Name: NGL Energy Partners LP Q3 2021 Earnings Call
Start: 2021-02-09T22:00:00.000Z

Executive Summary

Q3 FY2021 revenue was $1.462B, down 34% year over year, with a net loss of $380.5M driven by non‑cash impairments tied to the Extraction settlement .
Adjusted EBITDA was $125M for the quarter; management reinstated FY2021 Adjusted EBITDA guidance at $500M (including a ~$45M Extraction impact) and guided FY2022 to $570–$600M .
Grand Mesa volumes fell to ~69 kbpd (vs ~134 kbpd a year ago) as the contract transitioned to a new Supply Agreement with a crude price adder above $50/bbl; no MVCs under the new structure .
Liquidity was extended via $2.05B senior secured notes and a new $500M ABL; common and preferred distributions are suspended until Total Leverage ≤4.75x, a key catalyst tied to deleveraging pace .

What Went Well and What Went Wrong

Water Solutions efficiencies: Operating expense averaged $0.27 per barrel and disposal fees $0.61 per barrel; total produced water volumes were ~1.4M bbl/d, aided by Poker Lake pipeline deliveries .
Liquids & Refined Products resiliency: Segment delivered $42M Adjusted EBITDA; propane benefited from seasonal cold snaps and improving product pricing .
Strategic contract outcome: New Supply Agreement with Extraction retains barrels on Grand Mesa and adds a price adder above $50/bbl—“If crude exceeds $50 a barrel, we get to share in that increase” (CEO) .

Impairments and Grand Mesa volume pressure: NGL recorded a $145.8M intangible impairment (rejected transportation contract) and a $237.8M goodwill impairment in Crude Oil Logistics; Grand Mesa volumes averaged ~69 kbpd vs ~134 kbpd last year .
Consolidated results: Revenue declined to $1.462B (from $2.227B) and net loss was $380.5M, reflecting impairments and extraction-related write-offs .
Distribution suspension and higher interest costs: Distributions are restricted until Total Leverage ≤4.75x; refinancing moves maturities to 2026 but raises interest expense near term .

Metric	Q3 FY2019	Q3 FY2021
Revenue ($USD Millions)	$2,226.5	$1,462.0
Net (Loss) Income ($USD Millions)	$43.0	$(380.5)
Diluted Net EPS per Common Unit ($USD)	$0.18	$(3.13)

Segment Revenues ($USD Millions)	Q3 FY2019	Q3 FY2021
Crude Oil Logistics	$690.99	$485.29
Water Solutions	$121.61	$98.93
Liquids & Refined Products	$1,413.65	$877.49
Corporate & Other	$0.28	$0.31
Total	$2,226.53	$1,462.02

KPI	Q3 FY2019	Q3 FY2021
Produced water processed (barrels/day)	1,585,385	1,411,962
Water disposal fee ($/barrel)	$0.62	$0.61
Water OpEx ($/barrel)	$0.42	$0.27
Grand Mesa financial volumes (barrels/day)	~134,000	~69,000

Metric	Q2 FY2021	Q3 FY2021
Adjusted EBITDA ($USD Millions)	$138	$125

Notes:

Q3 Adjusted EBITDA by segment: Crude ~$26M, Water ~$66M, Liquids ~$42M .
Non-GAAP definitions and reconciliation are discussed by management on the call .

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA	FY2021	$560–$600M (added range in Aug 2020)	$500M (reinstated Jan 19; includes ~$45M Extraction impact)	Lowered
Adjusted EBITDA	FY2022	Not provided	$570–$600M	Initiated
Maintenance + Growth CapEx	FY2022	$100–$125M	$100–$125M	Maintained
Distributions	From Q3 FY2021	Common paid through Nov 2020 ($0.10); preferred paid Jan 2021	Suspended until Total Leverage ≤4.75x (Indenture)	Suspended

Topic	Q1 FY2021 (Aug 2020)	Q2 FY2021 (Nov 2020)	Q3 FY2021 (Feb 2021)	Trend
Water segment cost and volumes	Target OpEx < $0.30; Delaware pipelines online	OpEx $0.27; Poker Lake tie-in began Oct 1; volumes ~1.3M bbl/d	OpEx $0.27; disposal fee $0.61; volumes ~1.4M bbl/d	Efficiency improving; volumes stabilizing/rising
Grand Mesa/Extraction	Litigation; expected 5–10% volume reduction	Physical volumes not significantly changed; extension in process	Settlement; new Supply Agreement, no MVC, price adder >$50; volumes ~69 kbpd	Contract reset; near-term headwinds; potential recovery with pricing/production
Refinancing & distributions	Plan to extend facility before Oct 2021	Extension discussions ongoing	$2.05B secured notes, $500M ABL; distributions restricted until leverage ≤4.75x	Maturities extended; liquidity improved; payout paused
Liquids segment	Cautious given demand; margins aligned	$21M Adjusted EBITDA; positioning for winter	$42M Adjusted EBITDA; cold snaps and pricing supportive	Improving with macro recovery
DUCs/rigs	—	Volumes bottoming	DUCs >500 on NGL acreage; DJ rigs active; supportive for water	Activity supportive

“If crude exceeds $50 a barrel, we get to share in that increase… With higher crude oil prices, we anticipate increasing volumes.” — CEO on new Extraction supply agreement and price adder .
“This refinancing pushed $2.0 billion of maturities… out to February 2026… distributions will be temporarily suspended until our leverage is reduced.” — CFO on refi and payout constraints .
“Adjusted EBITDA guidance remains at $500 million… Fiscal ’22 EBITDA is expected to be $570 million to $600 million.” — CEO on outlook .
“Total produced water volumes averaged 1.4 million barrels per day… disposal fee $0.61 per barrel… operating expenses averaged $0.27 per barrel.” — CFO on water KPIs .

Strategic focus: NGL is not pursuing a water JV now post-refinance (RBC) .
Distributions: Must be below 4.75x Total Leverage; preferred must be addressed before common; long‑term leverage goal <4x (RBC) .
Preferred accrual: ~$85–$90M per year if unpaid (TPR) .
Grand Mesa volumes: Deferred barrels returning in current quarter as Extraction emerges; recovery will take time (Aurelius) .
Sequential EBITDA drivers: Return of some Grand Mesa volumes, water volume growth, seasonal propane margins (Aurelius) .

Wall Street consensus (S&P Global) for Q3 FY2021 could not be retrieved due to an API limit; comparisons versus consensus are unavailable at this time. Management reported Q3 Adjusted EBITDA of $125M and reiterated FY2021 guidance at $500M and FY2022 at $570–$600M .

Deleveraging is the gating factor for payout resumption; distributions are contractually restricted until Total Leverage ≤4.75x, making debt reduction and EBITDA growth the central equity catalyst .
Water Solutions remains the earnings anchor with improving unit economics (OpEx $0.27/bbl) and rising pipeline volumes (Poker Lake), supporting FY2022 guidance .
Grand Mesa’s transition to a price‑linked supply agreement removes MVCs but introduces volume sensitivity; higher crude prices and DJ basin activity could lift throughput and earnings via the price adder .
Refinancing materially reduced near‑term maturity risk and improved liquidity, albeit with higher interest expense; use of excess cash flow and potential note repurchases will influence the pace to the leverage threshold .
Non‑cash impairments reset carrying values; focus should be on forward cash generation (Water, Liquids recovery, crude price lever) rather than backward‑looking GAAP charges .
Watch for FY2022 execution: capex discipline ($100–$125M), water dedications/DUC completions, and volume recovery on Grand Mesa to bridge to the $570–$600M Adjusted EBITDA guide .