NGL Energy Partners’ Earnings Call Highlights Strategic Growth

NGL Energy Partners ((NGL)) has held its Q4 earnings call. Read on for the main highlights of the call.

NGL Energy Partners LP recently held an earnings call that conveyed a predominantly positive sentiment, highlighting strong performance in its Water Solutions segment and successful asset sales that have led to significant debt reduction. The company is strategically focusing on its core business areas, although it faces challenges in the Crude Oil and Liquids Logistics segments, compounded by potential headwinds from oil price volatility. Despite these challenges, the overall outlook remains optimistic.

Successful Non-Core Asset Sales

NGL Energy Partners LP has effectively executed the sale of 18 natural gas liquids terminals and monetized several other non-core assets. These transactions have generated proceeds at a double-digit multiple, underscoring the company’s strategic focus on optimizing its asset portfolio and improving its financial position.

Water Solutions Segment Growth

The Water Solutions segment has shown remarkable growth, with adjusted EBITDA reaching $154.9 million in Q4, up from $123.4 million the previous year. This growth is attributed to higher disposal volumes and increased fees, with total disposal volumes rising by 11% year-over-year.

Reduction in Operating Costs

Operating costs in the Water Solutions segment have been reduced, with the cost per barrel decreasing to 22¢ for fiscal 2025 from 24¢ in fiscal 2024. This reduction reflects the company’s efficiency improvements and cost management strategies.

Full-Year Adjusted EBITDA Exceeds Guidance

NGL Energy Partners reported a full-year adjusted EBITDA of $622.9 million, surpassing the previous guidance of $620 million. This achievement highlights the company’s effective management and operational execution.

Debt Reduction and Capital Structure Improvement

The proceeds from asset sales have been strategically used to pay off the entirety of the outstanding indebtedness on the ABL. Additionally, the company purchased 20,000 units of Class D preferreds in the open market, further strengthening its capital structure.

Strategic Focus on Core Water Solutions Business

NGL Energy Partners is concentrating its efforts on the Water Solutions segment, which is expected to generate approximately 85% of the adjusted EBITDA. This strategic focus is aimed at leveraging the segment’s growth potential and profitability.

Decline in Crude Oil Logistics EBITDA

The Crude Oil Logistics segment faced a decline in adjusted EBITDA, which was $13.1 million in Q4, down from $15.3 million in the previous year’s Q4. This decrease is primarily due to lower volumes on the Grand Mesa pipeline.

Liquids Logistics Segment Challenges

The Liquids Logistics segment also experienced challenges, with adjusted EBITDA decreasing to $17.7 million in Q4 from $22.2 million in the prior year. The decline in butane margins, attributed to a weak gasoline blending season, was a significant factor.

Potential Headwinds from Oil Price Uncertainty

NGL Energy Partners anticipates potential challenges from oil price volatility, with guidance for fiscal 2026 accounting for a $20 million decline in skim oil revenues due to lower crude prices. This indicates the company’s cautious approach in navigating market uncertainties.

Forward-Looking Guidance

Looking ahead, NGL Energy Partners has provided guidance for fiscal 2026, projecting an EBITDA range of $615 million to $625 million. The company plans capital expenditures totaling $105 million, with $60 million allocated to growth projects within the Water Solutions segment. These strategic investments are expected to drive future growth and stability.

In conclusion, the earnings call from NGL Energy Partners LP reflects a positive outlook, driven by strong performance in the Water Solutions segment and strategic asset sales. While challenges exist in the Crude Oil and Liquids Logistics segments, the company’s focus on core business areas and prudent financial management positions it well for future success.