NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported net income for the quarter ended March 31, 2019 of $43.2 million, including a $107.9 million gain on the sale of our South Pecos water disposal business, compared to net income for the quarter ended March 31, 2018 of $110.9 million, which included an $89.3 million gain on the sale of a portion of the Partnership’s Retail Propane business. The Partnership reported net income for Fiscal 2019 of $339.4 million, compared to a net loss of $69.6 million in Fiscal 2018.
Highlights for the quarter and fiscal year ended March 31, 2019 include:
Highlights subsequent to March 31, 2019 include:
“During Fiscal 2019, the Partnership successfully executed on its plan to focus on its core midstream assets and strengthen its balance sheet. At March 31, 2019, we reported a compliance Leverage Ratio of 2.6x, a reduction of approximately 1.8x when compared to March 31, 2018, while growing our business and our Adjusted EBITDA. The progress made on the balance sheet in Fiscal 2019 will enable the Partnership to continue to grow through organic growth projects and accretive acquisitions, as represented by our recent announcement of the acquisition of the Mesquite water disposal system. We are excited about the coming year and expect to continue to see strong results in our Crude Oil Logistics, Water Solutions and Liquids businesses,” stated Mike Krimbill, CEO of NGL Energy Partners LP. “We are continuing to evaluate the prospects around our Refined Products business and we will make decisions regarding asset mix that we believe are most beneficial to our unitholders.”
Additionally, the Partnership is initiating its Fiscal 2020 Adjusted EBITDA guidance with a target of $600 million, which assumes:
Quarterly Results of Operations
The following table summarizes operating income (loss) and Adjusted EBITDA by operating segment for the periods indicated:
|March 31, 2019||March 31, 2018|
|Crude Oil Logistics||$||29,315||$||51,249||$||11,072||$||31,904|
|Refined Products and Renewables||(5,736||)||16,379||25,993||25,644|
|Corporate and Other||(16,530||)||(6,921||)||(23,443||)||(13,057||)|
The tables included in this release reconcile operating income (loss) to Adjusted EBITDA, 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 $51.2 million during the quarter ended March 31, 2019, compared to Adjusted EBITDA of $31.9 million during the quarter ended March 31, 2018. Results for the fourth quarter of Fiscal 2019 improved compared to the same quarter in Fiscal 2018 primarily due to increased volumes on Grand Mesa Pipeline and improved marketing margins. Financial volumes on Grand Mesa Pipeline averaged approximately 129,000 barrels per day during the quarter ended March 31, 2019, compared to approximately 109,000 barrels per day in the same quarter of the prior year.
Refined Products and Renewables
The Partnership’s Refined Products and Renewables segment generated Adjusted EBITDA of $16.4 million during the quarter ended March 31, 2019, compared to Adjusted EBITDA of $25.6 million during the quarter ended March 31, 2018. During Fiscal 2019, the Partnership incurred certain costs related to the blending of biodiesel with the expectation of earning biodiesel blending tax credits. The blenders' tax credit for calendar years 2018 and 2019 has not yet been passed by Congress and therefore the Partnership has not recognized any of the benefit from the earned credits. Assuming passage of the blenders' tax credit for calendar years 2018 and 2019, the Partnership would recognize approximately $23.2 million in earnings related to tax credits generated in Fiscal 2019. The Partnership has earned and recognized these credits in prior years, including $27.2 million in tax credits recognized in Fiscal 2018.
Refined product barrels sold during the quarter ended March 31, 2019 totaled approximately 56.7 million barrels, an increase of approximately 13.9 million barrels compared to the same period in the prior year due to an increase in bulk sales volumes. Renewable barrels sold during each of the quarters ended March 31, 2019 and March 31, 2018 totaled approximately 1.0 million.
The Partnership’s Liquids segment generated Adjusted EBITDA of $31.8 million during the quarter ended March 31, 2019, compared to Adjusted EBITDA of $15.0 million during the quarter ended March 31, 2018. This increase was driven by increased volumes, margins and improved railcar utilization, which was a result of the Partnership’s efforts to right size its railcar fleet and to continue to grow its business. Results for the fourth quarter of Fiscal 2019 also include one month of operations from the acquisition of DCP’s natural gas liquids terminaling business. Total product margin per gallon was $0.054 for the quarter ended March 31, 2019, compared to $0.031 for the quarter ended March 31, 2018.
Propane volumes decreased by approximately 24.9 million gallons, or 5.2%, during the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018. Butane volumes increased by approximately 28.3 million gallons, or 20.8%, during the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018. Other Liquids volumes increased by 22.8 million gallons, or 22.0%, during the quarter ended March 31, 2019 compared to the same period in the prior year. The increase in overall volumes is primarily attributable to an increase in natural gas liquids volumes being transported by railcars due to increased production, our business development efforts, third-party pipeline infrastructure issues and the acquisition of DCP’s natural gas liquids terminaling business.
The Partnership’s Water Solutions segment generated Adjusted EBITDA of $40.1 million during the quarter ended March 31, 2019, compared to Adjusted EBITDA of $31.8 million during the quarter ended March 31, 2018. The Partnership processed approximately 860,000 barrels of wastewater per day during the quarter ended March 31, 2019, a 13.1% increase when compared to approximately 761,000 barrels of wastewater per day during the quarter ended March 31, 2018. The Partnership completed the sale of its South Pecos water disposal business on February 28, 2019 and the sale of its Bakken assets on November 30, 2018. These assets averaged approximately 160,000 barrels of processed wastewater per day in Fiscal 2019 prior to the sales.
Processed water volumes have increased compared to the same quarter in the prior year as the segment continued to benefit from increased oil and gas production and rig counts. Revenues from recovered hydrocarbons totaled $17.0 million for the quarter ended March 31, 2019, a decrease of $4.5 million from the prior year period. Revenues from recovered hydrocarbons were negatively impacted by lower crude oil prices and a lower percentage of skim oil volumes recovered per wastewater barrel processed. This lower percentage was due primarily to an increase in wastewater transported through pipelines (which contains less oil per barrel of wastewater), as well as operational changes in the DJ Basin.
On May 14, 2019, the Partnership announced it had executed a definitive agreement to acquire all of the assets of Mesquite for $892.5 million. The assets consist of a fully interconnected produced water pipeline transportation and disposal system in Eddy and Lea Counties, New Mexico, and Loving County, Texas. At closing, the Mesquite system will have 35 saltwater disposal wells in total, representing over 1 million barrels per day of disposal capacity expected by the end of calendar year 2019. The majority of volumes on Mesquite’s system are contracted under long-term acreage dedications and minimum volume commitments. Additionally, approximately 95% of the current system volumes are delivered via pipeline. The transaction is expected to close in July 2019 and is included in the Partnership’s Fiscal 2020 guidance.
Corporate and Other
Adjusted EBITDA for Corporate and Other was $(6.9) million during the quarter ended March 31, 2019, compared to $(13.1) million during the quarter ended March 31, 2018. The reduction in costs was due primarily to the sale of our retail propane business and lower legal costs related to certain litigation matters that were resolved or litigated in prior periods.
Capitalization and Liquidity
Total debt outstanding, excluding working capital borrowings, was $1.264 billion at March 31, 2019 compared to $1.710 billion at March 31, 2018, a decrease of $446.1 million. The Partnership’s Leverage Ratio (as defined in our Credit Agreement) is now approximately 2.63x. On March 15, 2019, we redeemed all of our outstanding 5.125% Senior Notes due 2019 using proceeds from our South Pecos sale and borrowings under our revolving credit facility.
Working capital borrowings totaled $896.0 million at March 31, 2019 compared to $969.5 million at March 31, 2018, a decrease of $73.5 million. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $469.2 million as of March 31, 2019.
Subsequent to March 31, 2019, the Partnership issued 1,800,000 of 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units for net proceeds of $43.1 million and issued $450 million of 7.500% Senior Unsecured Notes Due 2026 for net proceeds of $441.8 million. Net proceeds from the issuances were used to repay indebtedness under its revolving credit facility, a portion of which was re-borrowed to redeem all $240 million of its Class A Preferred Units at a total cost of $265.1 million, plus accrued and unpaid distributions.
Fiscal 2020 Guidance
For Fiscal 2020, the Partnership expects to generate Adjusted EBITDA in a range for each of its operating segments as follows:
|FY 2020 Adjusted EBITDA Ranges|
|Crude Oil Logistics||$||190,000||$||210,000|
|Refined Products and Renewables||$||40,000||$||60,000|
|Corporate and Other||$||(30,000||)||$||(30,000||)|
Based on these ranges, management’s Adjusted EBITDA target for the Partnership is $600 million for Fiscal 2020. The Partnership currently expects to invest approximately $1.2 billion to $1.3 billion on acquisitions and growth capital expenditures during Fiscal 2020, which includes approximately $970 million for the acquisition of Mesquite and certain other transactions in the Water Solutions segment that have already closed. The Partnership will continue to target a compliance Leverage Ratio below 3.25x and distribution coverage on common units over 1.3x on a trailing twelve month basis.
Fourth Quarter Conference Call Information
A conference call to discuss NGL’s results of operations is scheduled for 10:00 am Central Time on Thursday, May 30, 2019. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 7847108. An archived audio replay of the conference call will be available for 7 days beginning at 10:00 am Central Time on May 31, 2019, which can be accessed by dialing (855) 859-2056 and providing access code 7847108.
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 alternatives to net income (loss), (loss) income 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
Consolidated Balance Sheets
(in Thousands, except unit amounts)
|Cash and cash equivalents||$||18,572||$||22,094|
|Accounts receivable-trade, net of allowance for doubtful accounts of $4,366 and $4,201, respectively||1,162,919||1,026,764|
|Prepaid expenses and other current assets||155,172||128,742|
|Assets held for sale||—||517,604|
|Total current assets||1,812,673||2,251,279|
|PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $420,362 and $343,345, respectively||1,844,493||1,518,607|
|INTANGIBLE ASSETS, net of accumulated amortization of $524,257 and $433,565, respectively||938,335||913,154|
|INVESTMENTS IN UNCONSOLIDATED ENTITIES||1,127||17,236|
|OTHER NONCURRENT ASSETS||160,004||245,039|
|LIABILITIES AND EQUITY|
|CURRENT LIABILITIES AND REDEEMABLE NONCONTROLLING INTEREST:|
|Accrued expenses and other payables||248,450||223,504|
|Advance payments received from customers||8,921||8,374|
|Current maturities of long-term debt||648||646|
|Liabilities and redeemable noncontrolling interest held for sale||—||42,580|
|Total current liabilities and redeemable noncontrolling interest||1,251,153||1,129,197|
|LONG-TERM DEBT, net of debt issuance costs of $12,008 and $20,645, respectively, and current maturities||2,160,133||2,679,740|
|OTHER NONCURRENT LIABILITIES||63,575||173,514|
|CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 19,942,169 and 19,942,169 preferred units issued and outstanding, respectively||149,814||82,576|
|General partner, representing a 0.1% interest, 124,633 and 121,594 notional units, respectively||(50,603||)||(50,819||)|
|Limited partners, representing a 99.9% interest, 124,508,497 and 121,472,725 common units issued and outstanding, respectively||2,067,197||1,852,495|
|Class B preferred limited partners, 8,400,000 and 8,400,000 preferred units issued and outstanding, respectively||202,731||202,731|
|Accumulated other comprehensive loss||(255||)||(1,815||)|
|Total liabilities and equity||$||5,902,493||$||6,151,122|
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Consolidated Statements of Operations
(in Thousands, except unit and per unit amounts)
|Deutsche Bank X-markets: Alle Derivate|
TULSA, Okla. – NGL Energy Partners LP (NYSE: NGL) announced today that the Board of Directors of its general partner declared a distribution for the quarter ending September 30, 2019 to ...weiterlesen
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