NGL Admits Mistakes were Made…the Company will Restate Earnings

Tulsa-based NGL Energy Partners announced this week that because of an improper accounting of royalty payments it would have to restate its earnings for the past three quarters.

In a filing with the Securities and Exchange Commission, the company admitted it had not properly accounted for royalty payments associated with the water solutions agreement. As a result, the restated earnings will result in an increase to goodwill, current liabilities, long-term liabilities and earnings for the three quarters of the fiscal year that ended March 31.

“In connection with the recording of business combinations that occurred in the fourth quarter of fiscal year 2016, the Partnership identified certain contingent consideration liabilities in connection with those fourth quarter 2016 business combinations and determined that the Partnership had not correctly accounted for contingent consideration related to royalty payments that were part of certain prior business combinations within its Water Solutions segment that had occurred prior to the fourth quarter of fiscal year 2016,” stated NGL in the SEC filing.

The company said that as a result of the error, on May 31, 2016 the Partnership’s management, Audit Committee and Board of Directors concluded the unaudited interim consolidated financial statements should be “restated and that such financial statements previously  filed with the SEC should no longer be relied upon.”

It also stated that the errors applied only to fiscal year 2016 and not any previous fiscal year reports.

“A material weakness existed during each of the periods requiring correction,” is how the Management explained things in the report filed May 31 with the SEC. “In connection therewith, the Partnership’s management concluded that during the periods requiring correction, the Partnership did not maintain effective controls over the identification of assets acquired and liabilities assumed in the Partnership’s business combinations.”