NGL Energy Partners LP Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Asset Sales: Closed sale of 18 natural gas liquids terminals, Rack Marketing refined products business, Limestone Ranch ownership, and most of the crude oil railcar fleet. Proceeds were used to pay off ABL indebtedness and purchase Class D preferred units. The wind-down of non-core businesses eliminated on average $75 million of working capital.
• Water Solutions Growth: Entered a five-year 200,000 barrel per day MVC contract and constructed the LEX II water pipeline (placed in service in Nov 2024). Achieved record water disposal volumes and adjusted EBITDA in fiscal 2025. Volumes are ahead of internal expectations in Q1 2026.
• Capital Structure: Paid off dividend arrearages on all preferred units, is current on preferred equity financial obligations, and has purchased and retired Class D preferred equity. Focus is on reducing leverage and rightsizing the portfolio.

Segment Performance

• Water Solutions: Fourth quarter adjusted EBITDA was $154.9 million compared to $123.4 million in the prior year fourth quarter. Physical water disposal volumes were 2.73 million barrels per day in Q4 2025 versus 2.39 million barrels per day in the prior year fourth quarter. Total volumes paid to dispose of were 2.89 million barrels per day in Q4 2025 versus 2.6 million barrels per day in the prior year fourth quarter. For full-year 2025, adjusted EBITDA from continuing operations was $622.9 million, with Water Solutions contributing significantly.
• Crude oil logistics: Fourth quarter adjusted EBITDA was $13.1 million versus $15.3 million in the prior year fourth quarter. Volumes on the Grand Mesa pipeline averaged approximately 56,000 barrels per day in Q4 2025 compared to 67,000 barrels per day in the prior year fourth quarter.
• Liquids Logistics: Fourth quarter adjusted EBITDA was $17.7 million versus $22.2 million in the prior fourth quarter. Margins for product sales decreased due to a weak gasoline blending season for butane, while expenses decreased due to reduced compensation.

Guidance

• Fiscal 2026 adjusted EBITDA guidance: $615 million to $625 million with total capital expenditures of $105 million, with $60 million spent on growth projects in the Water Solutions segment.
• Water disposal volumes are ahead of internal expectations in Q1 2026. Fiscal 2026 guidance accounts for a pullback in oil prices relative to FY 2025 and excludes asset sale impacts from FY 2025.

Risks

• Commodity price uncertainty and tariffs could impact the Water Solutions segment.
• Volatility in liquids logistics businesses and potential delay in growth opportunities due to oil price uncertainty.

Q: Regarding 2026 guidance and operating assumptions for water and crude logistics A: Brad and Doug discussed water guidance, noting the water guide in the $620 million midpoint implies about $560 million, accounting for oil price pullback and excluding asset sale impacts. Doug also spoke about focus on core business and growth through existing agreements.

Q: Flexibility of capital spending A: Capital spending is already low, with maintenance capital predominantly for water, and not much room to go lower.

Q: Volumes and variability in water business A: Volumes vary due to recycling and completion timing, with swings of 500,000 barrels per day, but no volumetric changes from customers detected.

Q: Reinstating common unit distributions A: Near term focus is on reducing Class D preferred units and reducing leverage; no immediate plan to reinstate common unit distributions.