NGL Energy Partners Reports Strong Earnings and Growth

NGL Energy Partners ((NGL)) has held its Q2 earnings call. Read on for the main highlights of the call.

NGL Energy Partners’ recent earnings call showcased a robust performance with record growth in key segments and an optimistic financial outlook. The call highlighted strategic financial and operational moves, particularly in the Water Solutions segment, which point to a positive trajectory for the company. However, the increased capital expenditures for growth signal a need for careful financial management moving forward.

Record Water Volumes and Grand Mesa Growth

NGL Energy Partners reported a record in water volumes and a 30% growth in Grand Mesa volumes, contributing to a consolidated adjusted EBITDA of $167.3 million, marking a 12% increase from the previous year. This growth was primarily driven by the Water Solutions segment, underscoring its pivotal role in the company’s performance.

Increased Full Year Adjusted EBITDA Guidance

Reflecting strong performance and growth opportunities, NGL increased its full-year adjusted EBITDA guidance to a range of $650 million to $660 million, up from the previous range of $615 million to $625 million. This adjustment highlights the company’s confidence in its ongoing operations and future prospects.

Reduction in Term Loan B Interest Rates

In a move showcasing effective financial management, NGL repriced its Term Loan B to reduce the SOFR margin from 375 basis points to 350 basis points. This strategic decision is expected to result in annual interest savings of $15 million.

Strong Water Solutions Performance

The Water Solutions segment demonstrated remarkable performance, with an adjusted EBITDA of $151.9 million, an 18% increase from the previous year. This growth was driven by higher disposal revenues and increased skim oil revenue, reinforcing the segment’s importance to NGL’s overall success.

Strategic Capital Allocation

NGL’s strategic capital allocation was evident in its purchase of 88,506 Class D preferred units, saving $10.4 million in annual distributions, and the repurchase of 6.8 million common units. These actions reflect the company’s commitment to optimizing its capital structure.

Significant Delaware Basin Capacity

NGL has established a significant presence in the Delaware Basin, with over 5 million barrels per day of permitted injection capacity. The company is also pioneering the first large-scale produced water treatment plant in the area, highlighting its innovative approach to water management.

Increased Growth Capital Expenditure

The company reported an increase in contract volume commitments, necessitating an additional $100 million in growth capital expenditures, up from initial expectations. This indicates a significant investment in future growth, albeit with a need for careful financial oversight.

Forward-Looking Guidance

NGL Energy Partners’ forward-looking guidance remains optimistic, with a revised full-year adjusted EBITDA guidance of $650 million to $660 million. The company also projects an initial fiscal 2027 adjusted EBITDA guidance of at least $700 million, driven by strategic focus on water solutions and capital structure optimization.

In conclusion, NGL Energy Partners’ earnings call reflected a strong performance and optimistic outlook, driven by record growth in the Water Solutions segment and strategic financial management. While increased capital expenditures pose challenges, the company’s forward-looking guidance and strategic initiatives suggest a promising future.