NGL - Earnings call transcript Q2 2022

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Operator

Good afternoon, ladies and gentlemen, and welcome to the NGL Energy Partners Second Quarter 2022 Earnings Call. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Linda Bridges, CFO at NGL Energy Partners. Ma'am, the floor is yours.

Linda Bridges

Thank you. welcome second again, earnings fiscal and call. afternoon, to quarter NGL's XXXX Good like attention end call harbor start, filed to To I'd this close your earnings which can afternoon. found after market Partnership's language, be to towards our the of release, was which safe our the may contain of within Reform Litigation the statements remarks Securities Act Today's meaning forward-looking private of XXXX. website. management's in the act, I on for direct SEC Partnership's to and Partnership, website the available the to risk report would your and which in by section discussed like the on our Disclosure also with on Form Analysis accordance and the SEC's the March In annual year other factors and XX, are made attention XX-K filings ending XXXX, the safe in those from statements. set with could statement that factors together forward-looking earnings important in actual the results differ These, cause any such forth the to release, contained materially harbor a quarter. the I'm on the for with going the start results few to brief financial comments call Partnership's turn And business. additional and the then of I'm going the future the it over focused on remarks Mike operations for Krimbill to to very another had EBITDA Water in $XX.X quarter it reported NGL Overall, adjusted Solutions segment of million. our as strong per per quarter. totaled million barrels X.X XX,XXX the and over barrels approximately approximately grew barrels Processed day preceding day majority in demand was the The of the services growth continued for Delaware our this result of Basin.

that higher operating brackish, demand in However, for in encouraged we've from activity also and recycled commodity water we in prices areas, operate produced. which of basins drilling well. fresh, whether seen resulting continued in as oil our additional or other volumes completion prices growth benefited water, commodity -- in those the and be Skim sales core for each have higher

and to volumes volumes. day fiscal million exiting processed XXX,XXX of anticipate barrels X year, ratably quarter per the barrels per we the by remainder day year the approximately fiscal see per water with expect to XXX,XXX of increase For water

reported $XX $XX.X an day hedge at came by million X,XXX day segment with prices associated DJ's barrels book our approximately basin EBITDA crude embedded as margins certain oil than day which our And deferred increase. rates from operating in Logistics as results June increase XX,XXX of XXXX. Crude prices crude fiscal per for the first oil producer higher were Mesa million, per were barrels as the the quarter. profits core drive and adjusted estimated well as gains remainder Grand higher in Oil segment contracted inventory customers reported barrels that or volumes with includes producers XX,XXX helped NYMEX XX. of production will Our realized our prices of per at in in

markets of butane our adjusted primarily Our benefited supply Liquids for business driven $XX.X exports reported have demand and segment by which tighter as margins. EBITDA product was results in increases million, in

slower had the market business the to decreased demand. as and of start propane a propane Our year result a backwardation in

business $XXX.X is EBITDA expectations that adjusted normal degree million However, increase. coming $XXX.X in this of beginning is to during the a and all days, capital for business segment product flow the butane year-to-date. generates be It's EBITDA assuming we're fiscal is Funded heating cash fall-through line the in year. quarter as million. the XX most for winter hedged, quarter adjusted important total $XX remember this run the expenditures third and seasonal together, year-to-date for see should which to and from and and should it million propane business see the gains quarter with totaled heating back Putting liftings well this seasons, the blending its financial the totaled

to by approximately through the partially our commodity the was approximately consistent cash not who improve generate $XXX CapEx of increasing by leverage. liquidate $XX working prices. for to continued year expect going first debt The expect begin be has we flow second I'm product as capital will and With cash flow increase were significant as cash free year the quarter during the absolute perform generated fiscal to share. over the top half our capital message to like to flow fiscal and year, expenditures turn we've he'd weighted excess remarks be capital capital to decrease that -- in has that Mike majority and some changed mentioned, increased of projects, been our full we continue to And As increase period. the towards completed due million the and operationally. to excess remains of This to used half and million. fiscal that, We've working in to offset previously builds inventory generated our seasonal the debt Total plan during priority. it the inventories

Michael Krimbill

we Thank story. for you, NGL and tell as Linda. you us afternoon, Good the and back today. relax joining Sit thanks

And all the business to our we leaders going each XXXX projections and debt XXXX information energy segment comment fiscal As today and XXXX new environment. with And as questions expectations, you X go fiscal and have strategy. my provide we our segments, know, along. we're are answer our comments to us of distribution of current assume and and course, then covering

per day, volumes, are The segment. increasing a Volumes let's Water per XXX,XXX big barrels previously begin X.XX as fiscal QX, obviously, story day X.XX million. XXXX. barrels is million projected. Solutions quarter So with about our QX

million is should remain simply million volumes. to EBITDA. to approximate day. for Thus, are X each. makes QX barrel The to $XX flat, and QX QX a average day barrels million year X.X a million $XX.X about million We per Margins expect in EBITDA QX which was this and expected expected per for entire QX and X and segment was expenses positive $XX.X the fiscal of approach barrels at function modeling $XXX million. are to come

will current volume fiscal importantly, increases so be be profitable should We have positions, million. And incrementally. water forward in the significant $XXX expenditures our excess play largest below going year, injection capacity more shale capital

have and you dedications We recycle and recent I'd in like leads Doug water our developments discuss solutions White, Culbertson him reuse. Doug counties, who team. Reeves to there?

Douglas White

Thank you, Mike. Yes.

Let's on update seismicity. start with the

seismicity the the West NGL many As of of by Texas, Texas, assets you Railroad Commission been the may impacted area. recent In Texas the million injection Southern have in NGL our in in barrels a footprint know, the permitted Delaware, operation Permian no has about area injection induced by lately. wells and of negatively X this. news in proposed capacity There are reduction

resulted just available NGL's interest increased of Our the area. in outside capacity. sit But is this in has what assets risk

organization. X left mentioned Delaware basis. the So that dedications large it's previously a are Dedications, very really good positive in a the large-scale on we for

One recycle year. produced of closed to by those and been calendar of We've off simply focused A dedications, business on our year-end we business. that is this large volumes. approach that of reselling NGL's pipeline really volumes system. portion our water expect to to be approach Recycle

of different have the done. with what It scale We from which has multiple complete crews, taken been has for magnitude previously water. is the frac to producers at

QX. had those So we just recycle barrels reuse XXX,XXX our Those slipped this take quarter, QX, QX, put our into day. on. resale, per over volumes projects together. going other we with volumes did we along to

dedicated One that continuing on it, XX the move increase to those drilled DUCs XX more thing contracted expect demands continue our to acreage to have producers Delaware, across as to other uncompleted QX, are a to be XXX wells crews. sustainable We we QX, note, running rigs evenly in completions. toward but spread approach and on frac

increased to That's there's the continued contracted our bit XXX,XXX barrel of quarter-over-quarter. volume acreage. operation quite to what's So a lead going per day on

Michael Krimbill

On Thanks, Right. to Doug. Crude Logistics. Oil

remain oil for to XX,XXX is XX,XXX the expecting which positive acquisitions Our higher their to only note, is capacity to and have its synergies. margin first the through barrels consolidates due of volumes year the Grand the months. Mesa a We're Civitas the per XX% Grand averaged prices. achieves increasing the of about volumes day, Mesa as X remainder these on flat crude barrels On

Our X-month is EBITDA million. $XX about

leads you're believe, So it $XXX of margins, like of you a impact this Grand that these on And to -- the about the open as you're sure in discussion. full result everyone him for ahead, season year could Don. an is Don make million. area to Robinson full happened. increase, add million, if clear you year, then on I'd Don, $XXX want we is on segment. EBITDA, that some We have on recent like the Mesa increased this been double and Go will there's comment volumes upside. mute? some the what

Don Robinson

Grand to extraction No, volumes of Logistics Basin. bankruptcy and they're NGL logistics, the needed contract longer in a they with -- our to rightsize and them We NGL provide DJ with Grand service basically have Thanks. to Extraction contract with for Mesa entered a no sorry, commitment into Mike. for the Yes, because Mesa.

you for any offer and we same Mesa Grand approach is them to service the for the the -- the the primary parties NGL part Grand commitments open sure the we FERC could DJ. to out of producers season, up from or to of all have us you party. we go care commit volume basically make that in the Logistics offer would So to sign that to reason have rules This type other reason Mesa that third take that

open reason So successful basically it that behind and the a was have season.

Michael Krimbill

Great. Don. Thanks,

Liquids So Logistics.

butane the X was EBITDA seasonality total are due propane of quarters $XX.X million and for lowest the million. QX a gasoline blending. QX our $XX.X $X.X Our to These use of million, EBITDA

Our weather. a start is and prices due warm to improved to ahead butane due margins, since price slow the segment curve of wholesale backwardated to off while spring, plan higher a then is in

great pipeline of the anything and We EBITDA It's $XXX in ambassador into of exciting year expect source in X-inch to servicing is it ensure December. X. know move have the propane a his the accretive supply an second group. completion become with it for in more fiscal half to of midpoint is energy is operational security The this pipeline And runs is move south do of the to kind projected north the example pipeline wheeler line Jeff in could to shut a liquids the business. you terminal The summer for purchase highly if state add. of bidirectional, but if of Michigan. I Federal business This asset around Full so in come Pinter mile citizens Northern so, ambassador by there, because XXX northern winter. Michigan early The can critical make scheduled down a the only governments that and shortfall half propane asset-based million. new the up if to the year. XXXX you're Jeff, Michigan don't smaller, is continues

Jeff Pinter

Good for not it's And on the asset then state do We but connected comments pipeline of country. does the in of of state. and Mike. A part northwestern throughout states it you, demand more strategically as see to strategic just afternoon. all propane of the the to a highest the the the pipeline add. is traverse Thank NGL, couple Michigan, of southeastern the one part storage to way the customers

So having and this we're hearing from we our of customers, lot a winter. in look service forward to excitement

Michael Krimbill

Great. Thank you.

we're range numbers $XXX end fiscal our the be So $XX corporate conservative XXXX less $XX focus range. up segment low trying for of We're total, about expenses million, of to add range. confirming in that the EBITDA talked million, to end million about of million. low $XXX individual to that on we've here, NGL, of that The and

to flow use to that's focus what we want our debt. next, going we to free cash reduce are because So on

million $XXX numbers using cash some of we $XX starting margin flow million, sales, maintenance net $XXX of minus So and of XXXX. asset talked some interest million, CapEx requirements, about, $XXX expense combined XXXX, of fiscal the provides growth million EBITDA with $XXX back adding less for of free calculation about fiscal for million, the

the let's years. next jump So to couple of

picture you of get this the sheet quickly balance So full delevers. how

can if 'XX, start things, with EBITDA like. you'd you some here, fiscal For so we'll relationships well, these model

So XXXX, be EBITDA water expect we XX%. fiscal for up to

flat up DJ on X% the of liquids we're about the So Crude until and the and million, pipeline. result more see million. in $XX a ambassador as $XXX we drilling that's oil, obviously, then production assuming more

conservative. we've there we'll liquids water grow expect and another Again, we to EBITDA 'XX, flat fiscal try -- then just XX%, be just been For flat as assuming crude be a to to well. is assume

these growth about as drops said, $XXX EBITDA decreasing both have 'XX. will and $XXX it million. between and our million, to in prior from are 'XX, Interest EBITDA segments. obviously, a year which year excess significantly 'XX million deduct So and spend capacity XXX and we we Maintenance and in $XX is the years in due expense, CapEx

XXXX, in million $XXX XXXX year the drop So this and million in $XX to would million. $XX

of summarize 'XX free in this XXXX. $XXX million in $XXX cash almost to So over in results $XXX million in flow million fiscal XXXX, and

year's about the this the reinstatement annually. is pace to at preferred prior cash When that are which dividends flow million accruing of of the of accordingly. all reduced be are free preferred dividends, Now $XXX reinstated, will

you're leverage in sometime the if figure could preferred to there, be So dividends. reinstatement of a figure trying there the

be business should and liquids fairly margins per modeling our barrel simple fairly and with So now flat, expenses constant. water crude

a really and CapEx. interest expense increase with it's declining So volume story

So debt and together articulate to our distribution now let's pull all this strategy.

an So happens it you. Apple you if someone have watch, calls

Okay.

we're So this together. pull going all to

a X our covenant. points or important One, interest new secured not First, notes coverage leverage to have mention. and ABL do

So debt X-year has market due secured XXXX current provision. X, about any our speculation conditions under bankruptcy rubbish. is a non-call

order and to our reduce until dividends reinstate goal. it in unit than after of So under begin EBITDA the XXXX. February leverage debt must we declare subsequently This thirdly, cannot financial common #X to X.XXx distribution. And is a these preferred we documents, less repaying

markets forward believe will arrearages, XXXX XXXX into solely business our reinstate and balance their We we leverage we activity, are to sheet. begin improving we flow repay public the notes M&A Class additional no assets, below B, a flow. the C&D to strong will significantly preferred free reducing with the cash but notes prior dividend sufficient anticipate going unsecured nor do any common the EBITDA, will focused address good dividend preferred Once the is free equity model, secured maturity. So cash do We not repaid, on shares generate units. due accessing preferred we have X.XXx the in we Once the senior converting delever. continue to

that, with the and you, line thank So open let's for questions.

Operator

Instructions]. [Operator

from Your first question is Hamid Tarek coming JPMorgan. from

Tarek Hamid

water question business. one the just So on

potentially about the baked of changes of in beyond? much you ongoing potential in both to issues well beneficiary. How talked the of being half that last have with You dedications into seismology and rules in 'XX a the as as talked of the potential numbers that some hour, you've some some

Michael Krimbill

Doug?

Douglas White

Terek, none regarding seismicity. benefit include recent the of presented developments the forecasts Mike that these of

Tarek Hamid

So upside, that obviously, would all here? be from

Douglas White

Yes, incremental. give color it's It's a to all little correct. it. And more

the incremental, are the are like our to related Mike some events, certainly provided.. said, moving beneficial, which dedications We towards forecast actually recent I but to incremental

Tarek Hamid

And a then for follow-up me.

bit the free on been working you a hit cash capital, guidance. Just flow has of Obviously, a as talked here. about,

and just just of what's But about seasonal. obviously, do happened think sense, the of year? you versus sort use to permanent working and to that of just view talk the back of as commodity year, that's sort of far and about makes prices in what's capital half a function that of that the you of as Some seasonal, just is given second commodity you so this sort can of to of that you expect so much happened come much more how how

Linda Bridges

Yes. I'll take question. that

going look capital be you So is our to when most at working working seasonal. capital, of

had remaining on I a ABL that at million we think time. facility If take our million look XXXX, the $X balance you $X.XX at a at of balance

the liquids we'll March we down inventory, decrease would level crude we build through at that some inventory, to will move expect year, have XX. but that the to we As same

it need truly is on a you'll capital working So the that facility. of seasonal kind ABL see

Tarek Hamid

Got it. one me, million adjustment And CMA that's but EBITDA, and role on a differentials. last for -- the for then nit apologize I adjusted $XX question, just for

what a it's that on color just any of kind confusing. little Just actually is,

Linda Bridges

Yes.

in we the around detail. hedged. disclosures you can So more there is disclosure more That But EBITDA. have adjusted give essentially,

locked CMA We differential. in a roll $X.XX have

that backwardated or the is not because runs, we just first at Logistics we historically, we So call time. that speaking, which this NYMEX the in contract to probably that positive time, basin, the $X.XX out NYMEX blow it last saw role sell business, difference CMA market Last the we in sorry, that quarter, generally needed -- at minus the at role We've a given in CMA year CMA, year, our we that. it, differential within plus and generally Crude $X.XX normally role hedge to saw we when hedged saw at you CMA differential, risk any negative -- contract. Argus have look the buy taken and at the

position So we what of end EBITDA front EBITDA the -- the that adjusted on that so hedge. did entry is

So of December day barrels we've XX,XXX hedged what role we've XXXX, a about about per $X.XX locked through is will XXXX. or $X.X and barrel, million done to we've hedge that past year CMA which of sorry, in per between result $X.X -- of of May and this million a December we CMA hedge. role long-dated this will of is generate That year, in

views short in the of part hedge in positions and a Management strategy. that lung of out a December long the as the near-term same entire, short have XXXX. We both the and position

And gain December between the on have market out unrealized so the on of while what now you'll XXXX, have positions losses in realized short then and depending an you'll does.

done EBITDA. we've noise, we've in out what is So eliminate around that that And disclosure. EBITDA there's more in order disclosure again, adjusted to that of

Tarek Hamid

assume you'd have the as to in So of to That sort X net next of an time? period quarters. will into for that sort 'XX, everything loss you roughly of -- a couple And get add-back then that the with associated out you'll over get that.

Linda Bridges

CMA -- will through you role and will should $X.X to time. statement million those over that net see about the hedge flow X, associated Correct. Everything and income gains with losses the

Operator

with Our next from question Baird. coming is Patrick Fitzgerald

Patrick Fitzgerald

all this So right, in roll that's that Logistics quarter? add CMA Essentially, is Crude back right?

Linda Bridges

Crude Logistics. all it's in Yes,

Patrick Fitzgerald

Okay.

how we first the terms quarter? the a of about should and think that, normalized in second per the like margin quarter barrel, So between difference

Michael Krimbill

thought on that a Don, mute. have you're you do one. Don, on

Don Robinson

Mike. Yes,

-- in that each basically earnings month the X -- as to collecting. Sorry, Linda that quarter as we'll be per basically as would that We've next loss, again. the $XXX,XXX be taken spoke years yes, -- million, the to over about taking as was Linda as and duration, far spoke that's put the the as far contract. not That $X.X is and a just Logistics, did the It hedge reason of CMA. about feel bankruptcy And I'll we that being we we for because just reason that there Extraction add, that did on. the the NGL real the comfortable risk CMA additional

Linda Bridges

the derivatives. barrel you quote the margin the so that of that's excluding the all if impacts we Patrick, XX-Q, per look But at in XX-Q,

XX-Q. So in the role the CMA margin effect analysis, be whether hedging inventory excluded the from or of the it's should that's

Patrick Fitzgerald

XX was $X.XX then you Could like like kind barrel, Because I $X.X barrel, this understand like those you going per that forward? just of what going per $X.XX $X.XX it -- about out -- numbers? put the are call, before quarter. minutes this at the and how should think we mean,

Linda Bridges

Yes.

at a look going Patrick, it. have you additional look questions, you the then take to us Go contact the And you just -- us. just let ahead if So I'm if and you to actually, direct XX-Q. can at know

Patrick Fitzgerald

your What water year XX% going price just Or Okay. after, assumptions prices up of regardless assumption the growth is keep any there happen to are production. volume of what year are terms to are your price increasing next in that? just and going within

Linda Bridges

Yes.

what consistent assuming Mike market is price commodity and assuming that he's mentioned per think barrel. I he's environment, environment, consistent margin flat commodity

Michael Krimbill

Yes.

right -- producers don't So are going their budgeting cycle thinking. we They're the now. we're Patrick, through what know

at are amount you $XX. add? $XX the prices $XX, So the don't $XX would they price, But have same as Doug, doesn't anything to do as volumes assume no, if same it the know. drill a

Douglas White

Patrick. Yes,

to Keep So that we Hillstone mind, forecast. consider that in numbers we've in increases one thing large to have from that the used dedication acquisition volumetric annually. these

the the And it's that in based And or oil to stays the dedication know $XX Basin. We Basin. everyone large think where will mentioned, price $XX think a of certainly have on to oil dedication have volume volumes centric it to it this our good the $XX existing busy don't then constant. to I going in idea great adds today. is or acreage that as keep other dedications Delaware. Delaware fairly is this I range range take have for we And Delaware isn't crude forecast second has which a mind our achieve we what -- what I to well. Delaware That is largest also in activity

Operator

Duffner Your next question is with coming Philipp from Aurelius.

Philipp Duffner

For significant EBITDA what Logistics you Crude side, the quarter, you just obviously gain last -- call, I was Oil on loss mind a quarter? this the would unwound And and much what in normalized hedge business repeating quarter. the how have think this of would mentioned Logistics been had but the you the that Crude

Linda Bridges

Sure.

that got X/XX. embedded So back at hedge we about $XX related to gain million

this $XX.X normalized, quarter. So they did million

million quarter You $XX take quarter million off about been $XX $XX that, million. $XX around would million, at you're have the and this $XX for first million, of

Philipp Duffner

this Got be that the it. And there gained the Or is $XX to next quarter million, or more amount? is back full quarter?

Linda Bridges

I back expected. think we we everything received had

Operator

I this now further the the to no Bridges closing floor remarks. for have Linda to We at questions time. from turn lines back would like

Linda Bridges

Yes.

interest you, thank NGL. So conference and in call the joining the for guys, for

you we can coming hopefully, of on and you. tell Thank fiscal XXXX, think I and we're our to the excited the everybody quarter. remainder next about talking will into year plan

Michael Krimbill

you. Thank

Operator

and ladies this you, event. Thank concludes today's gentlemen,

disconnect may and Thank your this wonderful have a at for you day. time, participation. You

NGL Energy Partners (NGL) 10 Nov 212022 Q2 Earnings call transcript