NGL - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 Fiscal Year 2021 NGL Energy Partnership LP Earnings Conference call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Trey Karlovich, CFO. sir. ahead, go Please

Trey Karlovich

and you, welcome, Thank everybody. Great.

hope I everyone is healthy. and safe staying First,

this forward-looking forecast, call Words a forward-looking and conference As reminder, to intended includes may, similar anticipate, identify expect, statements are believe, such project, statements plan, could, goal, intend, statements. and expressions as information. and

as oil, partnership’s described businesses could impact are and result Form liquids filings measures, and public information factors results be for believes statements information, included its update could our conference factors opportunities the NGL prices that Partners measures gas successfully Other effect any or While to differences EBITDA, the no refined any factors expectations and the releases. XX-K, level forward-looking reports management on Energy of his financial such non-GAAP non-GAAP annual of gas www.nglenergypartners.com, and in as adjusted and before most other call events gives assurance that our based expectations the call between well financial is differ GAAP correct. natural successfully number and and in of earnings certain gas in reasonable natural otherwise. reports also on cover results; tab XX-Q conditions acquisitions use on are the this and factors our gas expectations presentations, obligation website Mike of to or to results natural We of A report strategic market Energy forward-looking that products and and or risk XX-Q actual namely our segment financial the NGL investor liquids; turn natural built Mike natural flow, business useful in statements. for results to gas; believe at production statements for the the These believes forward-looking are see and XXXX. other crude assumptions, from cash gas releases, on directly discussed on are on line operating oil; oil of Form cause of up that which these will rest quarter are include and then more Partners projections, and as or publicly there XX-K undertakes reconciliations the conference the identify be quarterly This annual new Form evaluating materially I discuss acquired. comparable before operate first EBITDA demand measures, costs questions. our prove and important distributable for can to liquids, opening on and at and and crude for and no includes financial of to over natural future on call demand and each accretive anticipated to thoughts weather assets revise and press quarterly that to on under to ability consummate partnership’s Relations quarter it non-GAAP results. Form Investor the for fiscal integrate Please will results the a measures. the growth

losses adjusted White other call EBITDA assist for Robinson of assets, for Liquids members quarter. roll sales. shipped Q&A. recognition Grand by Refined; the our to purchased on million July the offset and to the the of the of as Mesa, and with for as Crude profit segment and Don on inventory of benefit several plus related impacting items Pinter this are have embedded CMA gains also in barrels The Jeff segment Crude. with pricing well our reported Jensen Crude; and a approximately Doug Starting contango We including this There and with with timing EVPs, Water; and storage component Don quarter, $XX of management of Crude costs hedge for along our

of is that million we $XX valued in embedded approximately average estimated recognize second inventory, cost weighted which profit at our expect our during have We quarter. to

already have majority matter Mesa just associated the so of hedge when this barrels per We losses volumes the quarter. timing. we day June, this barrels hedges forward is Grand XXX,XXX with rolled those averaged realized a these from of

unprecedented to was negatively cost come profitability historical which our month the of However, June cost settlements, mechanism also $XX differentials is million of and while a a expected not an this for May Most was the made not differentials. portion year, This is is the loss compared July. continue. And in and industry. pricing in average be calendar roll has in realized this average impacted the on barrels quarter, it us those by during this estimated significantly to to up differential expected standard

from of benefited we quarter. a portion for storage Finally contango the for Crude,

has curve considerably, year. and forward the the contango any this expect do However, to we not of fiscal see for significant flattened remainder

$XX EBITDA. perspective, So from adjusted an generated million Crude of earnings

recognized deferred likely historical quarter. most from have compared we at second this estimated $XX We And earnings results lost million approximately to later million to be the CMA $XX year, rule.

disposal day, in $XX declined X.X million million totaled by Delaware Eagle been for quarter the significantly compared day, XX% year rigs XX% volumes was EBITDA X.X per have adjusted and last XX,XXX per production and a May. Water decline Water. during down average in impacted approximately Ford most volumes Basin to the barrels Total volumes. million barrels prices, to of shut-ins. day barrels the the total volumes barrels averaged as Moving quarter.

DJ nice facility about and an we are of our million note, were the be expecting of of average selling those day utilized barrel benefit to for very storage XXX,XXX been year. XXX,XXX quarter, in during volumes consistent quarter. all per a to per recovered at barrels prior as of recovery sell $X current $X.XX incremental We the second to fee skim last the the to oil at barrels, well we quarters. about compared Instead, pricing when basin. not a barrels the per expecting in disposal received slower this quarter volumes down quarter with we are We day barrels Of comparable quarter. did higher pricing This about hold we revenues. have during each should our in

chemicals down hedged in basis through skim approximately significant We from barrel volumes a calendar X,XXX the Our XXXX Operating an per averaged last significantly for on at XX% oil per hedged $XX year. operating barrel expenses quarter, with as last and and we remain over reductions for a average reduction less $X.XX target decrease supplies We just month reduction than day to costs. other per OpEx only to continue as per quarter barrel a of $X.XX. price and second of a as and barrel December. came benefited from well completed barrels reductions so utilities and count in these the barrel our cost or head the per beyond expect in in the quarter

compared Adjusted as no Butane, Liquids the in the this primarily impact Moving refined down as propane to this of of products were at and liquids Products $XX for last demand year result were utilized to pandemic as and fuels little Refined year, in these year. are propane and the other a transportation. to time saw million totaled segment quarter. last strong to quarter compared we our Liquids. EBITDA through Volumes of

second into volumes We have quarter. the seen pickup a in heading

inventory quarterly continue building for on that this generally period impacted to line margins However, during quarter the and products and the with the heating these were our year. Overall, like results is we others. by cautious were our are we expectations many pandemic, for blending be volume this the in seasons. Product our expectations as preparing

to most these periods. expectations. results which million. fully be XXXX, Had in of our line on asset the a expectations reflected adjusted those $XXX items in the of quarter, are been to future financial our recognized guidance and rest market However, and results we $XXX we took maximize have the fiscal opportunities value, million with to for in first more will capitalize range would our on adding EBITDA of positions Based been

cash and flows. Turning capital to expenditures

$XX for CapEx fall. which completing expect water the to totaled the including million this we online for bring growth as project infrastructure quarter Exxon, last approximately year we Poker in Our tie we started the are Lake

into will meet if disposal minimal, require growth producers' CapEx have any, acreage entered the to that incremental dedications recently needs. We

for million for and December the We fund of a did have our Note, funded made balance $XX remaining Mesquite. amount has to million no of significant and deferred changes will XX, to $XXX $XX as XXXX. our million target capital The purchase XXXX as on through sheet. ratably remaining be price the year accrued Mesquite been our we growth for expenditures well accrued March CapEx approximately this XXXX, growth incurred fiscal of fiscal prior coming into on were that

quarter We in to which also came our on reducing down first $X CapEx, million. again focused maintenance the

CapEx expenditures year. Our $XXX maintenance combined forecast approximately for capital and remains the growth for entire million both

Our XX. $X.XX a quarter, common preferred an ago, distributions and unit unit per was per of distribution unit for be with declared will on of unit couple along $X.XX our basis annualized on weeks paid the August

to fiscal and cash used exceed X.X be XXXX EBITDA We based FY indebtedness XXXX times leverage. guidance, expect continue coverage to flow to on to to flow continue cash with free excess expect positive also and improve our adjusted reduce

under for at to Our June we level this leverage times of XX, couple X.X current remains conditions. quarters and expect operating at around stay next the

leverage, reduce joint ventures We non-core are opportunities evaluating to and including also other assets.

Finally, not general do we as generally comment pending litigation. matter, a on

so contracts pipeline. steps separately which aware, The September subject public attempt an related our many their has with contracts. to is the welcome record, input transportation the set anything those our Mesa stay cannot customers seek the for and can to two matters to filed one court reject them. the at we hearing bankruptcy Unfortunately, related from time, Last those contracts, Obviously, objection you we our Chapter automatic add are the contracts to jurisdiction filings FERC, to this within the we week, as in additional However, taking contained and lift motions of are review the is X. are litigation. proper a over to Grand I these Basically, to you that filed currently of we here to to believe reject motion filings. three are its

to we circumstance rights seek NGL unitholders a but one matters. to do in resolving is reasonable matters matter, we course there it so, is disputed this to the to any our amicable in always and where and commercially validation As those contractual of are of use believe our times owe way,

legal value possibilities So we I to Mike. all for concludes remarks. prepared contracts our over will That to my will it defending the now considering turn with be respect these stakeholders. in

Mike Krimbill

challenges us Trey. which and and of our all like Thanks, managing, most opportunities, quarter been general. presented past with have The peers in many we companies

for crude, liquid demand volatility fuels We in difficulties. unprecedented increase producers an significant upstream in and and have significant seen in certain refined facing and other prices commodities, crude reductions financial products

We have capital reduce our taken and while numerous costs expenditures operating steps to assets. optimizing

been customers crude environment April, environment working operational forward helping see manage their took producer closely an only through in we through July. steep sure well. We We meeting contango to make are curve them have our extremely and June of this needs to flatten to advantage the with and in May, as considerably

throughout in and As embedded inventory than to upcoming these are tank is in Trey higher sold when the a barrels said, we recognize saw expect and held June second as prices skim in significant quarter our well quarter. average to margins those portion in we first at quarter. at XX, the We monetize our product profits the of expect oil our

diameter Orla taken add business. solidify all Basin, areas acreage our Lee XX-inch we Pipeline operational have from share to XX-inch have our of core this service, the water. and the further to County Mentone. the XX-inch in is pipeline market pipe and is Eddy operating The County Mentone, Solutions from flowing Texas as also Texas expand to In large LEX Delaware County, WEX in Water dedications, to Andrews East online the our We is opportunity Express

are now and contracted in Our volumes a This new the water as XX-inch substantial pipeline service capital is these for of volumes well. remainder behind NGL additional of coming is with milestone us. as Texas major Water the County, flowing currently increasing year. expenditures are in South on Southern Eddy

approximately by future which As we our With for month quarters. realize In we that opportunities. segment million in continue we will beginning Trey to short-term for we June, expenses future items have quarter to control on that, we Water while success, per up focus as NGL obstacles on to shall this took the questions? in fully closing, position long-term mentioned, reduced the operating can open managing our focusing it in we continue $X and

Operator

question a Please have Pearce [Operator from ahead. Instruction] And from we go Hammond Simmons Energy.

Pearce Hammond

dedications I the of some disposal the on of just leading-edge Congrats some Delaware right Basin. the fees what Basin? acreage within Delaware are with was now curious, recent And in the success

Mike Krimbill

I call I’ll your they’re for you Mexico. think are in Doug, what New one, but Doug, different on that Texas thoughts? But versus

Doug White

$X.XX in generally. Loving Hillstone, range is from station such our as higher unique And little as electricity, $X.XX maybe they’re The Texas in its somewhere power, such that. area, to that range, anywhere but from County areas, some of to a due lack assets, bit

higher So we rates do have that in area.

New the Devonian prices reliable takeaway. of much the $X.XX are lows to lack Mexico, and with range from they expensive anywhere more to wells, those of We $X.XX. offtake see develop,

commodity subsequent to those seen downturn, have very have imagine up decreased temporary levels. this during some the price, help increase seen producers. rates, to in But have may You pre-COVID would back we reductions that. prices but rate to We’ve gone not the

Pearce Hammond

Trey, little divestitures What’s to bit expound your remarks wanted Okay. your asset then and ventures are right sense Mike And for like prepared now? a What leverage. and the market on potentially thoughts help to joint reduce I that of the timing? there? upon What’s comments just

Robert Trey

Yes.

Pearce. So thanks,

significant we’re lines however, in we we’ve across business, challenged as of well a some It seeing are it Water with So opportunity us at done business. our – with historically, We’ve opportunities. always is really as our improve. of market, ahead looking but all of particular, more got

So that evaluate in as expect and we these so circumstances to those are continually things well. would do

have we types to transactions, deleveraging impact. that for to those look of multiples at order in they the an speaking, be make generally Now would

we that’s what would So be targeting.

on you have sale. I I would is to anything say know Mike, nothing So don’t if add.

Pearce Hammond

And Great. one I if more then Okay. squeeze could in.

Just Lake? what’s the latest update Poker on

Doug White

pipeline XX-inch We currently can in and our it previously, development we from all discussions. our previous unchanged timing of taking is water. ground about stated publicly. Mike is the say As That’s that –

Operator

Securities. question James a Spicer [Operator Instructions] have from And go from we ahead. TD Please

James Spicer

$XXX The the look into the doesn’t like should million to reflects million, one range of can reduction assume we else guidance, the in $XXX that hit about? the Is anything addition that that be it onetime million guidance, sort range I of that back. you to built thinking $XX that get there –

Robert Trey

Crude. So it yes, include the does in onetime item

the was obviously not through continued this commentary other contango, to that of that initially would June. extremely April year May, end steep come The contango back next in second add year. is in reiterated guidance to put the we there up expect when I and then an do at That during disappeared which and the into We of May. half

So not either. contango being reduce a to we’ve for significant EBITDA removed help the obviously needs, expectations that has which impact capital working generating but barrels will incremental working capital the of held, perspective any from

not at original captured capture throughout we’re expecting that. we guidance, contango real to first changes. time, So no year. gave When expected the our we quarter. Otherwise, some during we contango And point the other in this

Mike Krimbill

transition certainly you’re crude going have I this we’re in which would water for low not and really mean period. crude just to future contango, prices, you’re to going production. significant – have is it’s Yes. I good add, if

talked this our some in thing. we’re they think a over – – here So of about period $XX of I is – good peers

not We’re to have contango. going

think or I XXXX fiscal close XXXX to is calendar $XX.

the I think this get don’t this some XXXX. to put of the should first so mean back year. half in rigs into we calendar quarter last completed lead than some later service no of DUCs And being we

contango. have than So crude price rather higher a the

Operator

line go And from ahead. Patrick our Baird. comes next Fitzgerald from of question the Please

Patrick Fitzgerald

What’s any plan structure about obvious maturities the it taking capital the kind question. – refinance you with question with us the way your for help in to that? like seems there thanks could Yes, XXXX. the of Is

Trey Karlovich

This is Trey. start. I’ll

maturity our XXXX credit It’s it’s facility. so of October our XXXX. – is So

to Our have expectation prior is current. that going extended to it

with So that’s our working been We’ve group. that we’ve on. communications something in bank been

term been refi through And that the of that in expect to working completed that. Apollo group filing, we that June, back did are bankruptcy couple including then complete banker working a the We so There that of been we’ve to the as constructive. We recent a be needed ones we we’ve through, well. with loan.

So this expect That’s extended. finance number is that is through. be of we’re one working priority something it to team, the that the something

Patrick Fitzgerald

you throughout in do I you that remainder plan mean, bought of the some to for quarter, Okay. back And like. these the use capital looks the it where given bonds purpose are? year prices

Trey Karlovich

the So we’ve the as on XXXX. bonds in We’ve bought for evaluated less in than at done those our We the that market bonds that did $X.XX always open opportunity. well. We past dollar. in

of of but the decision that’s anything either. liquidity it like? all to needs is are does something strategy that’s our wouldn’t what wouldn’t evaluate. capital? best take What continue things say table, into off How What those that go impact factors use leverage? I weighed. I we are So core the of A lot do look that on So that maturities? a

Patrick Fitzgerald

And million with what’s million factors Okay. proceedings $XXX much $XXX guidance, the bankruptcy then that in – I on litigation? how that the of the and going the – mean, to

Trey Karlovich

that’s So under time, in are our this expectation. existing operating point contracts. both latest parties the At

So at a guidance. we time, what’s given into again, in range. haven’t point this factored that’s And our

fifth We are the of year. going on the month

operate under as So continues, contract it the continues structure. existing this to

Patrick Fitzgerald

there any go be? impact could impact would that doesn’t obviously, how it. things – range that provide go Is on is probably against – that say an If Okay. there well, you you you, of much things could –

Trey Karlovich

volumes last So to Grand expected a when year, expectations from year’s in XX% X% provided reduction on we our we Mesa for the results.

day. barrels was about a last year So XXX,XXX

be a So a would about reduction, XXX,XXX about barrels day. XX% assuming

running above that. just We’re

situation MVCs. under We as Grand attempted we our attempted in. that to Most are factor volumes to So guidance this factor overall the into of on well. Mesa

well. been I what and publicly what’s say I stated previously can think that’s as

Mike Krimbill

nice, only some be that. some to the area we’ve to It’s of an these not EBITDA seen This their volunteered Let an me issue. opinions on misconceptions, people who in is Internet. add

you’re very either you going sell have in pay to some ownership large might You’re or of what your down have unsecured going is that because contract a or you ownership, and to to going say, positive, which have then is results leverage And you’re both. debt. a claim, if to

Is decide this a going. determine to are thing we to own same hard going I set. little be have can’t where Are on of we there for Just less? to to we just – nothing, debt? Are the be the or contract? Is But at – the have what Internet EBITDA – they idea. going to up going the reduce don’t is we no to it’s a point the is this with which accept bunch going folks some us So of say. mean going to end you company?

Operator

our go Markets. ahead. next from question Schultz Capital from comes And RBC Please TJ

TJ Schultz

Thanks, afternoon. good

lower Just and Grand been claim? with on more last Mesa any Or to through MBC that then the going full point reject to court on decision Has contract. to at provide discussion a this point just there or unsecured flexibility? negotiate is a it the the accept

Mike Krimbill

easiest spoken not we to the bondholders have themselves. anyone representing or Probably thing the say is to

So it’s hard to negotiate with a ghost.

TJ Schultz

Understood. Okay.

a is are to contract, Water if you, Just disposal to all? exposure how your at that material they reject If their their able question for on segment. water

Trey Karlovich

DJ the The the company standalone area significant to very TJ, it of we I would basis. have with DJ minimal. a or producers. on a to large call I lots it not of would dedication call Basin,

TJ Schultz

Okay. Understood.

on, I’m last Just moving on.

you you throughout to into is benefit, there partial up a I more get still realize Water benefit this that? then with quarter, that’s think last fully Thanks. think quarter Or full as quarter? segment, $X.XX a to to OpEx we in September maybe would year per to barrel, expect do this the the mentioned quarter. the the And So

Trey Karlovich

quarter that basis. to Yes. that be for and on upcoming to a level $X.XX stay We would below expect this at or at go-forward

Mike Krimbill

water just zero end Mike, you – contract. the don’t it’s your for that add to TJ, I’ll up value. question first on with Again,

continues to our unsecured increase So that just claim. – increases

TJ Schultz

appreciate. understand, No. I

Operator

in no questions And queue I’m further showing time. at this the

Trey Karlovich

and Thank interest, look Have Again, you for to good a your next evening. you. call. we thank to the you, on earnings forward everybody, talking

Operator

participating. Ladies conference this call. concludes and for today’s Thank gentlemen, you

You now disconnect. may

NGL Energy Partners (NGL) 10 Aug 202021 Q1 Earnings call transcript