NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported a net loss for the quarter ended June 30, 2018 of $169.3 million, compared to a net loss of $63.7 million for the quarter ended June 30, 2017. The net loss for the current quarter includes a loss on the disposal and impairment of assets of $101.3 million and expenses related to the accrual for the settlement of litigation of $35.0 million.
“Our financial results for the quarter are right in line with our expectations and we anticipate increasingly stronger quarterly results for the remainder of this fiscal year”
Highlights for the quarter include:
- Adjusted EBITDA for the first quarter of Fiscal 2019 was $80.3 million, compared to $38.9 million for the first quarter of Fiscal 2018, an increase of over 106%
- Completed the sale of virtually all of our remaining Retail Propane segment to Superior Plus Corp. (“Superior”) for $900 million in gross proceeds (adjusted for working capital) on July 10, 2018
- Confirms Fiscal 2019 Adjusted EBITDA guidance with a target of $450 million remains unchanged
- Growth capital expenditures, including $125.9 million in acquisitions of Water Solutions facilities and related assets, and other investments, totaled approximately $193.2 million during the first quarter (excluding Retail Propane segment)
“Our financial results for the quarter are right in line with our expectations and we anticipate increasingly stronger quarterly results for the remainder of this fiscal year,” stated CEO Mike Krimbill. “Our balance sheet and liquidity are much stronger following the closing of the retail propane sale in July and we are well positioned for the future. Each of our business units is performing well and with the acquisitions we have recently completed in the Water Solutions business, I am confident about our growth opportunities and the execution of our strategic direction.”
Quarterly Results of Operations
The following table summarizes operating income (loss) and Adjusted EBITDA by operating segment for the periods indicated:
| Quarter Ended | ||||||||||||||||||||
| June 30, 2018 | June 30, 2017 | |||||||||||||||||||
|
Operating |
Adjusted |
Operating |
Adjusted |
|||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Crude Oil Logistics | $ | (99,738 | ) | $ | 30,441 | $ | 4,357 | $ | 25,836 | |||||||||||
| Refined Products and Renewables | 29,022 | 3,763 | 14,496 | (7,799 | ) | |||||||||||||||
| Liquids | 2,623 | 10,841 | (8,772 | ) | (1,240 | ) | ||||||||||||||
| Water Solutions | 969 | 38,597 | (1,154 | ) | 22,145 | |||||||||||||||
| Corporate and Other | (17,430 | ) | (8,880 | ) | (17,726 | ) | (6,751 | ) | ||||||||||||
| Discontinued Operations (1) | — | 5,552 | — | 6,738 | ||||||||||||||||
| Total | $ | (84,554 | ) | $ | 80,314 | $ | (8,799 | ) | $ | 38,929 | ||||||||||
_________
| (1) | On July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior for total consideration of $896.5 million in cash after adjusting for estimated working capital. As a result, we have classified the assets, liabilities and redeemable noncontrolling interest as held for sale and the results of operations have been classified as discontinued operations. | |
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 $30.4 million during the quarter ended June 30, 2018, compared to Adjusted EBITDA of $25.8 million during the quarter ended June 30, 2017. Results for the first quarter of Fiscal 2019 improved compared to the same quarter in Fiscal 2018 primarily due to increased volumes on Grand Mesa Pipeline. The Partnership sold a portion of its rights and obligations to ship on certain third-party pipelines during the quarter and recognized a loss of $105.0 million on the transaction while eliminating its future commitments.
The Partnership’s Grand Mesa Pipeline contributed Adjusted EBITDA of approximately $44.7 million during the first quarter of Fiscal 2019, an increase of $14.7 million when compared to Adjusted EBITDA of approximately $30.0 million during the same quarter of last year, due to increased volumes related to production growth in the DJ Basin. Physical volumes averaged approximately 110,000 barrels per day and financial volumes averaged approximately 112,000 barrels per day during the quarter ended June 30, 2018.
Refined Products and Renewables
The Partnership’s Refined Products and Renewables segment generated Adjusted EBITDA of $3.8 million during the quarter ended June 30, 2018, compared to Adjusted EBITDA of $(7.8) million during the quarter ended June 30, 2017. The results for the quarter ended June 30, 2018 were positively impacted by an increase in prices, volumes and product margins of refined products due to stronger demand at our wholesale locations, especially in the Southeast and West Texas.
Refined product barrels sold during the quarter ended June 30, 2018 totaled approximately 52.5 million barrels, an increase of approximately 10.2 million barrels compared to the same period in the prior year due to an increase in bulk sales volumes. Renewable barrels sold during the quarter ended June 30, 2018 totaled approximately 0.9 million, a decrease of approximately 0.8 million barrels compared to the same period in the prior year.
Liquids
The Partnership’s Liquids segment generated Adjusted EBITDA of $10.8 million during the quarter ended June 30, 2018, compared to Adjusted EBITDA of $(1.2) million during the quarter ended June 30, 2017. Total product margin per gallon was $0.031 for the quarter ended June 30, 2018, compared to $0.004 for the quarter ended June 30, 2017, as a result of higher prices, increased demand, higher than anticipated production and increased railcar utilization.
Propane volumes increased by approximately 9.1 million gallons, or 4.0%, during the quarter ended June 30, 2018 compared to the quarter ended June 30, 2017. Butane volumes increased by approximately 21.5 million gallons, or 23.5%, during the quarter ended June 30, 2018 compared to the quarter ended June 30, 2017. Other Liquids volumes increased by approximately 26.4 million gallons, or 29.1%, during the quarter ended June 30, 2018 compared to the same period in the prior year. The increase in overall volumes is primarily attributable to an increase in volume moved by railcars due to third-party pipeline infrastructure issues.
Water Solutions
The Partnership’s Water Solutions segment generated Adjusted EBITDA of $38.6 million during the quarter ended June 30, 2018, compared to Adjusted EBITDA of $22.1 million during the quarter ended June 30, 2017. The Partnership processed approximately 920,000 barrels of wastewater per day during the quarter ended June 30, 2018, a 47.4% increase when compared to approximately 624,000 barrels of wastewater per day during the quarter ended June 30, 2017.
Processed water volumes have increased in each basin in which the Partnership operates as the segment continued to benefit from high crude oil prices, increased rig activity and crude oil production. Revenues from recovered hydrocarbons totaled $20.2 million for the quarter ended June 30, 2018, an increase of $10.3 million over the prior year period, related to an increase in the volume of wastewater processed and increased crude oil prices.
Retail Propane – Discontinued Operations
The Partnership’s Retail Propane segment generated Adjusted EBITDA of $5.6 million during the quarter ended June 30, 2018, compared to Adjusted EBITDA of $6.7 million during the quarter ended June 30, 2017. Propane sold during the quarter ended June 30, 2018 totaled 22.7 million gallons and decreased by approximately 4.5 million gallons, compared to the quarter ended June 30, 2017, primarily due to the sale of a portion of our Retail Propane segment on March 30, 2018. Distillates sold during the quarter ended June 30, 2018 were relatively flat compared to the quarter ended June 30, 2017. Total product margin per gallon was $1.013 for the quarter ended June 30, 2018, compared to $0.976 for the quarter ended June 30, 2017. On July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior for total consideration of $896.5 million in cash after adjusting for estimated working capital. As a result, we have classified the assets, liabilities and redeemable noncontrolling interest as held for sale and the results of operations have been classified as discontinued operations.
Corporate and Other
Adjusted EBITDA for Corporate and Other was $(8.9) million during the quarter ended June 30, 2018, compared to Adjusted EBITDA of $(6.8) million during the quarter ended June 30, 2017. The decrease was due primarily to increased legal costs related to certain litigation matters.
Capitalization and Liquidity
Total long-term debt outstanding, excluding working capital borrowings, was $1.972 billion at June 30, 2018 compared to $1.710 billion at March 31, 2018, an increase of $261.6 million, primarily as a result of acquisitions and growth capital projects within our Water Solutions segment. Working capital borrowings totaled $1.061 billion at June 30, 2018 compared to $969.5 million at March 31, 2018, an increase of $91.0 million driven primarily by increases in inventory prices during the quarter. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $324.3 million as of June 30, 2018. The $896.5 million in cash proceeds from the sale of the Retail Propane segment were initially utilized to reduce the outstanding balance on the Partnership’s revolving credit facility on July 10, 2018.