Earnings call transcript Q4 2023

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Operator

Greetings. Welcome to the NGL Energy Partners 4Q '23 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to your host, Brad Cooper, CFO.

begin. may You

Brad Cooper

for afternoon, presentation on Good our you, for an our everyone, 'XX closed the Thank we filed today, call and our today, us issued outlook and update the our release, discuss 'XX. where joining After results, market investor you. earnings deleveraging thank fiscal and we fiscal will XX-K.

uncertainties forecasts law. that in earnings materials. forward-looking and statements assumptions, U.S. securities These Comments to are the are risks cause differ today the factors filings under forward-looking take could that language and will actual results statements. provided and estimates and risk SEC include note to comments plans, cautionary subject from our the of Please

of and quarter. absolute with driven record in the We I for adjusted the for year business, Water significant reductions was shortly. of and strong initial debt EBITDA, partnership, EBITDA will for was XXXX million Fiscal a aspects of adjusted transformational record which our discuss truly well fourth X.XXx. year goal below $XXX.X leverage EBITDA by in achieved our our all record $XXX.X the NGL growth the million across This

these sales. other the absolute these these $XX.X The our our strategy of completed assets assets multiples Selling underutilized implies reduce over associated allowed attractive marine which at million. to has on debt million, and We approximately asset totaling noncore assets multiple $XXX trailing and these EBITDA sale adjusted leverage. us approximately XX-month to miscellaneous with was XXx assets accelerate a and

we occur notes offices redemption million walls to later folks 'XX this operational year. with remaining prices capital year-end. the were due all of of of million of marine note, totaling our assets. the and million noncore the at to wouldn't was strong the both X.XXx. unsecured $XX able Most release notes until calendar the year commodity equipment XXXX and unsecured With of retired, asset on supported project the redeem ability as 'XX remaining the approximately $XXX the fiscal our $XXX the performance, unsecured the a the fiscal NGL moderated, about working notes sales 'XX the started and by We debt leverage on But off end the to this thought the equipment outside pay notes, by balance

the fiscal Our roughly $XXX the the at was end level it of year that of ABL million, balance fiscal the same at the was year. beginning

B our the acknowledged leverage stable. recently progress the minus on and debt front S&P from with You to saw upgrade

in final it is overall this a not rating, move our is credit the nice While stop.

As we along to continue way. additional overall to upgrades expect and the lower, debt leverage see would reduce drive we

jump We the strong X out. retirement start first have approximately are debt playing $XXX purchased into million off of and months how a get year the fiscal will the 'XX our retired basis. our on significantly start March reduction 'XX the fiscal thus later The debt and in fiscal XX, bolstering cash a have free we interest go-forward on reduction XXXX. which on no Mike notes. we current front, The for fully 'XX to notes, see XXXX fiscal balance million, unsecured through flow expense, But than this to on our reduces 'XX expect we of year, $XXX debt on

new Water Our in XXXX. achieved Solutions several business fiscal records

of disposal EBITDA $XXX.X record achieved driven Also, Water EBITDA quarter EBITDA adjusted was million. record by in Solutions the adjusted $XXX.X fourth million consolidated of and Water fourth Our record adjusted volumes quarter. Solutions

large record integrated the reliability pipeline completion our system our and value last activity in Basin and pipe saw year, of approximately producers demonstrates Solutions and how grew significant drilling business diameter Water year-over-year. track This Delaware volumes Delaware. with XX% the As growth service our

XX% barrels prior increase of fourth processed the year's Water quarter. is fourth X.XX million a over quarter, per the This approximately In water day.

During find quarter's hit to the the that a barrel team the to our the also per This than barrel The cost continues optimize system. fourth $X.XX operating higher the we per third expense $X.XX. Water volumes lower reduce house from quarter ways fourth and spot is to prior benefited on improvement side $X.XX fees of and quarter, in fiscal We versus locking costs, due of quarter variable the chemical fiscal This was X with our negotiated won't long-term utility to decrease with by this no higher barrel contracts the per be clauses and expense fixed fixed at our rates, and provider. a chemical disposal and materially year. royalty escalation contracts expense. largest driven volumes by utilities, impacted in of inflation royalty with XXXX fourth

crude Logistics prior prior price fourth environment. million rising during inventory the into higher-priced $XX.X the primarily versus was EBITDA in declining $XX.X sale the was in quarter. crude the fourth quarter of crude million inventory market a lower by adjusted In selling Crude price the variance a benefited Crude into driven by price quarter. Logistics This fourth quarter,

Since few could last our noteworthy that Grand in near and in impact basin the future Basin have DJ Mesa there a items the our volumes. call, the been positively

First, year. basin the in announced XXXX back this of completion the one of and of half additional and largest results the at end activity calendar strong operators well drilling the in

as Basin view the these Second, and We acquisition of potentially Chevron announced Grand for Mesa. both of positives DJ PDC the Energy.

optimistic last and the be said production we volumes on Grand I the additional on ideally, earnings cautiously Mesa. to in call, increasing hitting continue DJ As

not how 'XX did potential activity see this want 'XX in we playing to out, our details do additional I and Mike positive developments mention we fiscal currently budget. have As fiscal

year $XX.X quarter. the increase higher propane due fourth as primarily to $XX.X was EBITDA was demand This we margins than on quarter their for reducing results The the million the normal customers in pulled during in weaker warmer contracts. full propane adjusted due fourth segment price spot prior Logistics fixed in versus than quarter Liquids million winter, hoped volumes. the the for to a were had

fourth partially our the XXXX. level to to refinery quarter and full on to markets, team U.S. in continue infrastructure disruptions and its the the while due each fell margins year as for since product This market, increased the program offset purchased supply increase in reported a that lowest butane Margins was recently in successful a gallon was earlier the certain EIA for reducing purchased customers. products with margin propane our compete sold. lower on on demand in able execute to our product discounted by continued season refined to

fiscal the performance the our be of are the majority not our segment Fiscal quarters segment, our and Liquid XXXX in of is year. third this rebound as from expectations guidance year, the EBITDA for start fiscal Recall from to Liquids that off to should XXXX, ratable consolidated amount fourth for the see EBITDA the every occurs a so a assume in good we Mike in a and segment outlined quarter. a

will over that, Mike. I turn With to it

Michael Krimbill

Brad. Thanks,

So let's expect 'XX we discuss to how out. fiscal play

guiding Solutions So with Reconciling we $XXX for end of an barrels. to a $XXX growth to of our the the per put price a and XXXX we million end for fiscal with $XX a less respect crude million. to At million. Water XX% $XX realized $XXX skim barrel guidance, instead that extra to million range low million 'XX our of are $XX fiscal first, begin at million approximately adjusted EBITDA to results, range, actual on lower skim plus oil growth of high in range. the million This million reconciles $XX volumes $XX disposal would $XX

EBITDA net all deduct 'XX adjusted and in then crude million full $XX the so million add fiscal trailing the Water million, $XXX is for Second, add months of change the $XX we the XX million $XX which logistics that's $XXX sales approximately year million, the $XX we're skim Reconciling of recovery fiscal just minus 'XX then and million discussed, guiding in NGL, onetime gain to the of for Solutions $XX then liquids that deduct on $XX corporate and of overhead. of we back results plus. million, the reduced million, million oil asset $XX which is

being we guidance raise an are to conservative the We year. so have fiscal during opportunity

fiscal Significant included following in performance only for not that from growth, adjusted positive one is value raised the 'XX is it includes in guidance equation. are cash but factor EBITDA. the and Our

fiscal assets, have million We fiscal least with the interest in continue monetize our $XXX and assets this identify in million should double-digit we cash by 'XX, flow expense no reduction in them more of and million of X at $XX underutilized months already year we 'XX harvested million, debt us that those approximately $XX such capital. identified $XX first multiples. in this of year, decrease Again, of free to in fiscal cost and and at have source another

to flow. free We additional focused provide reducing on working are capital cash

on For longer or certain certain example, selling are we fill. pipelines no terminals, shipping and eliminating line idling

possible. reducing Finally, we wherever are capital expenditures

arrearage value add the sheet to equity. address cash NGL sooner. of sources of these balance preferred the of will accelerate also It to and the dividend deleveraging help our All allows

be So redeem to means XXXX XX, possibly this very we able all It year, December will are this the XXXX. what by unsecured fiscal does mean? notes that comfortable we

Our leverage. reducing debt priority and remains absolute lowering

to us calendar We and XXXX. position XXXX. expect dividend and any to We bonds, expect XXXX again, by a on preferred the pay X.Xx unsecured put of arrearage be to in balance leverage maturities. should the under extending in March This strong not total refinance XX, do equity outstanding calendar the those secured

I'd address water how other structurally disposal from companies. Solutions is different Now Water like to

our spend of spanning We we system, pipeline large are Producers do connect diameter the a into pipes long-haul pipeline their to capital hundreds business wellhead. own tie with hundreds to and not miles.

company We barrel our MVCs. water We're average disposal the than dedications is contract XX operating expense in the to weighted face either per life have And with of long-term reduce years. inflation. contracts more or acreage only currently

at by is a or focused not an pipeline, trades do for NGL typically comparable provide are volumes which We X multiple. transportation oil reuse sales, to crude to freshwater on recycling EBITDA but XXx producers.

comments second addressed the valuation. miss equity focus have quarterly first beat quarters. sales, as guidance what a X, be. annual of improving into a or considered divided approach asset our to listening simply There is that Finally, a call. and debt occasion, label. working miss leverage, capital these changes to so business, provide The performance the EBITDA quarterly the reduction, name beat more adjusted about miss often annual has even to consensus seasonal by analysts some should earnings outlined, we with EBITDA have a a ignoring simplified or the few. prior decide On endless guidance analyst our much to a guaranteeing We be to will None in company while are evolved few estimates story,

NGL's business EBITDA We and believe have at Water while there with higher few a a assets, equity take hard to is requirements to near-term dive NGL, NGL. marketing so X.Xx. value need capital competitors no our valuing with at were understand few and our at lower-growth believe a a is trades true analysts for and created X.Xx other A peer structure. current deeper smaller, valued the capital taken -- We being it to similar due business comp multiple,

leverage dividends levels, preferred headwind. of created Our maturities significant previous near-term and a suspension elevated equity,

news can level where 'XX year, and is accelerating and out our we balance good will our attacking growing enough The never I calendar in our financial fast to provide dividend structure, reduction for a improvement that but our fiscal arrearages maturities and debt flow free for sheet 'XX. cash this the are recovery capital regaining can are happen the into investors, ultimately the flexibility. we begin understand push we

NGL. Director, On of his a many for his experience thank our to like years would I knowledge, over Cropper, Steve advice as closing Board a and note, member Mr.

guidance miss him, will the years. but last for his We thankful few are over difficult

With you. let's thank Q&A. it open And up for that,

Operator

Instructions]. [Operator

comes Fitzgerald Patrick with The Baird. from first question

Patrick Fitzgerald

the terms value everything. about company you're the appreciate of how and in guidance on thinking to I how comments the

would Is on the way you wait until wait it that, of you about maturities just it? that on 'XX that to is before correct refi to distributions you again? turn safe So say thinking the the --

Brad Cooper

about that's months. the I thinking Yes, think we're how XX next

Michael Krimbill

want we possible. as leverage as low because be sense to makes It

Patrick Fitzgerald

Right. But just it, would your to covenants allow clarify?

Brad Cooper

correct. That's

Michael Krimbill

is under That's yes, X.XX we correct. where Once we get are. leverage, the which

Patrick Fitzgerald

of this of that been Okay. certainly like it Could headwind for you see provide kind back seemed the while. huge going -- XXXX? year, And you forward had do a it in -- quite was fiscal was a positive. How half a -- a in working capital

Brad Cooper

won't think Yes, the propane in mean, we prior like fiscal 'XX, our on years. oil for I we and I where near today, did ABL are crude constraints have prices capacity

respect historically hedge, our Crude nonevent the to CMA the other fiscal has working with and items is that capacity flat. or capital forward pinched the curve One that's fairly a year. inside is the price of

is the around a year. end I look the year how of see as million. previous at think So you don't fiscal $XXX at can the years working representation really balance of $XXX ABL capital million we this to

in fiscal year code think the it I of ZIP end 'XX. see we the same at

Patrick Fitzgerald

current is underpinning any -- disposal the then update? volume update you're what's Water And What's have EBITDA volumes the business. if or the the in you guidance what seeing guidance on the that guidance in volume the Great. guidance

Brad Cooper

Yes, published, it's fiscal about equates of in average to 'XX the investor Mike that that EBITDA guided presentation year. and the that's showing average to. we Again, year $XXX the to for million the

Michael Krimbill

first million about just X.X the months year a were under think X I day. this of barrels fiscal

Operator

is from question JPMorgan. next The Hamid Tarek with

Tarek Hamid

I'd love to business. fixed. contract some more you bit in talked But a Obviously, on on impressive. about performance Water of cost very, little take very pricing the the the being

kind through like how prices ever about that And sticks you If then chemicals, evolves. of you contract that things help for? maybe have say think long just sort how of us disclosed

Brad Cooper

disclosed of that terms we've I in don't historically contract. if the know

plus it. you years Doug, are we You I there? think on to... have want

Douglas White

This Doug. Sure. is

long-term to that reduce on that and our prices. contract a by longer-term using to on do to program volumetric a different our half administration expect chemicals. X/X the on reduce of we I mention, actually usage of is strategy are chemicals But a cents those chemical new be by a We chemical-related to working want initiative OpEx contract.

Tarek Hamid

of as should we like that? think coming Nothing 'XX in anything reset sort a of or

Douglas White

fiscal correct. basis not And regarding higher be said, this per I lower, coming on year anything That's chemicals. new like a barrel will

Tarek Hamid

that spoke couple quarters the the want in in or couple your of then a little the just and very about want first beneficial to bit capital sort bonds on the to repurchased prepared guys to That's of then the question. seasonality in working Obviously, fiscal a punitive the you've tie sort months. half. of last remarks, of business, just the helpful. whatever sort bit I just second and you I be of tends in of to that And of follow little the

into shaping So should couple how of of we sort is kind working capital quarters? this anything over of read up

Brad Cooper

some performance. I to if by anything I free don't the X mean, there's sales have is months. into driven -- Water's growth, that Water's asset more cash to With obviously our alluded know flow than other read come through first Mike

around that the within it's the accordion it, the maybe And what So as seasonal $XXX not of, Feb, we million recall amended seen ABL historically. as to was guess, organization end the early we've have permanent at again, feature I ABL.

here in some sales year. gave the So the that of we first us lower these the the lean commodity off X comfort first months prices X asset in pulled into of to months bond repurchases

Tarek Hamid

I appreciate And one me. that. for last just then

As get and you about size mostly this of about of layer you Or time? thoughts just your it redemptions point. preferred love to do being there as the the on should solving maybe for you little the think over arrearage? a preferred talk sort preferred addressing oversized maybe at is your focus bit general think securities, of just I'd about that

Brad Cooper

if And repurchase of we would some were definitely the preferreds, It's consider correct. some you're think both. that. I there to Yes, opportunity

both. So

Operator

is with RBC Mandel from Jason The next Capital. question

Jason Mandel

reasonably very the all detailed For helpful. guidance,

business, can on thus, this all Just EBITDA growth the the Water of Or is you that's any and sense volume if margin if from touched us specifically for with cost a and Tarek a minute, on more give improvement? you that but coming additional expansion? saves guidance,

Brad Cooper

think improvement. it's volume predominantly driven Yes, I by

if showing we earnings fiscal -- to at OpEx you'll again, presentation and Our compared this -- 'XX I $X.XX $X.XX think released, for we're OpEx in year year. the fiscal

you all impute it's can volume-driven. So

Jason Mandel

shouldn't a was in forward? Perfect. going just a the of buybacks were but the be puzzle, opportunistic of use there -- piece and small 'XX-es. on the quarter, a some cash buybacks big Was And Okay. that unsecured on it's there the then

Brad Cooper

'XX, They them. a discount grabbed Yes, that's decent fair. went at to trading pretty were the we so and

Operator

next Stifel. from [indiscernible] with is The question

Unidentified Analyst

are operations, it being Congrats I below on your Would kind before to on say ready you X.XXx this order to just thinking clear a you out arrearages the terms good press? to like quarter on the the the on in of on that attacking be maturities and as is point? arrearages of congrats to would push leverage. like the of preferred. thinking those relates the Or at the wanted -- XXXX the

Brad Cooper

very Yes, we're that's transparent. what looking exactly No, at. it's

have this drops call but on secured We perhaps, coincidental February and is next the coming premium -- 'XX-es the of February. in in timing X the half this

getting So drops and premium I we on think by all get the then our the timing the and XX% by cost December -- that -- well. we'll can -- XX, have rid call work if out of would 'XX

Unidentified Analyst

Got you.

processing like I year the to at water capacity relates capacity, end be the Okay. fiscal million looks What this to for day. after produced processing water your X.X X.X it at And XXXX. -- you've expectations would this as million per -- got barrels mean, year? the of end it's of the It

Michael Krimbill

address you can Doug, that?

Douglas White

I can take that.

at the end the is 'XX? fiscal you are of fiscal can I was 'XX? -- asking at if Or clarify Our end operational the what capacity the of end this -- question, this

Unidentified Analyst

of At the end 'XX.

Douglas White

north going be 'XX. going and end At the future, of by per permitted capacity, 'XX, X.X have end Permitted in to that's and of the X.X day. we capacity the new for development permitted been fiscal working X be capacity barrels between of million on of to we're million million somewhere additional

Operator

we Brody next, Bank America. with Up Gregg have of

Gregg Brody

Congrats on the execution.

the this confidence fiscal of quarters months sense year, first the first expectations. two a volumes your us your gave showing you in Just X -- of

based are you today capacity, How think how do your cetera? curious can takeaway Just far you volumes. et visibility see producers on on doing, you think out about what

Michael Krimbill

Tuesday, that I'll next question. Doug take say I'll let Well, but

Douglas White

question. a great It's

We big It's our working planning and consistently growth. are a driver. future

per we general see say we think throughout approximately cetera, contracts, And comparable XX% XX well et pretty inventories, the cetera. rely that's months XX XX-year on But permit to we would out. number And year-over-year. to dedications, look large areas, dedicated there. at Delaware Basin, as our We really view growth that growth months, excellent growth published year, growth remaining we et a have the I an very our We our with have activity, after that then out XX%. see

Gregg Brody

Got what's down today? guidance potential or the it. you gave when on And the you risks spend, about just then think the CapEx up

Michael Krimbill

That's additional rates risk. could if we the use, spend And we money, some an return. to get to interesting at attractive especially would contracts MVCs and love word of

know don't next can of year, I if year. money think projects some new see but any more risk we have to this I -- spend we having

Gregg Brody

assume of Great. And think us I did already just extent seems of low are finish million this the the kind what sense books digits. year $XX be to of mentioned then the up, -- -- over and think can give said you high you that's the asset us. should we $XX you double or sell the million, sales a in else $XX identified. that's maybe million Of you've what to selling, And you the if tell you you to

Michael Krimbill

where not a our to Yes, enough surprised kind big this because issue is an than area Marine release. other they're the we of market press sale

$XX $XXX,XXX not million, from assets to $XX million, it So $XXX,XXX, they're anywhere rather because employees million, those for up may sale. at be they're disclose aware $XX but not have we we'd that

Operator

from Wells Ned question Baramov next The Fargo. is with

Ned Baramov

Could capacity on And mentioned you going incremental Chevron-PDC Cushing? X intensify producers? you currently you from given to remarks, handle prepared transportation volumes review pipelines anticipate if going deal. forward, volumes from competition for do your of you in the any maybe potential ample Brad, the benefits to

Brad Cooper

that But of would think I by overall and view. don't the can think think same our I customer. there economics underlying disclose kind volumes like increase would the Yes, feel to stance some you activity is our a going assume this, in we others transaction fully be across support I

Michael Krimbill

direction. would majors to ownership in. our get And lines these those pipelines we in basin, you add put have their I'll off volume, maybe would they're we in volume Yes, in But Don, jump the push going volume other over where -- pushed to then hope in but -- the it. they if that's

Ned Baramov

the between And then CapEx about talk projects primarily up guidance. Water growth of CapEx on side, maybe your Got it. the these CapEx? growth question split And the maintenance are the in you then Solutions and on following segment? Could

Brad Cooper

Yes, in is a majority it Water of the segment. Solutions

growth $XX $XX think deck, earnings guiding the million the I then of we're of million and maintenance. in

$XX chunk You million-plus. could million $XX Water, the assume a of is

Michael Krimbill

least million at Yes, $XX it. of

Operator

Sunil The from next with Securities. is question Sibal Global Seaport

Sunil Sibal

related about with of the have mentioned to commitments you So systems. I life around MVCs current my talk curious contractual any you I Permian, think volumes. that In the your first question you on if water was the was XX contract years. could

Douglas White

take I Brad. can that,

Brad Cooper

Yes, go ahead. ahead, Go Doug.

Douglas White

contracts our were And call, dedicated from last the new our contracts that the market term Mesquite extended added at able we rate, we amended the big prior Since in mentioned X a as we've executed the the term. one well current and have was with execute large sizable We we a contracts that of to actually inherited Okay. so XX-year as on it call. quarter acquisition, positive. X MVC

our So past already new and fiscal year, in this by day per another year. XX% barrels grown we've MVC it this grew

MVC -- term contracts. terms of terms new are average those are with the addition a those XX-year So

Sunil Sibal

Okay. volume-wise, saying where grew you XX% for your And fiscal year in -- the then volumes will 'XX, it were 'XX? than MVC higher -- be you're

Douglas White

that the around 'XX. by Yes. approximately MVCs in in We I XX% grown think, day And we've per new already barrels somewhere year. fiscal with were, XXX,XXX fiscal

Sunil Sibal

the Okay. as year-over-year on to by then you for guide a volumes Got years. front, XX% the guided think CapEx And -- post, deliverable growing it. I few next

of good is CapEx of about a a kind that you're in to guiding just get way meeting 'XX, rate? the XX% the trying whether run CapEx. rate number with basin? in of to So growth good terms I'm there's for Or lumpiness think that is fiscal that your in any kind that run

Douglas White

may, I I'll go and that. take ahead if Brad,

Brad Cooper

Doug. Okay. Go ahead,

Douglas White

Okay.

We fiscal close outlook is to on to growth the capital. fiscal CapEx year pretty this prior new have our same -- year,

XXX,XXX executed online are One we and Brad this mentioned projects quarter, XX in an per this the already Mike integrated -- connect big that system more that to area XX% fully. new assets growth. barrels we've underutilized. project been As the for on capacity our of a pipeline to add those system bring going to has the of is actually underutilized, Block That's from first day mentioned, week, to Hillstone there was that portion

growth on project. that So we there nice trajectory just have a

and And others Of additional But do with likely maximize We course, as Mike they we adding on have able to MVC-type said, additional projects, to cap integrated into underwritten be contracts, years expect for based most are current as as would CapEx that that, some executed. we system. after the would capacity. enter year's go fully to next we growth we down were if would then new deals able that. looking be to we do those demand

Sunil Sibal

of I want have business then you you to -- Got this was think leverage. related and And right level composition? about you to XXXX of leverage. kind in nice composition is leverage with was for your curious debt, reduce your where talked tailwinds the the last you so curious do absolute that was my terms it. how business Obviously, I into have now, going you question

Michael Krimbill

I think in a the of arrearages the short -- leverage. term, there and to dividend between be trade-off has

think refinance. we it to to So to need significantly be up continue under Xx be to on arrearages. difficult decreasing decrease the while but will then leverage maybe we're catching want definitely But somewhat, I it we

Operator

Okay.

now question-and-answer floor for I Krimbill like the end of session. would to Mike back have the to the reached closing turn We remarks.

Michael Krimbill

ahead, go Oh, Brad.

Brad Cooper

in we of your August, interest QX all appreciate in we you when company, you, connecting report fiscal and today. Thank look Thank We 'XX. Yes. to you forward with the all. for joining guys,

Michael Krimbill

it very to add, is in just NGL. would exciting I work now

Brad Cooper

Thanks, everyone.

Michael Krimbill

you. Thank

Operator

today's concludes at Thank and disconnect for this time. your lines may This participation. conference, you you your

NGL Energy Partners (NGL) 31 May 232023 Q4 Earnings call transcript