NGL Energy Announces Fourth Quarter and Full Year Fiscal 2022 Financial Results

Source: www.gulfoilandgas.com 6/6/2022, Location: North America

NGL Energy Partners LP reported its fourth quarter and full year fiscal 2022 results. The Partnership reported a loss from continuing operations of $29.4 million for the quarter ended March 31, 2022 and $184.1 million for its full fiscal year 2022.

Highlights for the quarter and fiscal year ended March 31, 2022 include:
- Produced water volumes processed of approximately 1.93 million barrels per day during the quarter ended March 31, 2022, growing 37.7% from the same period in the prior year and 4.7% versus the preceding fiscal quarter
- Water Solutions Adjusted EBITDA1 of $342 million, an increase of $100.5 million, or 42%, year-over-year
- Adjusted EBITDA1 from continuing operations for the fourth quarter of Fiscal 2022 of $157.4 million compared to $94.3 million for the fourth quarter of Fiscal 2021
- Fiscal Year 2022 Adjusted EBITDA1 from continuing operations of $542.5 million compared to $448.3 million in the prior year
- Announced a new long-term produced water transportation, recycling and disposal agreement with a leading investment grade independent producer. The new dedicated agreement spans an area of over 300,000 acres in New Mexico and Texas, bringing our total dedicated acreage portfolio in the Delaware Basin to over 660,000 acres.

“The Partnership had a strong finish to its Fiscal 2022 and continues to see positive momentum as we move into our 2023 fiscal year. Produced water volumes approximated 2.1 million barrels per day in April, 2.2 million barrels per day in May and are expected to exceed this level for the remainder of Fiscal 2023. We achieved our first $90 million Adjusted EBITDA1 quarter in Water Solutions segment and anticipate Adjusted EBITDA1 for the Water Solutions segment of over $400 million for the upcoming fiscal year, assuming current producer activity levels and commodity prices. This is an increase of $15 million from our previous guidance of $385 million. We have worked incredibly hard over the past few years to build the premier water solutions asset position in the best basin in the country and we are beginning to realize the benefit of those efforts,” stated Mike Krimbill, NGL’s CEO. “The Partnership expects total Adjusted EBITDA1 of at least $600 million and capital expenditures of approximately $100 million for Fiscal 2023. Assuming stable commodity prices, we expect the resulting free cash flow to total approximately $280 million, which we plan to use to repay our Senior Notes due 2023. We will update the market on our progress towards these goals as the year goes on,” Krimbill concluded.

Water Solutions
Operating income for the Water Solutions segment increased $113.9 million for the quarter ended March 31, 2022, compared to the quarter ended March 31, 2021. The Partnership processed approximately 1.93 million barrels of water per day during the quarter ended March 31, 2022, a 37.7% increase when compared to approximately 1.40 million barrels of water per day processed during the quarter ended March 31, 2021. This increase was due to higher production volumes (and associated produced water) primarily in the Delaware Basin driven by the recovery in crude oil prices from the prior year. The Partnership also sold approximately 146,000 barrels per day of produced and recycled water for use in our customers’ completion activities.

Revenues from recovered crude oil, including the impact from realized skim oil hedges, totaled $26.4 million for the quarter ended March 31, 2022, an increase of $14.3 million from the prior year period. This increase was due to increased skim oil barrels sold due to higher produced water volumes processed as well as higher realized crude oil prices received from the sale of skim oil barrels.

Operating expenses in the Water Solutions segment decreased to $0.28 per produced barrel processed compared to $0.29 per barrel in the comparative quarter last year primarily due to continued efforts to manage operating costs per barrel along with higher produced water volumes processed. Two of the Water Solutions segment’s largest variable expenses, utility and royalty expenses, were not (and are not expected to be) impacted by the rise in inflation due to negotiating long-term utility contracts with fixed rates and royalty contracts with no escalation clauses.

Crude Oil Logistics
Operating income for the fourth quarter of Fiscal 2022 increased slightly compared to the same quarter in Fiscal 2021. Our margins continued to benefit from high crude oil prices, which increase contracted rates with certain producers, and realized gains on the sale of inventory due to rapidly increasing crude oil prices. This was offset by our losses from derivatives which increased by $33 million for the quarter ended March 31, 2022, compared to the quarter ended March 31, 2021, a portion of which is expected to be realized in Adjusted EBITDA1 during the quarter ending June 30, 2022.

During the three months ended March 31, 2022, physical volumes on the Grand Mesa Pipeline averaged approximately 74,000 barrels per day, compared to approximately 66,000 barrels per day for the three months ended March 31, 2021. This increase was due primarily to the new supply agreement with a term customer, which commenced in March 2021.

As a part of continued efforts to optimize the Partnership’s asset portfolio, we sold certain of our crude trucking assets during the quarter, which generated a $5.5 million gain on the sale of assets.

Liquids Logistics
Operating income for the Liquids Logistics segment decreased $8.8 million for the quarter ended March 31, 2022, compared to the quarter ended March 31, 2021. This decrease is mainly related to lower product margins on propane due to reduced demand, increased competition and lower product allocations from certain suppliers, as well as lower service revenues due to the sale of Sawtooth and less throughput in certain of our terminals. The decrease was offset by higher product margins for butane and refined products as a result of tighter supply markets and volatility caused by the geopolitical unrest.

Propane volumes decreased by 87.8 million gallons, or 18.4%, compared to the quarter ended March 31, 2021, due to the warm winter weather in our core operating areas, increased competition and lower allocations of product from certain suppliers. Butane volumes decreased by 19.2 million gallons, or 10.7%, due to the tight supply market and an increase in demand for exports.

Capitalization and Liquidity
Total liquidity (cash plus available capacity on our asset-based revolving credit facility (“ABL Facility”)) was approximately $232.7 million as of March 31, 2022. On March 31, 2022, the Partnership reported $116.0 million in outstanding borrowings on its ABL Facility, compared to $4.0 million in outstanding borrowings at March 31, 2021. This increase was due to higher working capital requirements as a result of increased commodity prices, a portion of which was funded using free cash flow. On April 13, 2022, the ABL Facility was amended to increase, under the accordion feature, the commitments to $600 million with an agreement to lower the commitments back to $500 million on or before March 31, 2023.

As of March 31, 2022, the Partnership is in compliance with all of its debt covenants and has no significant current debt maturities before November 2023. The Partnership expects to generate approximately $280 million of excess cash flow in Fiscal 2023, which it plans to use to repay outstanding indebtedness and improve leverage.


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