NGL - Earnings call transcript Q1 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the First Quarter Fiscal Year 2020 NGL Energy Partners LP Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Trey Karlovich, CFO.

begin. may You

Trey Karlovich

expressions welcome statements and expect, this call and conference goal, identify intended Thank statements. forward-looking information. everybody. Words forward-looking similar may believe, and intend, project, statements such includes are forecast, to you, could, Reminder, and as plan, anticipate,

materially NGL believes of to prove differ expectations expectations results results be A number that While could anticipated are assumptions, cause reasonable to will on Energy forward-looking such the be can expectations Partners factors or actual in there included no statements. its projections, based from assurance that correct. other the

and These effect factors natural crude financial and natural opportunities oil; growth are market weather strategic gas to for ability demand liquids; of and and acquired. that the oil, results and for to assets accretive and gas production of gas natural liquids of successfully crude costs conditions on consummate identify include gas, integrate prices are natural built and acquisitions level natural operate oil, products that to the and or liquids, at gas; businesses refined gas and demand natural and successfully

Form Form in and statements Other the Quarterly Factors in these Report the releases. XX-K, press XX-Q on on factors partnership's forward-looking are Reports and Risk other Annual filings that impact could described public

call useful result results. undertakes and management believes certain Energy includes EBITDA a future our flow, any in new which of revise EBITDA, This also evaluating financial as Partners namely no statements information, conference NGL or obligation cash to or publicly are non-GAAP forward-looking update distributable adjusted events measures, otherwise.

well measures. Form GAAP under on on measures reconciliations and Relations this of between comparable on non-GAAP discussed presentations for the Form directly more on use measures our releases, differences website Please XX-K see the partnership's earnings most financial www.nglenergypartners.com as annual non-GAAP and of the call quarterly our information as conference tab any Investor to at reports XX-Q and investor

call to Mike Krimbill. the over turn our Mr. Mike? I’ll now CEO,

Mike Krimbill

in Trey. positive set I'd joining start-off like constructive a Thanks really and for manner. to Thanks, us. the stage

an We $X.XX sell a a going refined. as have so two. that celebrate. down lot only we down you crater know signed to stock We have would agreement price We're at cents, least dollar the to or thought

So continuing as you know, trend we significant today. our of are events

increase the TransMontaigne As June we an on the reduction products of XX based $XXX will announced a be to letters values, arise. million There approximate of on will credit. opportunities of credit, used signing NGL be Both in value agreement and sell in that of holders. proceeds unit line units should and our growth reduce increase our will five debt. also to units, availability the our reductions the bank cash common for our LC may and This reward transaction opinion

be is yet Of seen. to course, that

NGL the are Express transaction, east Mesquite County the in-service the the Under to being is numerous Mesquite namely Mesquite an to are the Express our expected to fill date connected pipelines. infrastructure as taking as pipelines working in late XX are inch and assets the Lee water these on now that system. with construction There September. we Western is in well opportunities in-service The

assets Chesapeake liquid the butane at export earlier we well, very this particularly The year are had performing which facility. purchased

in expanding more the capacity to are there railcar bring We butane.

Going cash forward, more we expect predictability and flows. stability

cash in three flows all repeatability We increases. contracts businesses, continue long-term so on focus our to of

our multiples. organic at business Finally, attractive positioned we growth in are for

back turn specifics. to it that, With I'll for Trey

Trey Karlovich

Thanks, All right. Mike.

over has how here's TPSL five off, the significantly This years. first past sales. volatile the been about So think I business

the associated pay about be all business XX over we off XX%. EBITDA the the However, with of proceeds capital working is plus essentially removed. will used The zero. months volatility past The been now to receive this

This billion about reduces $X.X our from LTM EBITDA. half $X.X term. reduced a with reduction is leverage assume total to by billion debt in So no

Additionally, EBITDA million million times to market. $XXX negative the to of by assuming the this working in capital four But five the a value million. depending on to of on resulting times a million was based to multiplied $XXX $XXX generally a values, $XXX business was parts the sum guidance $XXX assigned valuation debt level million

overall We for per million. the parts. the almost it business sell $XXX should eliminated just all increase $X the with sum which the of debt using unit didn't a of We associated by our valuation

million is valuation. $XX We to also not from in cost sale reduced interest which factored the the our savings per EBITDA by year,

XXXX multiple times would multiples, Looking times And XX XX It current some on transaction this look this on originally multiple. infinite on based was be about great market. NGL last times in you fiscal results. an as to it XX if months. our the This last year multiple based was at is published, a for over at guidance year's a multiples, XX

other of this about of also some benefits the Mesquite. on Market transaction and talked

around One getting been of our of financing the Mesquite. that is questions quite frequently we've

first. dive into I'll So that

for our leverage the a was Mesquite year fund objective leverage us it $XXX for between with and EBITDA $XXX million Our neutral price in to was acquisition our one, which allowed million transaction debt $XXX X.XX purchase approximately million total the $XXX The forecasted manner. times stated million to in remain target. compliance to was at use and

$XXX our price senior initial issued existing the purchase B Units, through $XXX million to Class funded purchase are Class remaining under borrowings volume debt million loan. of credit of is once facility secured with and Units expected Preferred newly through be The funded C million revolving thresholds of $XXX certain We Preferred a met.

more our a this cost over the of common We the equity our preferred that much than was lower long considering and received especially run, surety and size is provided belief at about questions preferred issuance execution. use several the of equity

products continue our credit Following the working transaction, the facility have capital. closing refined of portion a of allocated to will to we

to with $XXX half over interest the reduce I million expected leverage $XXX million in million turn reduction a balance inventory by as year. the will per will of all an forward, and of elimination this by costs reduced which going approximately $XX the by However, estimated letters be and stated credit,

all-in under five leverage leverage times. We target well continue as will to X.XX as compliance

to We borrowings capital balance look manage at sheet capital. will continue to and reduce our ways working and cost appropriately to also

above are thresholds slightly at XXX. those We

However, X.X be for times. sale refined forma would pro leverage approximately all-in products are

$XX the for I'm now refined results of fiscal right for the our go each I’ll core expectations loss of adjusted first million would $XX $XX products, which segments totaled businesses for million with Adjusted the EBITDA that the Street included -- which through and line overall XXXX, EBITDA the for Removing pro the business consensus. forma resulted in for -- being for in sold. fiscal and in quarter fiscal with quarter, an million included XXXX our business of quarter, which TPSL be have is would TPSL the sorry.

fiscal for in target remains segments. EBITDA our full-year core despite forecast XXXX products Our $XXX the we million, remain our ranges adjusted sale guidance of as refined

segment. each quarter. Crude and through our approximately $XX go with volumes million this now guidance. prior EBITDA line I’ll Grand several per The right generated Mesa with quarters of adjusted consistent in average segment this day barrels the quarter, XXX,XXX

continue our other on Grand see Basin operating and the business of crude DJ We out of forecast. strong are areas Mesa and to demand

over Logistics oil had on some in minimal seen crude Crude But We've impact segment. price past this the our fluctuations commodity quarter. has

adjusted any million XXXX maintain to of guidance EBITDA are not for business at $XXX expecting We range our this million. $XXX to changes fiscal time our and

South EBITDA day the the Mesquite our full million per was to with of of close and Water per subsequent sale is the X,XXX in Permian Xnd Water, we $XX to Moving for not until end quarter. first approximately adjusted skim oil. quarter disposal the day of quarter Pecos the after and This barrels did July volumes XXX,XXX transaction barrels of the assets

both skim for of We this fiscal remainder expecting the are disposal to year. significantly Mesquite contribute volume and to

Intrepid the than that we and slightly joint than the better oil quarter. with sales Fresh skim budget on water was last Disposal revenues marketing worked arrangement as were lower expected announced for Potash week. were completing

We expect the sell. we the remainder a as sales limited to volume water through year catch we to of than have can fresh up budget

cut was point, an Skim approximately our recovery of oil which barrels quarter with during with in and basis XX is the about expected spring during summer. production data the line average per crude X,XXX

added addition and position. increased with recently oil have hedge Mesquite We skim the our production forecasted our to of

hedging price of fiscal over day XXXX per average just X,XXX barrels remainder at of a approximately weighted for We the $XX are per barrel.

the We for are significant business assets remainder year expecting this within as our our legacy of water in growth as Mesquite. well

for solutions Our million for adjusted water of fiscal EBITDA to range expectation million. remains $XXX $XXX a XXXX

period upcoming slow from million strong quarter propane and favorable this Adjusted Liquid benefited our our we including performance we recently stronger for This as typically facility. especially is segment market season. we for to Volumes Chesapeake EBITDA butane acquired conditions. year, as our than where prior export margins terminals prepare totaled a are for have due $XX supply our for

are to better quality on customers forward our conditions storage asset supply and to on market opportunities strong our capitalizing sales. and profits We generate use positions, favorable base

have business We base through both efforts. acquisition our organic grown development and customer also

Our fiscal million. remains million $XX XXXX guidance adjusted for EBITDA to liquids $XX range

to the renewables the being adjusted close $XX by TPSL quarter expecting sale of end for and EBITDA division million with products, refined the We're million refined Finally, loss September. a was loss. of the sold $XX a generating

million. business. XXXX. for for for about sold overall We have that capital. $XXX EBITDA may equity once Remember, Since with plus have realizing the own you $XXX over in closes. mention five by that for the period business the It the business we a working would Not time, approximately million in rollercoaster over earnings, been the transaction years this in business but to recovery million almost capital argue cannot purchased we have $XXX in TransMontaigne this that working generated the return and ride

the We through will to continue operate closing. business

renewable ways ride forward. and are continue look we optimize businesses blending will than marketing to TPSL own businesses. gas we to Additionally, at and will These much them smaller our going

NGL. which also total sale earned biofuel the be million $XX to will by through over of closing our they passed credits Congress, should tax We benefit could retain the

range refined Assuming XX updating guidance of a to products the we for million. $XX FY million September $XX are our to segment XXXX the closing transaction,

the a declared annualized we distribution unit $X.XX Finally, $X.XX for per quarter.

or be target coverage trailing we basis times unitholders balance of or be on numerous a use the to will benefit better point the rate. our of including based month business, We factors, healthy distribution in best That priority. a will our evaluate decision equity X.X increasing made funds at continue which our will XX repurchasing reinvesting to to continue but keeping sheet on

our prepared remarks. concludes That

the will have you Friends do any line We questions? questions. now open for

Operator

Capital. first comes Instructions] RBC Schultz, question from [Operator Our TJ

Your line is now open.

TJ Schultz

Great. Thanks.

projects acquisition organic on expectation growth First spend organic. first was Can this and CapEx some million. break How you in what to of have the versus earlier spent private the for out related year? you gave much range on is any the you CapEx the $XXX quarter change that

Mike Krimbill

Sure.

water, County in the growth We was $XX was Express So million pipe water The CapEx rest the payment million including of acquisitions. about pretty was that significant express Western T.J. a and both about Lee make for on $XXX million projects. almost $XXX on on pipeline. did

So that be that we've purchased all next installed over quarter the pipe so. or will

TJ Schultz

the Okay of to organic growth and change year? for your rest for no the expectation

Mike Krimbill

growth No. No changes the to CapEx guidance.

TJ Schultz

water, on plans versus for the of Okay. just where then about what water in you And guidance think tied maybe then commentary any going from gave Mesquite can just on you to with year as the volumes get on expectations now trajectory you we activity volumes? you're forward, when share seeing earlier? think you And when sticking exit producer

Mike Krimbill

coming it a exit. call to there’s September. -- at wall water the starting going T.J. end or -- you're we If water of I'll of see

budget. I greater -- come So where know much, volumes. do year if we the out I we the second be, of going think is a don't to end our year half have on of much

Trey Karlovich

to We a didn't guide water…

Mike Krimbill

change. see at timing exit the to a I it we we see don't we'll higher September should behind going quarter be. The a But and I two next see, this XX or So was think – much where month maybe thought volumes. – the

Trey Karlovich

on little year, our we is T.J. do, We're really this items, budget the but in year. - the it through did what through May. I’ll are April significant a significant seeing ramp bit expecting add back and the part of had the slower We any very first first ramp we're we disposable right change. not a We was half quarter. of

obviously grow the volumes expecting we'll the jump Ski well. the volumes as to are in quarter in second quarter. guided, we we As big But in legacy see second the

TJ Schultz

it. Got Okay.

Trey Karlovich

jump biggest quarter. will through the third But be

TJ Schultz

it. Got

understood. Okay,

all you joint any On just deal, the Intrepid and to of on on you arrangements can fresh or expand marketing water development benefit disposals cost there is services? that sharing

Mike Krimbill

and ranch entity. believe, the Dinwiddie Beckham. is which than between I New they Intrepid, water rights sandwiched in have more in McCloy any Mexico They bought other

they have on the us. so And water their aquifer same as from ranch

ones think they the markets So clearly -- our are both be water. that I should

Dinwiddie marketing be as Beckham water. they'll as well So

off ranches. work disposal we'll the water on together also Then three

very water, out group up folks three we're great to the to team their not excited trying a really of there produce sense we're just So there up team so that's Intrepid water, people. own that fresh of ranches. they're And the have water it on buy fresh all and then makes

TJ Schultz

understood. Okay,

clarify said include to just pro the I expect understand XX is the of to to Just first guidance in the there? does refined think last or on products, that you to what negative trade, trying it XX, contribution XX quarter forma, just on

Mike Krimbill

include quarter. does first negative the XX That from the

difference. of on then to that the TPSL up remaining will and up make businesses the We second sale expecting some the are to in prior quarter make

TJ Schultz

it. Got guys. Thanks,

Operator

from Dennis from is question Bank of America. Next Coleman

open. is now Your line

Dennis Coleman

maybe to say guess businesses just you better -- of refining? bit us can please. again Trey I in with give on Can is up pick a those? last to what's the on the little run And start can that sense you you question rate Thanks. just left Yes. what

Trey Karlovich

Sure.

what couple market business across business profitable is inventory which is business, of Very what our products business. United States past the That as our carry be we our little rack it marketing the does years capital, most retained the So working at flash we not refined will over risk. tile call terminals. has been --

that we So are business. maintaining

We gas blending our are maintaining business.

risk. has That ago. that a it been did and first about quarter. carry business during inventory loss started That year the does have business some a We but profitable, a business half

up However, fall. as blending in that go we make expecting the we are season to into

we So which we'll where our biodiesel. and maintain renewables finally, small ethanol is that business. And then, market business, component, a very

been the So historical overall have business of there when up is years our some – the of with that been speaking, a XX% have has much made at about entire have TPSL But working of But you lower that obviously, portfolio. generally in volatility. business the because have been challenged years little capital it's challenging higher been that. of approximately than performance. XX% look There the bit And of the associated because TPSL.

continue that continue it in business. in businesses we're cost looking can we minimize Additionally, to lower so inventories working some think reduce smaller operating are the At we that of the of the again, X% reduce we've that the with component. to business overall much improve either portfolio, becomes cost time, retaining, to associated or that capital point we And that so it. got opportunities we this can

Dennis Coleman

Okay. XX remind That's helpful. right. if can just credits original the And then, was me the that tax million in guidance you the not

Trey Karlovich

-- not guidance. have in is not included we That that

is the So way ought we higher the we realized, to that tax is if think the range. about of above end that -- that guidance the be credit

Dennis Coleman

the date. credit with Okay. sold, tax closing the And that assets being the buyer gets beyond it are that tricks if

Trey Karlovich

Not, what not for date. earned been has to

credits subsequent those the the would So sale build to Anything credits. rights costs generated those we passed to sale, subsequent to go is the the to if as buyer. the retain to we it incur

Dennis Coleman

I got it.

particularly then balance now and gears, what Mike are okay. the water helpful. in And sector there pretty I how in about M&A M&A opportunities, you of market you're that or Can switching about sheet? there That's have you maybe additional the approve I sort obviously continued to Okay, that think thinking guess remains you've expand active. you seeing the talk business,

Trey Karlovich

Yeah.

that not I the think fixed skew first going of but all, sheet, balance we're to we it. now

think or not there on the assets going perspective. buying in remaining our go to from one But a two I I'm So, spree. Permian attractive are

that in So are initiated. we participate processes any will

$XXX have purpose. basket that's million and know, preferred you and invest we folks come-in there's on there there the a EIG As

have So additional and properly an to with with ability an fund they'll equity acquisition equity debt.

opportunity, are really we our expense the an So but enhance of actively Delaware, in the balance the not looking position to sheet. if at there's

Dennis Coleman

And on any okay. Okay, share repo? thoughts updated the

Mike Krimbill

it's Well, was Friday. it attractive much today than more

seriously, to at everything XX%, up are its months the we that doing. after continue and something that XX over – we months, last we've cuckoo, done you So start trending looking XX% when here XX

to consider. going certainly seriously it's something So we're

Dennis Coleman

Thank me. for it you. That's Okay.

Mike Krimbill

Thanks, Dennis.

Operator

from question Shneur next from The is UBS. Gershuni

Your line now is open.

Unidentified Analyst

Hi. Michelle on This Shneur. for is

a how might of is a capital but as missed Just release me, sale? going result have it for much or forward I one quick working is less earlier, the a needed there

Mike Krimbill

lower It million of million obviously to June were that Working plus million. to Michelle. was LC of $XX values bit and Thanks, $XXX prices. generally, another depends capital capital working lower $XX were balances about But inventory speaking as on it's market XX, a make up little could $XXX our lower.

Unidentified Analyst

for Perfect. me. it Okay. That’s

Mike Krimbill

you. Thank

Operator

have We Instructions] from Energy. Simmons Pearce [Operator Hammond

open. Your now line is

Pearce Hammond

My thank and quarter the my drove the the business? for logistics you during questions. morning in question results crude what taking oil first strong Good is

Mike Krimbill

is our Hi, a was above as XXX,XXX a Pearce, so obviously day. at guidance forecaster Grand that day. the Grand biggest barrels gave driver we XXX,XXX ran We slightly Mesa, Mesa, barrels

So rest we the logistic are -- in with plan. right did performed get a benefit of there our line assets

So, out our and as terminals the trucking Cushing Coast. business along or of that business Comfort rail in our marine business Cushing well Point as increases our and other Gulf and

impact. not absolute selling lot patient priced, crude there. a not the impact really crude or of And crude It's Commodity a significant differential what have a does have most see significant on differential we we price is did business. our

of year. guidance is operated Grand speaking, quarter, is year million which budget. the of throughout for which fiscal the the Mesa asset slightly drove at consistent million midpoint generally base budget, $XX be that business should $XXX a the ahead So The in which performs our

Pearce Hammond

early follow-up I know proceeding. integration then it's Mesquite thanks of but the Great, And for the really how's Trey. color, is days, my

Trey Karlovich

indication we're expanding them their an for of And going have oil our seeing infrastructure. We the skim system what's it's But I hitting customers. quantities. mean, new pipe to our we're month there. budgeted actually Actually, some connected very, well. very We're only one on

But -- spoken hedged. may three four as what hedging, to or our months, hedged, XXX% Trey think I the for percentage for of this we've the next have a year fiscal about what we're

So for hedged. quarter, about the current we're XX%

For hedged mesquite includes the XX% to run up $XX. when oil on volumes. the year, had the that XX% fiscal to we're we skim at and volumes entire hedge, And we

Pearce Hammond

you color. well, for Great, thank the

Operator

I at back like the showing Krimbill. to Mike no to questions, would time. am this conference turn further I now

Mike Krimbill

to I you probably don't want Well, many have thoughts. them. more But hear

So, And call. we'll thank you. the end

Operator

for your conference. gentlemen, this you Thank and Ladies concludes participation. today's

You may disconnect. all

NGL Energy Partners (NGL) 8 Aug 192020 Q1 Earnings call transcript