NGL Energy Partners LP (NGL) Earnings

Management highlights

### Strategic Transformation Progress - The company closed the sale of its wholesale propane and rack marketing businesses in April 2026, advancing its goal of becoming a pure-play water-focused company. The remaining Liquids Logistics segment will continue to be right-sized as the company works to monetize remaining non-core assets in this division. This disposition eliminated significant EBITDA volatility and working capital swings. ### Capital Structure Improvement - Completed a $950 million refinancing transaction that extended debt maturities and provided capital to reduce outstanding high-cost Class D preferred units. Approximately 285,000 Class D preferred units (47% of the original outstanding amount) were redeemed during fiscal 2026. - The company will continue to reduce Class D preferred units using free cash flow and non-core asset sale proceeds, and will access capital markets for further redemptions once leverage reaches an appropriate level. The company remained opportunistic on repricing term loan B debt, reducing overall interest expense as operational and financial performance improved. - Repurchased 8.7 million common units under the $50 million approved buyback program at an average price of $5.72 per unit; management believes this allocation of capital delivered strong returns that are validated by recent unit price performance. ### Water Solutions Segment Growth - Water Solutions delivered 11% year-over-year EBITDA growth in fiscal 2026. The share of disposal volumes covered by committed volume agreements increased from 45% to 53% during the year, with over 90% of total volumes covered by either contractual volume commitments or acreage dedications. - The company announced a 165,000 barrels per day expansion of the LEX II water system, bringing total capacity to 560,000 barrels per day, with future expansion optionality up to 650,000 barrels per day. The expansion is underwritten by a long-term volume commitment contract that adds an additional four-township committed area in Eddy County. - The segment continues to expand its infrastructure footprint in the Delaware Basin, adding incremental disposal capacity in Andrews County which holds millions of barrels of available pore space.

Guidance

- Management provided consolidated adjusted EBITDA guidance for fiscal 2027 of $715 million to $725 million, representing approximately 10% year-over-year growth at the high end of the range, compared to fiscal 2026's full year adjusted EBITDA of $660 million. - All projected growth is expected to come from the Water Solutions segment, driven by projects that have already been contracted; guidance does not include potential contributions from any new contracts signed after the call, nor benefits from current crude oil price levels. - Total capital expenditure guidance for fiscal 2027 is $200 million for growth capital and $45 million for maintenance capital. The company is absorbing higher pipeline construction costs for new projects and will not pass these costs onto customers. - The majority of the 2027 growth capital budget is allocated to the LEX II expansion, with a smaller portion allocated to other incremental projects, and all capital for the LEX II expansion will be spent within fiscal 2027, mostly in the first two to three quarters of the year.

Segment performance

1. Water Solutions: This is the company's core growth segment. It delivered record quarterly adjusted EBITDA of $153 million in 4Q26, and full year fiscal 2026 adjusted EBITDA of $603 million. Produced water volumes reached 3 million barrels per day in 4Q26, a 10% year-over-year increase. Total billed volumes averaged 3.1 million barrels per day in 4Q26, up from 3 million barrels per day year-over-year. Full year average disposal volumes hit 2.9 million barrels per day, an 11% year-over-year increase. Operating expense per barrel was 22 cents in 4Q26, reflecting ongoing efficiency gains. This segment contributes ~91% of total full year adjusted EBITDA from continuing operations. 2. Crude Oil Logistics: Generated adjusted EBITDA of approximately $17 million in 4Q26. Grand Mesa pipeline volumes averaged 78,000 barrels per day in 4Q26, and 72,000 barrels per day for the full fiscal year. This segment contributes ~3% of total full year adjusted EBITDA from continuing operations. 3. Liquids Logistics: Generated adjusted EBITDA of approximately $17 million in 4Q26, following the divestiture of non-core assets including the wholesale propane business. This segment is now smaller, more stable, with reduced seasonality and lower capital requirements than prior periods. It contributes ~3% of total full year adjusted EBITDA from continuing operations. Consolidated full year adjusted EBITDA from continuing operations was $660 million, and 4Q26 consolidated adjusted EBITDA was $176 million.

Risks & headwinds

Management disclosed that all forward-looking statements are subject to inherent assumptions, risks, and uncertainties that could cause actual actual results to differ materially from projected guidance. No additional specific operational, financial, or market risks were explicitly discussed during the call.

Analyst Q&A

• Q: Does the $200 million 2027 growth capital budget include projects beyond the LEX II expansion, and what is the client split for the LEX II expansion capacity, and what drives the option to expand further to 650,000 barrels per day?

  A: The bulk of the $200 million growth capital is allocated to LEX II, with a small portion for other incremental projects. The expansion capacity is entirely underwritten by existing customers via an amended and extended long-term agreement that added additional volume commitments and a new four-township dedicated acreage area. The option for further expansion to 650,000 barrels per day exists because there is extremely high unmet demand for additional water capacity in the Delaware Basin, with demand continuing to grow rapidly.

• Q: Beyond the already well-documented pull forward in producer activity, are you seeing any further acceleration in activity that could drive additional demand?

  A: The primary trend we are seeing is the previously flagged pull forward of activity. The larger driver of growing demand for our capacity is that overall water volumes in the basin have grown by roughly 10% from ongoing development, with very little available unused capacity left in existing infrastructure. This, rather than near-term commodity price changes, is driving strong deal flow for new contracted projects, as development acceleration and operational efficiency improvements from producers continue to increase generated water volumes.

• Q: What is the current status of next-generation water opportunities like beneficial reuse and desalination, such as the previously announced Natura project?

  A: We are continuing to make strong progress on all previously announced next-generation projects. We expect to receive our draft permit from TCEQ for these projects within the next few weeks after extensive preparatory work. We are also progressing on the energy campus project that includes large-scale desalination, nuclear power power supply, and a potential added data center development, with meaningful advances to date.

• Q: What is the activity and production outlook for the Crude Oil Logistics segment in the DJ Basin for 2027?

  A: We are seeing very strong activity levels in the DJ Basin this year. Private equity-backed smaller producers have consolidated acreage positions and developed more cohesive long-term development plans, which has driven an uptick in activity. We expect this higher activity level to continue through fiscal 2027 and into the next few fiscal years, compared to historical muted activity.