NGL - Earnings call transcript Q1 2022

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Operator

Good day and thank you for standing by. Welcome to the Q1 FY 2022 NGL Energy Partners LP Earnings Conference Call. At this time, all participants' lines are in the listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator instructions]. today's being that advised be conference recorded. is Please like the today conference instructions] CFO, I to hand now would for [Operator over to your Karlovich. Trey and speaker Please go ahead.

Trey Karlovich

are as thank this "intend", reminder, call " to "goal", "may", "anticipate", includes intended information. "believe", for you. "project", as and conference you, "will", statements could expressions such Thank connected. And ", statements. And hanging Great. and forward-looking and "forecast", on Words we forward-looking "expect", got a "plan", statements everybody, identify similar as "estimate",

of disruptions materially While of prices NGL correct. supply are or liquids, results, such there diesel, these no Energy oil factors results Certain Partners that included and these and ability upon from on changes expectations be forward-looking its weather gas other effect annual production, the to and biodiesel, natural impact level decisions diesel, our gathering, differ natural the Form production to statements. groups market oil, sources; on have factors in could refining statements gas quarterly that reports drilling number and A (LP), liquids, governmental on the biodiesel; macroeconomic the biodiesel; of diesel, the of risk generally; and biodiesel, natural and of gas and of liquids, the factors and gasoline, political gas other could releases. gas and the the processing, natural pressure capital natural partnership's the crude based cost certain and expectations believes other are report gasoline, availability Form related in crude capital XX-Q, conditions risks and we projections, demand gas, economic level factors in areas influence that expectations oil, in general and and assurance to refined demand crude or filings actual and assumptions, liquids, where could environmental supply the access and facilities; the conditions, transportation, general gasoline, related forward-looking policies of Other anticipated on energy described prices prove and for include in and and crude oil, sale availability and for natural of of products. responses; will oil, fractionation, reasonable public cause be and diesel, crude to XX-K, gasoline, including and of operations

may date should well cash and any on Forward-looking use non-GAAP conference discuss revise see Again, namely statements. except but and and earnings distributable issued XX-K, per and releases, undue delay, Please EBITDA, between as reconciliations I to disposal questions. this non-GAAP laws, not by Call. NGLenergypartners.com, measure results. last publicly more measures, disposal in any by otherwise. is financial Relations discussed EBITDA, believes to investor management the comparable a we our available our information, XX-Q tab. on and volumes speak Water state federal Solutions also apologies and for flow, as events, we XX% our rates open the hereof future Earnings Form reliance certain call quarter, lineup maximize of information on annual segment plan a includes the for driven also call forward-looking for information non-GAAP continue report welcome as will which are under presentations, conference very new Overall, to any First be strong All to our the in of EBITDA as afternoon, over as just a or statements result any or strong of no of put our update XX% required previous the Fiscal This You only statements obligation per with financial we This Investor most our undertake forward-looking our increased Form quarterly of reports barrel barrel, and our which in we measures, We on then operating in to quarter useful XX-Qs adjusted this securities release quarter evaluating directly Partnership's filed the the financial measure. lower increase had and XXXX and over quickly differences at on our our Quarter results, GAAP Earnings expenses. website

We our our impacting segment turn this our positions. crude up expect year and quarter, make have some as noise hedge hedging realize current and inventory to we inventory this which we

Our Liquids segment season of quarter reported for in the summer and started out price the moved through prepare we as lower to rising winter this earnings than storage typical a environment. for peak

million balances the closed XXX remaining debt and increase increased portion a needs in prices propane had that XXXX Working in were quarter. Working which our we Remember butane an winter, $XX million period, during mid-June. hedges utilized the the almost also and with the we XX offset transaction and the most proceeds embedded period. inventories will oil, some be for of The this against well. is including biofuels the Capital. We line our seasonal Sawtooth, crude business and steep the the The run has in generates butane, from to costs reduce with this through about to inventory including in of revolver heating run-up profits driven this continue increase which its fall a million commodity seasons, and during as announced year. this and notes, in in We going this cash and flow sale believe the segment of expectations with fund business gross blending our during the of propane, Capital

including Our prior the totaled the funded million quarter, accrued expenditures Capital Capital this expenditures quarter. XX from

million weighted for cash that excess year in expect excess quarter cash $XX in are generate approximately recognized will the in operating debt during flow with liquidate capital increase with prices, commodity flow an combined are a the last could our working majority and our Capital overall reduction our of capital we flow are to complete balance We the we requirements year improvement. leverage cause This as over this expenditures debt with capital as in monetize This most noted of increases of coming quarter. focus on Our significant the year. of The inventories, cash increase assumes front-half that guidance to and the half in well. we and our projects, line significant be months. second no there which working resulted

end to Fiscal the of first-quarter range XXXX that guidance are million million the to following the and of sale. range our lower We XXX XXX soft-tooth results EBITDA and reaffirming guiding

expenditures this our loss Our total a in are year. $XXX capital sale to the $XX range loss come includes for of the still operating net a middle for million reported which quarter million We [Indiscernible]. million Fiscal the of on expected million, of to XX $XXX

segment barrel quarter. per at the the Disposal Our was EBITDA have at EBITDA quarter quite Overall, at operating by came strong in totaled operating some million and water XX was this disposal came Crude barrel. for driven remain had we expense adjusted barrel adjusted per Logistics cost XX.X rates volume EBITDA per level the million reductions, XX.X reuse Delaware Water quarter. $X.XX and growth, million per this adjusted time. in Solutions Basin sales, for highest $X.XX Oil $X.XX per for per barrel, and EBITDA recycling. barrel, barrel in freshwater a record including

prices is we nice day, quarter period and last ultimately quarters of However, peak-demand from increasing in segment. as that came will escalate our and the traditionally million reported per are recovery into million is winter. storage completion significantly slowly this and realize the EBITDA hedge well-positioned a season the they of and X.X coming businesses Basin volumes businesses. Grand recognized and quarter, as DJ from we a not our adjusted earnings XX,XXX lower estimate summer inventory XX in propane periods Both about crude current positions. over believe fall and turn assumes of period do going time. be at deferred this profits book, last both for This in Liquids butane is Mesa barrels hedge Logistics inventory for activity which

refined volume our to We business. demand see continue lower products

an from the period. increase prices biofuel benefited we However, during in

were costs expectations in and prior corporate X million line with periods. about this Our with quarter,

to focus same. the following do the factors Basin for production to water Delaware fiscal continue should We investors for completion on continue believe activity, this key. services and year associated oil demand and remain the and

to significant noted, quarter we see growth in volumes As in as second continue and the well. into quarter a saw disposal increase the

where refined customers, year, increases well. ahead expect Basin. recovery area growth resale slightly initial DJ growth the in from this continued and throughout our a on throughout also We're producer year butane strong and recycle most Basin core pre-pandemic growth production levels. we also We in expecting volume the here the Pipeline, the year services our Mesa started we our ratable Grand driving feedstocks, demand growing expect blending and products fiscal and as expectations for to ratable of notably are in

return demand blending expect levels. to pre normalized to more We pre-pandemic --

is we continue accordingly. will and However, the something recent resurgence in monitor react COVID to

capital look at We our Crude certain losses, corporate and impacted reductions This prices, notably our our hedge quarter needs our operational segments in to sheet. level, commodity cost minimize in was expenditures will which by also Segment of and on run-up capital needs. working and the continue to meet the current to across Logistics on all focus drove balance most

our do and expectations. quarters Segment not the and in in recognize prices we inventory line from would Crude the levels, expect significantly with hedge to Assuming borrowings bring to gains offsetting increase back coming Logistics capital working these

me during position business environment. will concludes which adequate open liquidity believe to we the the remarks Mike quarter. for notes lineup your operate we questions. generate was purchased cash throughout small XXXX Our a We we the our That June year. flow on repurchase for is quarter, of prepared our our is this and and excess to with as portion more million about XXX the in bonds now expect XXth,

Mike Krimbill

for can questions? you open the Erika, please line

Operator

Instruction] just We'll the Q&A to Yes. roster. a for moment pause compile I'm sorry. [Operator

JPMorgan. comes question Tarek first Hamid line of Your from from the

ahead. Your line is open. Please go

Tarek Hamid

in just I loss to terms bit Good of looks a crude in just on guys. see million about quarter. the Can you expect derivatives unrealized, it talk how the what that of year? much the realized $XX little guess it's over remainder of again, about in the or derivative was oil and segment, like the afternoon, you'd first first

Mike Krimbill

Xst we're hedges happens had right? going Prices losses we a past down holding to in couple commodity current price that XXth, in period guess. significant -- Obviously, here But the over period. a bit this June what those rolling back little hedge I come in is from those we're and run-up inventory Sure. is April days, recognize have through of

As bring that you'll to back we roll start those to in. the future, profit

to the numbers flipping I'm So, -- the exact for during current quarter you.

the Logistics, come Crude $XX we we XX.X of back will included of would periods. realized in EBITDA So, as recognized be that to expect we realized that's yet in XX.X million. million in loss to future I have was unrealized gains the referring loss what and $XX.X that $XX.X the us The had is a And included in but to is not we've reported. The our of future. million

Tarek Hamid

in losses, terms million or gains would what can change on Obviously, basis? right then, of And you expect you'd where XX just it's now? in but realized a quickly, realized terms a expect of go-forward gain, the things at from

Mike Krimbill

there in depending go, delays, Again, make yet. see can in again we that expect But but that timing we physical at would on to of the the inventory any would change -- overall, on the made the $XX.X it we we offset a should but that physical. physical million commodity loss some be prices the quarter, any on that side. obviously. all difference Yeah, side, for portion turned significant up Which haven't on up where

Trey Karlovich

of quarter. And the terms Got EBITDA the mathematically, the in of XXX rest minus about X. million XXX XX just per divided just to to end reaffirmed guidance by That's for getting just it. be guidance, year the requires then of low the

how in growing position to that, to those just of sort in chunk think that oil. of you bridge But of obviously, numbers to normalization water is of guidance? that is earnings sorts much a getting of the about of crude the sort hedge hit you As to a

Trey Karlovich

in growth a ratable pretty quarter. strong expecting we're had very Water Water. So,

in it's take above our or expectations. quarters, profit just Liquids segment the generates of would performed most its our in the steady quarter business, would and that so fourth third if first not of some I that's second or trajectory. not quarter. can't -- a you the growth growth And not expect think ratable line throughout year. imagine pretty Water again -- street I We continued Remember, in most

You can't million. three just say quarters at XXX

And going first that than in the Liquids, do quarters, you and to with expectations. stronger run see have Crude more the quarters what prior get with we will third second be quarters. You're to business in the fourth back some again, particularly and expect, rate then line

Tarek Hamid

just me, and terms And it. of you Capex potentially throughout the working loaded. one the about capital the should talked year, else we Got Capex Anything back? front-end about some then course cash last in of uses getting for besides of being think

Trey Karlovich

the are to back Those Again, March No. keys. working capital getting levels. the

reduction. uses of Our Capex would XXX and million million. interest be be are about to to going interest expense debt The And XXX expected XXX Capex. the this then to expense to cash was Capex and year, again, go is remainder

Tarek Hamid

the jump Got in back it. queue. you. Thank I'll

Trey Karlovich

Thanks.

Operator

from Management. Aurelius next the Your comes question Duffner of Philip Capital from line

open. Your line ahead. Please is go

Philip Duffner

question. my for taking Trey. Hi, Thanks

through Crude adjusting but whatever were was would unrealized with and what at a hedging you EBITDA? looking would be QX first one on at is just When and losses number the the normalized you if be going what the The hedges, ran the adjustment Logistics. the gains, on for

Trey Karlovich

for XX.X. Yeah. about been for We would've instead crude, $XX of the million quarter at

Philip Duffner

it. what than weaker Liquid the be Got caused to of it in the has it terms And been business, in past?

Trey Karlovich

well pre-buys impact commodity Philip. One, things we of generally couple causes had price for waiting demand to quarter, year. as inventory not -- would things, the you're purchase prices A significantly and did be levels. are That at it that overall commodity don't we having product, I impacts too. as the as high so these those of People and there some noted, some significant But are the believe higher.

between normal-type $XX million look the million I did our think $XX generally, So pretty if quarter. at you a business, Liquids in quarter, and that it first if was

probably why it level. think this half that factors about And were put each. was behind driver those would biggest in on two I the quarter I

with expecting So, expecting the in over butane last we blending we pick demand business, are this fall to up for are up. pick saw we back Again, what to year.

going we're in think But the on economy -- We be the -- that like Delta going are in what's perspective cautious a we going to year. is COVID today. to with the still a -- back not that the shut being that we prior not and they're lockdown variant from down, saw

on Propane, there. recovery will again, highly heating demand. a expecting are be dependent we So,

this quarter to a But So again, think in not and in still that we'll determined. point we first that's significant be of as time, be is the period line.

Philip Duffner

statement, last And How settlement you've Got loss activities, the million a what's numbers income statement? the it. the just net derivatives. And to one that question to in the you in of related flow mentioned? relate under-investing cash XX have does

Trey Karlovich

laid combination that that's additional all you earnings lot most to the new XX-Q. one mentioned agreement. on that's the that's in But crude out in side, crude will see -- I $XX.X a Yeah, most Extraction related -- million. And the in the put add-back on release Extraction of related -- with positions some the the we

Philip Duffner

thank [Indiscernible] you.

Trey Karlovich

a million over related is segment. $XX million, crude to $XX little the that Of

Operator

Your question line Patrick the of Baird. from next from comes Fitzgerald

Your is open. go ahead. line Please

Patrick Fitzgerald

Hi, thanks the for questions. taking

was Sorry but said if I you this, Sawtooth EBITDA? missed if what

Trey Karlovich

So, separately. is we that $XX nice disclose say a about would never de-leveraging I sold pretty it What multiple. million we Sawtooth Sawtooth and EBITDA was for

from think can share this Patrick. I what point, that's So that transaction I at

Patrick Fitzgerald

Fair enough.

these Looks forward think go margin online. new processed. it barrel the coming your there And going like are know new up. projects you with Is to I have barrel Water the online? per will EBITDA reason coming margins that So, per continues change any to stuff

Trey Karlovich

per there. couple disposal A Sure. to note of our barrel. One, rate things

we our the per could services benefited we higher including dedications. we're oil freshwater, a additionally, perspective. have providing, saw little quarter that so What this some And recycle, to with we prices, margin come of oil volumes Basin bit, was barrel, larger that especially Delaware down reuse, saw these the skim hedged grow, from new we that extent not we're crude etc. a As then

barrel -- revenues from we've basis, per increase us on barrel disposal metric. that's so will Those disposal margin a historically reported our per those on benefit a per As barrel. not

Patrick Fitzgerald

there about thanks any organic this way Is Capex right, what any to There growth your -- versus front-end there for connections what that. And way about Is quarter? there water did was increasing, loaded? in was was All Capex new way to they think your volumes think organic Okay. is the any for think about some volumes? just there. to versus

Trey Karlovich

infrastructure majority is pipelines. the -- our and So, completing expenditures in our of completing our Capital our

that producer a Remember, all a of still it into lay our our supported organic. area system. call to lay connects in the of did so of was producer, from day existing we well we we so So, would the don't capacity the system, than Delaware new capacity, se. customers, I the existing I less million individual we're wells, in perspective disposal per have growth well everything utilizing but for interconnecting would a entire we've has all Basin. don't incremental may We Capex growing over so done half barrels a X We Remember of but Delaware, have that call most organic. -- and volume

Patrick Fitzgerald

Okay. Yeah.

that's was asking. kind what of Now I

just unwind then get was back-half of quite working on the you. happen the unwind So, for that -- end that commentary or to it to thank a year capital. the quarter. you by headwind Do of needs the And to expect Obviously, in I your this like price-wise year? is didn't what it

Trey Karlovich

rise, a see well. and up get barrel down, Crude are have working $XX similar our come our XXth, to that as get chance $XX If Capital our about Capital XX-Q as you prices to bit are per a to to April level at increase to working up comes in which June a into saw price, we Liquids prices that from it Sure. Xst a prices could that would you'll to If translated go and then rise volumes was When the well. up, continued little but down.

So, $XX through Liquids per Capital does that the as margin barrel we working the But expecting will have to to it Inventory, as increase manage $XX an back well. from not price. that working associated we're Capital come with continue a perspective. in then we fall liquidate and to winter commodity And incremental plus

Patrick Fitzgerald

Okay. Alright, thank you.

Operator

Your the Blum of line UBS. from Ward next question comes from

Your open. Please, line is ahead. go

Ward Blum

the not? debt for versus to quarter afternoon. Is your the year-end? there or project good Hi, prior number from changed any Is EBITDA that way

Trey Karlovich

in or first again, last EBITDA, -- changed of quarter-over-quarter has about to point the this to time It year quarter same. our year is not the the quarter this first

debt in Our point but from balance XXX increased to leverage slightly, time. would XXX our consistent this at be

We decrease EBITDA pay over the this as leverage are last. generate incremental well as we debt through as expecting to down year, year

Ward Blum

you. Thank Okay.

Operator

Your from RBC line from next TJ of question Schultz Capital comes Markets. the

Your line is go open. ahead. Please,

TJ Schultz

our just Great. the that's be year quarter this volumes water model last maybe by And you just The maybe on Good define quarters. plan maybe there? guidance? from good envision in afternoon. step your can you definitely jump ramp, Hey, how were what Fiscal just this kind you can ahead your several mean you of ratable volumes, and exiting a of the growth pretty get a to

Trey Karlovich

TJ. Yeah. Thanks,

barrels between X pretty a So, about growth expect of to X.X year. next to we point and volumes March day by million trajectory that ratable a to would get be and

day those towards looking a was we're this speaking, barrels XXX,XXX targets. think step increase, quarter a to So, achieving at quarter-over-quarter. per positive I definitely Generally XXX

TJ Schultz

reduction? pace I one for about table, other on the helpful. other asset debt think just only guess question. there as the you Are That's Okay. want just you sales any

Trey Karlovich

looking T.J. We're anything not currently at significant,

happy from think operate call, we have working sale. quarter, here on the so asset that the anything smaller of we I on. saw were Sawtooth, Sawtooth be we expect a referring a earnings was may one terminals. to of three been what We we kind last non-core don't that one one-offs that's last coming the generally in. As I or There size there, that mentioned we're segments some with

be this at there could things in So, small some significance, point there. or of nothing but here time,

TJ Schultz

Okay. thanks. Great,

Trey Karlovich

Yeah.

Operator

America. of question next The Herman line Bank of Lauren the from comes from

open. Your ahead. go line is Please

Lauren Herman

have, I for guess kind philosophical more Hi, guys. Crude my conceptual of guys I Derivatives -- taking for I the one Thanks I much I appreciated on is a question. exposure. Can bit that question about guess, you, you or guess that just during there was what little -- price commodity there? more I that encompassed think exposure Logistics time. just hadn't talk

helpful. -- or going what And you're so, you guess should exposure think be the it to what and pertains anything about I you how derivative hedging we forward would

Trey Karlovich

Sure, so Crude. X.X We Inventory. million carry to million we're hedging X.X of barrels our about primarily

During after when is Crude you've a month quarterly one selling. are have you'll sales the made you you'll that have period, your that settlement. Obviously, purchase

you're You're that a your In having backward dating as rolling impact your margin market, to by well. Inventory hedge role.

market's be per So, your impacting $X.XX by $X.XX same by sales if to physical you're the amount. that backward or barrel, going

monthly when see are You a significant in margin current timing you price in because those hedge basis decrease commodity that monthly price. periods your and can, significant mismatch hedges some position a price, increase in in physical at have settled or on commodity your a between

Our goods weighted out cost inventory on is of average costed sold. a

sense? current making to If that inventory prices your that the your were able could back a you you're to up is disconnect come don't that margin get of to physical a commodity capitalize types of physic we position commodity that the time, timing would you profit that there of that position. atypical have I fell, with the a Again, over this Does So, stayed that two. inventory. would hedge through if is accelerate for midstream same, other catch back -- your If think period back similar rise, expecting our continued because businesses. we prices continue sales. in until the of our make to all for on going hedge prices to are make have between companies to mismatch bit

Operator

further hand Trey call There to Mr. would queue. over sir. now in questions to I like are no the Karlovich. Please, the ahead, go

Trey Karlovich

reach And hesitate got please the Appreciate if any everybody follow-ups, line it. for Again, appreciate your you you we Thank sticking out. you connected. to Thank don't Great. as on time. you. have I

Operator

joining. This you for concludes all Thank call. today's conference

now may You disconnect.

NGL Energy Partners (NGL) 10 Aug 212022 Q1 Earnings call transcript