Business Context and Reporting Period
Company: NGL Energy Partners LP
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three and nine months ended December 31, 2025
Segments: Water Solutions, Crude Oil Logistics, and Liquids Logistics.
Strategic Shift: The Partnership completed the sale of its refined products business and exited its biodiesel business in April 2025. These operations are now classified as discontinued operations, representing a significant strategic shift.
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended Dec 31, 2025 | 9 Months Ended Dec 31, 2025 |
|---|---|---|
| Total Revenues | $909,816 | $2,206,649 |
| Operating Income | $109,650 | $301,351 |
| Net Income (Continuing Ops) | $48,194 | $108,271 |
| Net Income (Total) | $48,189 | $147,654 |
| Net Income Attributable to Common Unitholders | $11,967 | $20,429 |
| Adjusted EBITDA (Continuing Ops) | $172,528 | $483,833 |
| Cash from Operating Activities | N/A | $255,934 |
| Total Debt (Long-term + Current) | $2,933,373 | $2,933,373 |
| Cash and Cash Equivalents | $6,476 | $6,476 |
Material Changes vs. Prior Period
- Revenue: Total revenues decreased 7.4% for the three months ended Dec 31, 2025, compared to the prior year, primarily due to lower product volumes and prices in the Liquids Logistics segment following the Wholesale Propane Disposition. For the nine months, revenues decreased 11.7%.
- Operating Income: Operating income increased 29.5% for the quarter and 21.4% for the nine months compared to the prior year periods. This improvement was driven by the Water Solutions segment (higher water disposal volumes) and lower expenses in Liquids Logistics due to asset dispositions.
- Discontinued Operations: The nine-month period included a significant gain of $39.4 million from discontinued operations (refined products and biodiesel sales), whereas the prior year period showed a loss of $20.4 million.
- Interest Expense: Interest expense decreased for the nine months ended Dec 31, 2025, compared to the prior year, due to lower weighted average balances on the ABL Facility and reduced interest rates on the Term Loan B.
Guidance, Outlook, and Risks
- Capital Expenditures: Management expects capital expenditures for the fiscal year ending March 31, 2026, to be approximately $220 million to $230 million.
- Distributions: The Board declared a distribution of $24.9 million for preferred unitholders for the quarter ended Dec 31, 2025. The Board expects to evaluate the reinstatement of common unit distributions in due course, contingent on leverage, liquidity, and cash flow sustainability.
- Liquidity: As of Dec 31, 2025, the Partnership had $92.0 million outstanding under its $475.0 million ABL Facility, with a borrowing base of $392.5 million. Current assets exceeded current liabilities by approximately $74.6 million.
- Risks: Key risks include commodity price volatility, induced seismic activity related to water disposal (requiring volume reductions or facility shutdowns), and regulatory changes regarding hydraulic fracturing and environmental compliance.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the sustainability of earnings excluding the one-time gains from the sale of the refined products and biodiesel businesses.
- Water Solutions Volume Growth: Confirm the continued increase in produced water volumes processed in the Delaware and DJ Basins, which drove the segment's operating income growth.
- Debt Covenants: Review compliance with the Fixed Charge Coverage Ratio (ABL Facility) and Debt Service Coverage Rate (Term Loan B), noting the Partnership was in compliance as of Dec 31, 2025.
- Common Unit Repurchases: Note that the Partnership repurchased approximately 1.6 million common units in Q3 2025, reducing the outstanding unit count to 123.8 million.
- Seismic Mitigation: Assess the long-term impact of induced seismic events on water disposal capacity and potential revenue constraints in Texas and New Mexico.