10-Q: NGL Energy Partners LP Reports Q3 2025 Results: Revenue Declines Amid Strategic Shifts

Sentiment:

Quarterly Report 10 February 2025 4:21 PM

NGL Energy Partners LP's Q3 2025 results reveal a decrease in revenue compared to the previous year, influenced by strategic dispositions and market volatility.

Worse than expectedNet income and revenue were lower compared to the same period in the previous year.

Summary

NGL Energy Partners LP reported a net income attributable to NGL Energy Partners LP of $13.5 million for the three months ended December 31, 2024, compared to $45.7 million for the same period in 2023.
Revenues decreased to $1.55 billion from $1.87 billion year-over-year.
For the nine months ended December 31, 2024, net income attributable to NGL Energy Partners LP was $25.6 million, down from $93.0 million in the prior year period.
Total revenues for the nine-month period were $4.29 billion, a decrease from $5.33 billion in 2023.
The company is winding down its biodiesel business, expecting liquidation of inventory by the end of February 2025 and subleasing of remaining railcars by March 31, 2025.
The company sold certain railcars in the Crude Oil Logistics segment for $7.5 million, with sales to be completed in tranches within one year.
The company sold certain saltwater disposal assets in the Eagle Ford Basin to a third-party for total consideration of $1.5 million.
The company sold certain freshwater water solutions facilities for $68.5 million in cash.
The company sold certain saltwater disposal assets in the Delaware Basin to a third-party for total consideration of $4.2 million in cash.
The company sold certain real estate located in Lea County, New Mexico to a third-party for total consideration of $8.0 million in cash.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company is profitable, key metrics are down year-over-year. Strategic asset sales and business adjustments are underway.

Positives

The company sold certain assets for a total of $82.2 million in cash.
The company is winding down its biodiesel business, which is expected to improve profitability.
The company is in compliance with the covenants under the ABL Facility and Term Loan B.
The company repurchased 500,000 common units for an aggregate price of $2.1 million, including commissions.

Negatives

Net income attributable to NGL Energy Partners LP decreased to $13.5 million for the three months ended December 31, 2024, from $45.7 million in the same period of 2023.
Revenues decreased to $1.55 billion from $1.87 billion year-over-year.
For the nine months ended December 31, 2024, net income attributable to NGL Energy Partners LP was $25.6 million, down from $93.0 million in the prior year period.
Total revenues for the nine-month period were $4.29 billion, a decrease from $5.33 billion in 2023.
The company recorded a net loss of $7.4 million primarily related to the write down of the value of certain saltwater disposal wells as well as abandonment of certain capital projects and the retirement of certain other assets.

Risks

Commodity price volatility and demand fluctuations could impact future results.
Global markets and commodity prices have been extremely volatile due to the impacts from the COVID-19 pandemic, the war in Ukraine, the current conflict between Israel and Hamas and conflicts involving Iran and its proxy forces.
The subsurface injection of produced water for disposal has been associated with induced seismic events in Texas and New Mexico.
The company is subject to extensive federal, state, and local environmental laws and regulations.

Future Outlook

The board of directors of our GP expects to evaluate the reinstatement of the common unit distributions in due course, taking into account a number of important factors, including our leverage, liquidity, the sustainability of cash flows, upcoming debt maturities, capital expenditures and the overall performance of our businesses.

Industry Context

The report reflects the challenges and strategic shifts occurring within the energy sector, including the impact of commodity price volatility, regulatory developments, and the ongoing transition towards renewable energy sources.

Comparison to Industry Standards

It is difficult to compare NGL Energy Partners LP's results to industry standards without specific competitor data.
However, the company's performance can be assessed against broader industry trends, such as the increasing focus on water solutions and the challenges faced by crude oil logistics businesses due to production declines in certain areas.
Companies like Plains All American Pipeline, Enterprise Products Partners, and Magellan Midstream Partners are comparible in the midstream energy sector.
Their performance metrics, particularly in crude oil and NGL transportation and storage, could provide a benchmark for evaluating NGL Energy Partners LP's results.

Related Party Transactions

During the three months ended June 30, 2024, we created a new aviation entity whereby we own a 90% interest and a member of our management owns a 10% interest.
During the three months ended December 31, 2024, we created another new aviation entity whereby we own a 90% interest and a member of our management owns a 10% interest.
On November 22, 2024, we purchased 16,734,375 of our outstanding warrants for $5.0 million from a greater than 10% beneficial owner of our common units.

Stakeholder Impact

Shareholders: Suspension of common unit distributions continues to impact returns.
Employees: Winding down of the biodiesel business may result in job losses.
Customers: Changes in service offerings due to asset sales and business adjustments.
Creditors: Compliance with debt covenants maintained.

Next Steps

Complete the sale of railcars in the Crude Oil Logistics segment.
Liquidate inventory and sublease remaining railcars in the biodiesel business.
Close the sale of the natural gas liquids terminal in Green Bay, Wisconsin.
Close the sale of 17 natural gas liquids terminals.

Key Dates

Date	Description
February 2, 2024	Closed on private offering of $900.0 million of 2029 Senior Secured Notes and $1.3 billion of 2032 Senior Secured Notes and entered into a new seven-year $700.0 million senior secured Term Loan B.
April 4, 2024	Board of directors declared a cash distribution of 55.4% of the outstanding distribution arrearages through the quarter ended March 31, 2024 to the holders of the Class B, Class C and Class D Preferred Units.
April 5, 2024	Sold approximately 122,250 acres of real estate on two ranches located in Eddy and Lea Counties, New Mexico and certain intangible assets to a third-party for total consideration of $68.5 million in cash.
April 9, 2024	Board of directors declared a cash distribution to fully pay the remaining distribution arrearages and interest through the quarter ended March 31, 2024 to the holders of the Class B, Class C and Class D Preferred Units.
April 15, 2024	Sold certain saltwater disposal assets and intangible assets in the Delaware Basin to a third-party for total consideration of $4.2 million in cash.
April 18, 2024	Total distribution of $120.0 million was made to the holders of record at the close of trading on April 12, 2024.
April 25, 2024	Total distribution of $98.1 million, which included a distribution of $27.3 million earned during the quarter ended March 31, 2024, was made to the holders of record at the close of trading on April 19, 2024.
May 14, 2024	Sold approximately 1,400 acres of real estate located in Lea County, New Mexico to a third-party for total consideration of $8.0 million in cash.
June 5, 2024	The board of directors of our GP authorized a common unit repurchase program, under which we may repurchase up to $50.0 million of our outstanding common units from time to time in the open market or in other privately negotiated transactions.
June 21, 2024	The board of directors of our GP declared a cash distribution for the quarter ended June 30, 2024 to the holders of the Class B, Class C and Class D Preferred Units.
July 15, 2024	Total distribution of $28.8 million was made to the holders of record at the close of trading on July 1, 2024.
August 1, 2024	Retained a 51% voting interest and sold a minority interest in certain saltwater disposal assets in the Eagle Ford Basin to a third-party for total consideration of $1.5 million.
September 19, 2024	The board of directors of our GP declared a cash distribution for the quarter ended September 30, 2024 to the holders of the Class B, Class C and Class D Preferred Units.
October 15, 2024	Total distribution of $30.8 million was made to the holders of record at the close of trading on October 1, 2024.
December 5, 2024	Entered into a definitive agreement with a third-party to sell 84 railcars in our Crude Oil Logistics segment for total consideration of $7.5 million in cash.
December 12, 2024	The board of directors of our GP declared a cash distribution for the quarter ended December 31, 2024 to the holders of the Class B, Class C and Class D Preferred Units.
January 15, 2025	Total distribution of $28.9 million was made to the holders of record at the close of trading on January 1, 2025.
January 23, 2025	Sold 35 railcars of the 84 railcars discussed above for $3.2 million.
January 31, 2025	Signed a purchase and sale agreement to sell our natural gas liquids terminal in Green Bay, Wisconsin for approximately $3.8 million, plus working capital.
February 5, 2025	Sold an additional 31 railcars of the 84 railcars discussed above for $2.7 million and signed a purchase and sale agreement to sell 17 of our natural gas liquids terminals for $75.0 million, plus working capital.
February 5, 2025	Entered into a definitive agreement with a third-party to sell 77 railcars in our Crude Oil Logistics segment for total consideration of $6.6 million in cash.
March 14, 2025	Purchase and sale agreement includes a financing contingency that expires on March 14, 2025.
March 31, 2025	The sale is expected to close by March 31, 2025.

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