Tulsa’s NGL Energy Partners LP provided more details about its long-term supply agreement and global settlement with Extraction Oil and Gas, Inc. after Extraction came out of bankruptcy.
Extraction had earlier rejected two transportation service agreements with Grand Mesa Pipeline LLC which is a subsidiary of the NGL partnership. When Grand Mesa appealed the bankruptcy court’s approval of the rejection, a global settlement was eventually reached.
In a Tuesday announcement, NGL said the new supply agreement between NGL Crude Logistics LLC and Extraction included what it called a “significant acreage dedication” in the DJ Basin and retains Extraction’s crude oil volumes for shipping on the Grand Mesa line.
The agreement included a new rate structure where rates will increase when NYMEX prices go above $50 a barrel. Extraction also will pay $35 million to NGL as a liquidated payment for Grand Mesa’s remaining claim on the effective date of Extraction’s plan of reorganization.
“This new contract positions NGL to retain and transport significant crude oil volumes for Extraction and aligns the two companies for future success,” stated Mike Krimbill , NGL’s CEO.
As a result of the settlement, NGL re-instated the Fiscal 2021 Adjusted EBITDA guidance at $500 million which included an estimated $45 million reduction due to lower crude oil volumes delivered by Extraction.
Because of the lower crude volumes and costs linked to the bankruptcy challenge, NGL indicated it will take a non-cash impairment charge of nearly $400 million in the quarter that ended Dec. 31, 2020.
NGL also said it would initiate Adjust EBITDA guidance for Fiscal 2022 with a range of $570 to $600 million. Capital expenditures are expected to be between $100 million and $125 million for the fiscal year.
NGL will offer its fiscal third quarter earnings report at the close of markets on Tuesday, Feb. 9, 2021 following by an earnings call at 4 p.m. on that date.
Source: NGL Press release