085

Other income (expense), net

43

(2

)

32

(51

)

162

184

-

184

Adjusted EBITDA attributable to unconsolidated entities

-

-

(26

)

-

(147

)

(173

)

-

(173

)

Adjusted EBITDA attributable to noncontrolling interest

-

(319

)

(283

)

-

-

(602

)

-

(602

)

Intersegment transactions (1)

-

-

-

(12,368

)

-

(12,368

)

-

(12,368

)

Other

3,132

131

17

52

-

3,332

-

3,332

Discontinued operations

-

-

-

-

-

-

(15,714

)

(15,714

)

Adjusted EBITDA

$

54,632

$

56,879

$

19,301

$

(517

)

$

(11,318

)

$

118,977

$

(15,714

)

$

103,263

Three Months Ended September 30, 2018

Discontinued
Operations

Crude
Oil
Logistics

Water
Solutions

Liquids

Refined
Products
and
Renewables

Corporate
and
Other

Continuing
Operations

TPSL

Retail
Propane

Consolidated

(in thousands)

Operating income (loss)

$

31,022

$

9,770

$

10,758

$

(1,851

)

$

(35,352

)

$

14,347

$

-

$

-

$

14,347

Depreciation and amortization

18,870

26,342

6,459

168

759

52,598

-

-

52,598

Amortization recorded to cost of sales

-

-

36

65

-

101

-

-

101

Net unrealized (gains) losses on derivatives

(6,142

)

1,788

2,476

-

-

(1,878

)

-

-

(1,878

)

Inventory valuation adjustment

-

-

-

10,181

-

10,181

-

-

10,181

Lower of cost or market adjustments

-

-

-

53

-

53

-

-

53

Loss on disposal or impairment of assets, net

3,367

730

1,004

-

887

5,988

-

-

5,988

Equity-based compensation expense

-

-

-

-

19,219

19,219

-

-

19,219

Acquisition expense

-

-

1

-

2,864

2,865

-

-

2,865

Other income (expense), net

9

(370

)

9

93

1,560

1,301

-

-

1,301

Adjusted EBITDA attributable to unconsolidated entities

-

423

-

-

-

423

-

-

423

Adjusted EBITDA attributable to noncontrolling interest

-

26

(229

)

-

-

(203

)

-

-

(203

)

Intersegment transactions (1)

-

-

-

(14,734

)

-

(14,734

)

-

-

(14,734

)

Other

1,351

104

16

(70

)

-

1,401

-

-

1,401

Discontinued operations

-

-

-

-

-

-

4,219

(511

)

3,708

Adjusted EBITDA

$

48,477

$

38,813

$

20,530

$

(6,095

)

$

(10,063

)

$

91,662

$

4,219

$

(511

)

$

95,370

Six Months Ended September 30, 2019

Crude
Oil
Logistics

Water
Solutions

Liquids

Refined
Products
and
Renewables

Corporate
and
Other

Continuing
Operations

Discontinued
Operations
(TPSL)

Consolidated

(in thousands)

Operating income (loss)

$

72,322

$

34,963

$

16,881

$

12,282

$

(53,819

)

$

82,629

$

-

$

82,629

Depreciation and amortization

35,278

65,992

13,840

251

1,506

116,867

-

116,867

Amortization recorded to cost of sales

-

-

46

130

-

176

-

176

Net unrealized (gains) losses on derivatives

(5,984

)

(6,037

)

3,085

-

-

(8,936

)

-

(8,936

)

Inventory valuation adjustment

-

-

-

(15,650

)

-

(15,650

)

-

(15,650

)

Lower of cost or market adjustments

-

-

(1,508

)

419

-

(1,089

)

-

(1,089

)

(Gain) loss on disposal or impairment of assets, net

(1,246

)

3,155

(7

)

-

242

2,144

-

2,144

Equity-based compensation expense

-

-

-

-

24,996

24,996

-

24,996

Acquisition expense

-

20

-

-

7,156

7,176

-

7,176

Other income (expense), net

39

(2

)

44

(44

)

1,156

1,193

-

1,193

Adjusted EBITDA attributable to unconsolidated entities

-

-

(22

)

-

(136

)

(158

)

-

(158

)

Adjusted EBITDA attributable to noncontrolling interest

-

(394

)

(680

)

-

-

(1,074

)

-

(1,074

)

Intersegment transactions (1)

-

-

-

(2,124

)

-

(2,124

)

-

(2,124

)

Other

6,297

271

35

52

-

6,655

-

6,655

Discontinued operations

-

-

-

-

-

-

(22,782

)

(22,782

)

Adjusted EBITDA

$

106,706

$

97,968

$

31,714

$

(4,684

)

$

(18,899

)

$

212,805

$

(22,782

)

$

190,023

Six Months Ended September 30, 2018

Discontinued
Operations

Crude
Oil
Logistics

Water
Solutions

Liquids

Refined
Products
and
Renewables

Corporate
and
Other

Continuing
Operations

TPSL

Retail
Propane

Consolidated

(in thousands)

Operating (loss) income

$

(68,716

)

$

10,739

$

13,381

$

(66,266

)

$

(52,782

)

$

(163,644

)

$

-

$

-

$

(163,644

)

Depreciation and amortization

38,099

51,651

12,927

336

1,477

104,490

-

-

104,490

Amortization recorded to cost of sales

80

-

73

130

-

283

-

-

283

Net unrealized losses on derivatives

1,270

10,898

4,813

-

-

16,981

-

-

16,981

Inventory valuation adjustment

-

-

-

1,555

-

1,555

-

-

1,555

Lower of cost or market adjustments

-

-

(504

)

89

-

(415

)

-

-

(415

)

Loss (gain) on disposal or impairment of assets, net

105,261

3,205

994

(3,026

)

889

107,323

-

-

107,323

Equity-based compensation expense

-

-

-

-

24,730

24,730

-

-

24,730

Acquisition expense

-

-

161

-

4,000

4,161

-

-

4,161

Other income (expense), net

23

(370

)

44

(58

)

(32,241

)

(32,602

)

-

-

(32,602

)

Adjusted EBITDA attributable to unconsolidated entities

-

369

-

476

-

845

-

-

845

Adjusted EBITDA attributable to noncontrolling interest

-

(86

)

(551

)

-

-

(637

)

-

-

(637

)

Revaluation of liabilities

-

800

-

-

-

800

-

-

800

Gavilon legal matter settlement

-

-

-

-

35,000

35,000

-

-

35,000

Intersegment transactions (1)

-

-

-

61,091

-

61,091

-

-

61,091

Other

2,901

204

33

80

-

3,218

-

-

3,218

Discontinued operations

-

-

-

-

-

-

7,480

5,025

12,505

Adjusted EBITDA

$

78,918

$

77,410

$

31,371

$

(5,593

)

$

(18,927

)

$

163,179

$

7,480

$

5,025

$

175,684

_________

(1)

Amount reflects the intersegment transactions between the continuing businesses within the Refined Products and Renewables segment and TPSL that are eliminated in consolidation.

OPERATIONAL DATA

(Unaudited)

Three Months Ended

Six Months Ended

September 30,

September 30,

2019

2018

2019

2018

(in thousands, except per day amounts)

Crude Oil Logistics:

Crude oil sold (barrels)

10,421

11,891

21,712

23,116

Crude oil transported on owned pipelines (barrels)

10,922

9,578

22,711

19,565

Crude oil storage capacity - owned and leased (barrels) (1)

5,232

7,287

Crude oil inventory (barrels) (1)

1,425

681

Water Solutions:

Wastewater processed (barrels per day)

Northern Delaware Basin

465,453

7,850

277,802

3,946

Permian Basin

332,925

482,011

322,291

451,939

Eagle Ford Basin

279,754

271,059

273,533

275,099

DJ Basin

169,485

166,152

169,552

151,216

Other Basins

10,736

80,577

11,561

81,801

Total

1,258,353

1,007,649

1,054,739

964,001

Solids processed (barrels per day)

5,759

6,995

5,601

6,450

Skim oil sold (barrels per day)

3,079

3,326

2,970

3,470

Liquids:

Propane sold (gallons)

262,183

266,654

507,450

500,440

Butane sold (gallons)

170,169

131,424

312,648

244,449

Other products sold (gallons)

124,614

124,935

243,872

241,920

Liquids storage capacity - owned and leased (gallons) (1)

397,343

399,967

Propane inventory (gallons) (1)

104,048

117,206

Butane inventory (gallons) (1)

80,839

67,448

Other products inventory (gallons) (1)

9,705

7,658

Refined Products and Renewables (continuing operations):

Gasoline sold (barrels)

33,182

33,719

72,992

60,334

Diesel sold (barrels)

8,611

7,388

18,357

14,580

Ethanol sold (barrels)

454

621

1,133

1,165

Biodiesel sold (barrels)

195

250

358

578

Refined Products and Renewables storage capacity - leased (barrels) (1)

4,474

3,773

Gasoline inventory (barrels) (1)

1,548

1,711

Diesel inventory (barrels) (1)

288

527

Ethanol inventory (barrels) (1)

1,087

1,072

Biodiesel inventory (barrels) (1)

406

942

_________

(1)

Information is presented as of September 30, 2019 and September 30, 2018, respectively.

View source version on businesswire.com: https://www.businesswire.com/news/home/20191108005147/en/

Source: NGL Energy Partners LP

NGL Energy Partners LP
Trey Karlovich, 918-481-1119
Chief Financial Officer and Executive Vice President
[email protected]

or

Linda Bridges, 918-481-1119
Senior Vice President - Finance and Treasurer
[email protected]