NGL Energy Partners ((NGL)) has held its Q1 earnings call. Read on for the main highlights of the call.
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NGL Energy Partners’ recent earnings call conveyed a generally positive sentiment, primarily driven by strong performance in the Water Solutions segment and strategic debt reduction efforts. Despite challenges in the Crude Oil and Liquids Logistics segments, the company’s focus on capital allocation and cost management supports a favorable outlook.
Water Solutions Business Segment Performance
The Water Solutions business segment emerged as a key performer, reporting an adjusted EBITDA of $142.9 million, marking a 13.8% increase from the previous year’s first quarter. This growth was fueled by higher disposal revenues and increased water pipeline revenue, underscoring the segment’s robust performance.
Increase in Physical Water Disposal Volumes
Physical water disposal volumes saw a notable rise, increasing by 12.4% year-over-year to reach 2.77 million barrels per day in the first quarter. This increase highlights the segment’s expanding operational capacity and efficiency.
Cost Reduction in Water Solutions
The company achieved a reduction in operating expenses within the Water Solutions segment, with costs decreasing by $0.02 per barrel compared to the previous year, bringing them down to $0.22 per barrel. This cost efficiency further enhances the segment’s profitability.
Debt Reduction and Strategic Capital Allocation
NGL Energy Partners made significant strides in debt reduction, paying off $17 million of debt on their ABL and repurchasing $19 million of outstanding 2032 notes at a discount. These actions reflect the company’s strategic approach to strengthening its financial position.
Common Unit and Preferred Unit Repurchase
The company strategically repurchased approximately 4.7 million common units and 70,000 Class D preferred units. This move demonstrates a calculated use of cash to bolster balance sheet strength and shareholder value.
Decrease in Crude Oil Logistics EBITDA
The Crude Oil Logistics segment faced challenges, with adjusted EBITDA falling to $9.6 million from $18.6 million year-over-year. This decline was primarily due to reduced sales from lower production and crude oil prices.
Decline in Liquids Logistics Segment
The Liquids Logistics segment also experienced a downturn, with adjusted EBITDA decreasing to $2.9 million from $5.7 million in the previous year, adjusted for asset sales. The company is now focusing on the butane blending business to drive future growth.
Forward-Looking Guidance
Looking ahead, NGL Energy Partners reported a consolidated adjusted EBITDA of $144 million for the quarter, a 4% increase from the previous year’s first quarter, largely driven by the Water Solutions segment. The company reaffirmed their full-year adjusted EBITDA guidance of $615 million to $625 million. Strategic asset sales, debt reduction, and opportunistic capital allocation, including the repurchase of 4.7 million common units and $19 million of 2032 notes, were highlighted as key strategies moving forward.
In summary, NGL Energy Partners’ earnings call painted a positive picture, with strong performance in the Water Solutions segment and strategic financial maneuvers overshadowing declines in other areas. The company’s proactive approach to cost management and capital allocation positions it well for future growth, despite challenges in the Crude Oil and Liquids Logistics segments.