NGL Energy Partners LP — FY2024 Form 10-K
Period: Fiscal year ended March 31, 2024. This is an annual report, not a standalone 2023 fourth-quarter filing; the provided filing text does not give separate Q4 results. Amounts below are in U.S. dollars unless stated otherwise.
Business context
NGL is a diversified midstream energy partnership with three segments: Water Solutions (produced-water transport, treatment, recycling and disposal), Crude Oil Logistics, and Liquids Logistics (natural gas liquids, refined products and biodiesel). Its strategy emphasizes fee-based, contracted cash flows, debt reduction and eventually reinstating common-unit distributions.
Financial and operating highlights
| Metric | FY2024 | FY2023 |
|---|---|---|
| Revenue | $6.957 billion | $8.695 billion |
| Operating income | $177.6 million | $289.2 million |
| Net income (loss) attributable to NGL | $(143.8) million | $51.4 million |
| Loss per common unit | $(2.14) | $(0.56) |
| Adjusted EBITDA (non-GAAP) | $610.1 million | $632.7 million |
| Cash from operating activities | $376.2 million | $445.2 million |
| Capital expenditures (cash-flow statement) | $152.3 million | $147.8 million |
- Revenue fell about 20% year over year, mainly reflecting lower commodity prices and volumes in Crude Oil and Liquids Logistics. Water Solutions revenue increased.
- Segment operating income: Water Solutions $231.3 million (up from $198.9 million); Crude Oil Logistics $52.1 million (down from $81.5 million); Liquids Logistics $2.5 million (down from $66.6 million). Corporate and Other recorded a $108.2 million operating loss.
- Water Solutions processed 884.6 million barrels of produced water, averaging 2.42 million barrels per day. Disposal service fees rose with higher volumes, new-contract and spot pricing, and producer deficiency payments.
- Liquids Logistics results were pressured by a warmer-than-normal winter, lower propane volumes, weaker refined-product margins and a $69.2 million goodwill impairment. Butane margins improved.
- Interest expense was $269.9 million, compared with $275.4 million. A $55.3 million loss on early extinguishment of liabilities, including refinancing premiums and write-offs, contributed to the annual net loss.
Debt, liquidity and capital allocation
- At March 31, 2024, face-value debt was $2.9 billion: $900 million of 8.125% senior secured notes due 2029, $1.3 billion of 8.375% senior secured notes due 2032, and a $700 million Term Loan B due 2031. The refinancing replaced the prior 2025 and 2026 notes and extended maturities.
- The $600 million asset-based revolving facility had no borrowings at year-end; approximately $99.5 million of letters of credit were outstanding. Current assets exceeded current liabilities by approximately $201.6 million, and cash was $38.9 million.
- Management said operating cash flow and ABL availability were expected to meet liquidity needs. Seasonally higher working-capital requirements generally occur June through December. Capital expenditures for FY2025 are expected to be approximately $210 million.
- Common-unit distributions have been suspended since the quarter ended December 31, 2020. Management expects to evaluate reinstatement based on leverage, liquidity, cash-flow sustainability, debt maturities, capital spending and business performance.
- Preferred-unit distributions had been suspended, but arrears were paid in distributions totaling $120.0 million on April 18, 2024 and $98.1 million on April 25, 2024. The filing says all preferred arrears were paid as of April 25, 2024.
Material changes, outlook and risks
- Water Solutions is expanding its Lea County Express pipeline system from 140,000 to 340,000 barrels per day, with completion expected in the second half of FY2025. The expansion is supported by a minimum-volume commitment and acreage dedication with an investment-grade producer.
- FY2024 included $115.9 million of net asset disposal and impairment losses, including the Liquids Logistics goodwill impairment and write-downs of certain water-disposal assets and projects. Dispositions included three natural gas liquids terminals and certain saltwater-disposal assets.
- The Delaware Supreme Court affirmed the LCT legal verdict on May 28, 2024. NGL had accrued $62.1 million at March 31, 2024, including approximately $26.1 million of interest; interest continues to accrue. The company expected to pay the judgment, costs and interest by June 30, 2024.
- Key risks include substantial debt and associated covenants, variable interest rates, commodity and working-capital volatility, customer concentration, producer activity and demand, seasonal weather, counterparty credit, and restrictions or seismicity-related suspensions affecting disposal wells. In January 2024, a Texas injection suspension reduced disposal capacity by 10,000 barrels per day but did not materially affect the business, according to the filing.
- Environmental and regulatory risks include evolving methane and climate rules, permits, water disposal and hydraulic-fracturing regulation. The SEC climate-disclosure rules were stayed on April 4, 2024 pending judicial review.
- Grant Thornton issued an unqualified opinion on the financial statements and internal controls. Management also concluded internal control over financial reporting was effective as of March 31, 2024.
Important facts for investors to verify
- Confirm the refinancing’s effective interest cost, debt-service capacity, covenant headroom and availability under the ABL borrowing base; reported year-end debt was $2.9 billion.
- Track cash generation after the large FY2025 capital-spending plan, the LCT judgment payment and the preferred-arrears payments, and whether common distributions can be reinstated without weakening liquidity.
- Assess whether the Water Solutions volume and fee growth, including the LEX II expansion, can offset weaker or volatile Crude Oil and Liquids Logistics earnings.
- Review the assumptions supporting the $69.2 million goodwill impairment and the Crude Oil Logistics reporting unit’s stated 4% fair-value cushion over carrying value.
- Verify the final LCT judgment amount after the trial court recalculates interest, and whether payment timing or amount differs from management’s stated expectation.
- The cover page indicates that the financial statements reflect a correction of an error; the supplied filing text does not clearly identify the error or its effects. Verify the correction’s nature, periods affected and whether any prior figures were restated.