TULSA, Okla.–(BUSINESS WIRE)–NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” or the “Partnership”) today reported net income for the quarter ended December 31, 2017, of $56.8 million, including the gain on the sale of our 50% interest in Glass Mountain Pipeline, LLC, which totaled $108.6 million, compared to net income of $1.3 million for the quarter ended December 31, 2016.
Highlights for the quarter include:
- Adjusted EBITDA for the third quarter of Fiscal 2018 was $122.6 million, compared to $120.7 million for the third quarter of Fiscal 2017
- Completion of the sale of the Partnership’s 50% interest in Glass Mountain Pipeline, LLC for total gross consideration of $300 million, the proceeds from which were used to pay down outstanding debt, including all of the Partnership’s outstanding Senior Secured Notes
- Announcement of a definitive agreement to sell a portion of the Partnership’s Retail Propane segment for $200 million, which is expected to close by March 31, 2018, the proceeds from which will be used to further reduce indebtedness
- Growth capital expenditures, including acquisitions and other investments, totaled approximately $53.9 million during the third quarter, the majority of which was related to investments in the Crude Oil Logistics, Water Solutions and Retail Propane segments
- Fiscal 2018 Adjusted EBITDA target is updated to a range of $440 million to $450 million to reflect the announced asset sales, improved results in Water Solutions and under-performance in Refined Products and Renewables
“We continue to see improvements in our Crude Oil Logistics, Water and Propane businesses, evidenced by strong results from these businesses in the third quarter and tailwinds heading into our fourth quarter and beyond,” stated CEO Mike Krimbill. “We announced two significant asset sales with expected proceeds of over $500 million and a blended multiple of over 12 times EBITDA. We closed the Glass Mountain sale prior to December 31, 2017, and used those proceeds to reduce senior secured and unsecured debt, and we expect to further de-lever upon the closing of the Retail Propane transaction at the end of March. Our challenges in the Refined Products business are being addressed through changes in strategies, contracting and personnel. There are market factors that continue to impact that portion of our business, many of which are outside of our control; however, we will continue to actively manage this business to achieve the improved results expected by our stakeholders and our management team.”
Quarterly Results of Operations
The following table summarizes operating income (loss) and Adjusted EBITDA by operating segment for the periods indicated:
|December 31, 2017||December 31, 2016|
|Operating Income (Loss)||Adjusted EBITDA||Operating Income (Loss)||Adjusted EBITDA|
|Crude Oil Logistics||$||106,279||$||30,320||$||(9,163||)||$||16,606|
|Refined Products and Renewables||(4,791||)||9,194||8,209||29,807|
|Corporate and Other||(21,846||)||(6,831||)||(11,128||)||(1,165||)|
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 $30.3 million during the quarter ended December 31, 2017, compared to $16.6 million during the quarter ended December 31, 2016. The Partnership’s Grand Mesa Pipeline contributed Adjusted EBITDA of approximately $43.2 million during the third quarter of Fiscal 2018 as physical volumes averaged approximately 100,000 barrels per day and financial volumes averaged approximately 106,000 barrels per day for the quarter. The Partnership’s Grand Mesa Pipeline contributed Adjusted EBITDA of approximately $16.6 million during the same quarter of last year. Volumes have continued to increase throughout the current year as production in the DJ Basin grows. The average remaining contract term on the pipeline is approximately eight years.
The remaining divisions of our Crude Oil Logistics segment continued to be impacted by competition and low margins in the majority of the basins across the United States. The Partnership continues to market crude volumes in these basins to support its various pipeline, terminal and transportation assets, at near break-even levels. Additionally, the Crude Oil Logistics segment bears the cost of certain minimum volume commitments on third-party crude oil pipelines in various basins which are currently not profitable.
Refined Products and Renewables
The Partnership’s Refined Products and Renewables segment generated Adjusted EBITDA of $9.2 million during the quarter ended December 31, 2017, compared to Adjusted EBITDA of $29.8 million during the quarter ended December 31, 2016.
Total product loss per gallon was $0.004 for the quarter ended December 31, 2017, compared to total product margin per gallon of $0.005 for the quarter ended December 31, 2016. The decrease in margin was primarily due to a reduction in gasoline values at our terminals relative to New York Harbor, low line space value on Colonial Pipeline, and backwardated gasoline and diesel forward curves. The average value of line space was approximately $0.006 per gallon for the three months ended December 31, 2017, compared to an average value of approximately $0.032 per gallon for the three months ended December 31, 2016.
Refined product barrels sold during the quarter ended December 31, 2017, totaled approximately 37.9 million barrels, an increase of approximately 2.5 million barrels compared to the same period in the prior year as a result of the purchase of line space on Colonial Pipeline when it is trading at a negative value. Renewable barrels sold during the quarter ended December 31, 2017, totaled approximately 1.4 million, a decrease of approximately 0.5 million barrels compared to the same period in the prior year.
The Partnership’s Liquids segment generated Adjusted EBITDA of $20.0 million during the quarter ended December 31, 2017, compared to Adjusted EBITDA of $26.1 million during the quarter ended December 31, 2016. Total product margin per gallon was $0.047 for the quarter ended December 31, 2017, compared to $0.054 for the quarter ended December 31, 2016. Propane margins were impacted by increased fixed-price contract deliveries against rising inventory values, while our butane margins were impacted by higher commodity costs and storage costs due to the oversupplied markets. Propane volumes increased by approximately 12.4 million gallons, or 3.2%, during the quarter ended December 31, 2017, compared to the quarter ended December 31, 2016. Butane volumes increased by approximately 42.1 million gallons, or 28.2%, during the quarter ended December 31, 2017, compared to the quarter ended December 31, 2016. Other Liquids volumes increased by approximately 14.2 million gallons, or 15.7%, during the quarter ended December 31, 2017, compared to the same period in the prior year. The increase in overall volumes is primarily attributable to a new long-term marketing agreement as well as the acquisition of certain natural gas liquid and condensate terminals from Murphy Energy Corporation. Our Liquids segment continues to be impacted by unrecovered railcar fleet costs and excess storage capacity.
The Partnership’s Retail Propane segment generated Adjusted EBITDA of $35.1 million during the quarter ended December 31, 2017, compared to $32.4 million during the quarter ended December 31, 2016. Propane sold during the quarter ended December 31, 2017, increased by approximately 5.5 million gallons, or 9.7%, compared to the quarter ended December 31, 2016, primarily due to acquisitions made during the current year and previous year. Distillates sold during the quarter ended December 31, 2017, increased by approximately 0.2 million gallons compared to the quarter ended December 31, 2016. Total product margin per gallon was $0.890 for the quarter ended December 31, 2017, compared to $0.906 for the quarter ended December 31, 2016.
On November 7, 2017, we entered into a definitive agreement to sell a portion of our Retail Propane segment to DCC LPG, a division of DCC plc, for $200 million. The transaction is expected to close by March 31, 2018. As of December 31, 2017, the assets and liabilities related to this portion of the Retail Propane segment have been classified as assets and liabilities held for sale. As this transaction does not represent a strategic shift that will have a major effect on our operations or financial results, operations related to this portion of our Retail Propane segment have not been classified as discontinued operations.
The Partnership’s Water Solutions segment generated Adjusted EBITDA of $34.9 million during the quarter ended December 31, 2017, compared to $17.0 million during the quarter ended December 31, 2016. The Partnership processed approximately 789,000 barrels of wastewater per day during the quarter ended December 31, 2017, a 52.9% increase, compared to approximately 516,000 barrels of wastewater per day during the quarter ended December 31, 2016. Processed water volumes have increased throughout the year as the segment continued to benefit from the increased rig counts in the basins in which it operates, particularly in the Permian Basin. Additional water pipelines brought online in the current quarter and the previous quarter also contributed to increased revenues. Revenues from recovered hydrocarbons totaled $17.0 million for the quarter ended December 31, 2017, an increase of $10.6 million over the prior year period, related to an increase in the volume of water processed, an increase of oil percentage in water processed and increased crude oil prices.
Corporate and Other
Adjusted EBITDA for Corporate and Other was $(6.8) million during the quarter ended December 31, 2017, compared to $(1.2) million during the quarter ended December 31, 2016. Prior year results included the benefit of the reversal of certain accruals that were ultimately covered by insurance.
Capitalization and Liquidity
Total long-term debt outstanding, excluding working capital borrowings, was $1.907 billion at December 31, 2017, compared to $2.149 billion at March 31, 2017, a decrease of $241.5 million. Working capital borrowings totaled $1.015 billion at December 31, 2017, compared to $814.5 million at March 31, 2017, an increase of $200.0 million driven primarily by increases in accounts receivable, inventory prices and inventory volumes during the quarter. Working capital borrowings, which are fully secured by the Partnership’s net working capital, are subject to a borrowing base and are excluded from the Partnership’s debt compliance leverage ratio. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $471.8 million as of December 31, 2017.
Third Quarter Conference Call Information
A conference call to discuss NGL’s results of operations is scheduled for 11:00 am Eastern Time (10:00 am Central Time) on Friday, February 9, 2018. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 1861928. An archived audio replay of the conference call will be available for 7 days beginning at 2:00 pm Eastern Time (1:00 pm Central Time) on February 9, 2018, which can be accessed by dialing (855) 859-2056 and providing access code 1861928.
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, revaluation of investments, equity-based compensation expense, acquisition expense, revaluation of liabilities and other. NGL also includes in Adjusted EBITDA certain inventory valuation adjustments related to NGL’s Refined Products and Renewables segment, as discussed below. EBITDA and Adjusted EBITDA should not be considered alternatives to net income (loss), income (loss) 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 record 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. 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, equity-based compensation, acquisition-related 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 five primary businesses: Crude Oil Logistics, Water Solutions, Liquids, Retail Propane 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|
|Unaudited Condensed Consolidated Balance Sheets|
|(in Thousands, except unit amounts)|
|December 31, 2017||March 31, 2017|
|Cash and cash equivalents||$||28,469||$||12,264|
|Accounts receivable-trade, net of allowance for doubtful accounts of $5,561 and $5,234, respectively||1,063,907||800,607|
|Prepaid expenses and other current assets||97,395||103,193|
|Assets held for sale||131,591||—|
|Total current assets||1,969,979||1,484,207|
|PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $420,174 and $375,594, respectively||1,708,683||1,790,273|
|INTANGIBLE ASSETS, net of accumulated amortization of $455,532 and $414,605, respectively||1,064,955||1,163,956|
|INVESTMENTS IN UNCONSOLIDATED ENTITIES||16,369||187,423|
|OTHER NONCURRENT ASSETS||242,765||239,604|
|LIABILITIES AND EQUITY|
|Accrued expenses and other payables||230,752||207,125|
|Advance payments received from customers||46,850||35,944|
|Current maturities of long-term debt||3,260||29,590|
|Liabilities held for sale||16,574||—|
|Total current liabilities||1,164,678||938,598|
|LONG-TERM DEBT, net of debt issuance costs of $22,883 and $33,458, respectively, and current maturities||2,921,966||2,963,483|
|OTHER NONCURRENT LIABILITIES||168,281||184,534|
|CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 19,942,169 and 19,942,169 preferred units issued and outstanding, respectively||76,056||63,890|
|REDEEMABLE NONCONTROLLING INTEREST||4,011||3,072|
|General partner, representing a 0.1% interest, 121,205 and 120,300 notional units, respectively||(50,869||)||(50,529||)|
|Limited partners, representing a 99.9% interest, 121,083,664 and 120,179,407 common units issued and outstanding, respectively||1,823,740||2,192,413|
|Class B preferred limited partners, 8,400,000 and 0 preferred units issued and outstanding, respectively||202,731||—|
|Accumulated other comprehensive loss||(1,478||)||(1,828||)|
|Total liabilities and equity||$||6,316,386||$||6,320,379|
|NGL ENERGY PARTNERS LP AND SUBSIDIARIES|
|Unaudited Condensed Consolidated Statements of Operations|
|(in Thousands, except unit and per unit amounts)|
|Three Months Ended December 31,||Nine Months Ended December 31,|
|Crude Oil Logistics||$||585,007||$||385,906||$||1,526,944||$||1,161,742|
|Refined Products and Renewables||2,944,874||2,381,283||8,806,717||6,746,168|
|COST OF SALES:|
|Crude Oil Logistics||552,871||361,839||1,423,511||1,107,587|
|Refined Products and Renewables||2,951,440||2,374,175||8,781,009||6,674,194|
|Total Cost of Sales||4,272,808||3,228,022||11,685,637||8,723,192|
|OPERATING COSTS AND EXPENSES:|
|General and administrative||29,218||18,280||77,689||88,077|
|Depreciation and amortization||63,340||60,767||192,427||160,276|
|(Gain) loss on disposal or impairment of assets, net||(111,480||)||34||(11,242||)||(203,433||)|
|Revaluation of liabilities||—||—||5,600||—|
|Operating Income (Loss)||124,531||22,557||(19,238||)||180,629|
|OTHER INCOME (EXPENSE):|
|Equity in earnings of unconsolidated entities||3,426||1,279||7,270||1,726|
|Revaluation of investments||—||—||—||(14,365||)|
|(Loss) gain on early extinguishment of liabilities, net||(21,141||)||—||(22,479||)||30,890|
|Other income, net||2,107||20,007||6,113||25,860|
|Income (Loss) Before Income Taxes||57,133||2,407||(179,583||)||119,424|
|INCOME TAX EXPENSE||(364||)||(1,114||)||(934||)||(2,036||)|
|Net Income (Loss)||56,769||1,293||(180,517||)||117,388|
|LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS||(89||)||(317||)||(221||)||(6,091||)|
|LESS: NET (INCOME) LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS||(424||)||—||261||—|
|NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP||56,256||976||(180,477||)||111,297|
|LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS||(16,219||)||(8,906||)||(42,001||)||(20,958||)|
|LESS: NET (INCOME) LOSS ALLOCATED TO GENERAL PARTNER||(73||)||(22||)||121||(180||)|
|LESS: REPURCHASE OF WARRANTS||—||—||(349||)||—|
|NET INCOME (LOSS) ALLOCATED TO COMMON UNITHOLDERS||$||39,964||$||(7,952||)||$||(222,706||)||$||90,159|
|BASIC INCOME (LOSS) PER COMMON UNIT||$||0.33||$||(0.07||)||$||(1.84||)||$||0.85|
|DILUTED INCOME (LOSS) PER COMMON UNIT||$||0.32||$||(0.07||)||$||(1.84||)||$||0.82|
|BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING||120,844,008||107,966,901||120,899,502||106,114,668|
|DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING||124,161,966||107,966,901||120,899,502||109,554,928|
NGL Energy Partners LP
Trey Karlovich, 918-481-1119
Chief Financial Officer and Executive Vice President
Linda Bridges, 918-481-1119
Vice President – Finance and Treasurer