EX-99.1 2 exhibit991q22019earningsre.htm EXHIBIT 99.1 Exhibit


EXHIBIT 99.1

NGL Energy Partners LP Announces Second Quarter Fiscal 2019 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--November 8, 2018--NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported net income for the quarter ended September 30, 2018 of $354.9 million, compared to a net loss of $173.6 million for the quarter ended September 30, 2017. Net income for the current quarter includes a gain of $408.6 million
on the sale of virtually all of our remaining Retail Propane segment.

Highlights include:

•
Adjusted EBITDA for the second quarter of Fiscal 2019 was $95.4 million, compared to $90.8 million for the second quarter of Fiscal 2018, an increase of 5.1%
•
Completed the sale of virtually all of our remaining Retail Propane segment to Superior Plus Corp. (“Superior Plus”) for approximately $900 million in gross proceeds (adjusted for working capital) on July 10, 2018
•
Redeemed all of our $367.0 million of outstanding 6.875%Senior Notes due 2021 on October 16, 2018
•
Confirms Fiscal 2019 Adjusted EBITDA guidance of $450 million
•
Growth capital expenditures, including $110.1 million in acquisitions of Water Solutions facilities and related assets, and other investments, totaled approximately $195.2 million during the second quarter (excluding the former Retail Propane segment)

“We are reporting our second consecutive quarter of record Adjusted EBITDA compared to the same quarters of the prior year. We believe we have successfully repositioned NGL over the past twelve months by raising $1.5 billion in asset sales at double digit multiples, lowering leverage substantially and expanding our Water Solutions business in the Permian Basin. Our quarterly results came in very strong, particularly in the Crude Oil Logistics and Liquids segments, which are trending towards the higher end of our annual guidance,” stated NGL’s CEO Mike Krimbill. “Grand Mesa continues to outpace our projections and will benefit from increased volumes. Our Water Solutions business continues to grow as we execute on securing long-term contracts for wastewater disposal and build our water pipeline infrastructure. Our Refined Products profitability has shifted to the second half of the Fiscal Year. We are very proud of the progress we have made through the first half of this year and we are confident about our performance for the remainder of Fiscal 2019.”


Quarterly Results of Operations

The following table summarizes operating income (loss) and Adjusted EBITDA by operating segment for the periods indicated:
 
 
Quarter Ended
 
 
September 30, 2018
 
September 30, 2017
 
 
Operating Income (Loss)
 
Adjusted EBITDA
 
Operating Income (Loss)
 
Adjusted EBITDA
 
 
(in thousands)
Crude Oil Logistics
 
$
31,022

 
$
48,477

 
$
1,196

 
$
29,601

Refined Products and Renewables
 
(29,507
)
 
(1,876
)
 
21,042

 
22,216

Liquids
 
10,758

 
20,530

 
(118,107
)
 
16,065

Water Solutions
 
9,770

 
38,813

 
(7,548
)
 
27,273

Corporate and Other
 
(35,352
)
 
(10,063
)
 
(16,459
)
 
(7,795
)
Discontinued Operations (1)
 
—

 
(511
)
 
—

 
3,392

Total
 
$
(13,309
)
 
$
95,370

 
$
(119,876
)
 
$
90,752

 
(1)
On July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior Plus for total consideration of $896.5 million in cash after adjusting for estimated working capital. As a result, the results of operations of our former Retail Propane segment have been classified as discontinued operations.




The tables included in this release reconcile operating income (loss) to Adjusted EBITDA, a non-GAAP financial measure, for each of our operating segments.

Crude Oil Logistics

The Partnership’s Crude Oil Logistics segment generated Adjusted EBITDA of $48.5 million during the quarter ended September 30, 2018, compared to Adjusted EBITDA of $29.6 million during the quarter ended September 30, 2017. Results for the second quarter of Fiscal 2019 improved compared to the same quarter in Fiscal 2018 primarily due to increased volumes on Grand Mesa Pipeline as well as improved margins in most of the basins in which the segment operates.

The Partnership’s Grand Mesa Pipeline contributed Adjusted EBITDA of approximately $46.1 million during the second quarter of Fiscal 2019, an increase of $8.1 million when compared to Adjusted EBITDA of approximately $38.0 million during the same quarter of last year, due to increased volumes related to production growth in the DJ Basin. Financial volumes averaged approximately 109,000 barrels per day during the quarter ended September 30, 2018.

Refined Products and Renewables

The Partnership’s Refined Products and Renewables segment generated Adjusted EBITDA of $(1.9) million during the quarter ended September 30, 2018, compared to Adjusted EBITDA of $22.2 million during the quarter ended September 30, 2017. The results for the quarter ended September 30, 2018 were negatively impacted by significant price volatility and minor supply disruptions, offset by stronger demand at our wholesale locations, especially in the Southeast and West Texas. Additionally, margins were favorably impacted during the three months ended September 30, 2017 due to Gulf Coast prices increasing significantly as a result of supply disruptions.

Refined product barrels sold during the quarter ended September 30, 2018 totaled approximately 59.1 million barrels, an increase of approximately 17.7 million barrels compared to the same period in the prior year due to an increase in bulk sales volumes. Renewable barrels sold during the quarter ended September 30, 2018 totaled approximately 0.9 million, a decrease of approximately 0.7 million barrels compared to the same period in the prior year.

Liquids

The Partnership’s Liquids segment generated Adjusted EBITDA of $20.5 million during the quarter ended September 30, 2018, compared to Adjusted EBITDA of $16.1 million during the quarter ended September 30, 2017. Total product margin per gallon was $0.048 for the quarter ended September 30, 2018, compared to $0.025 for the quarter ended September 30, 2017, as a result of higher prices, increased volumes and improved railcar utilization driven by the Partnership’s efforts to right size its railcar fleet.

Propane volumes increased by approximately 8.9 million gallons, or 3.4%, during the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017. Butane volumes increased by approximately 6.0 million gallons, or 4.8%, during the quarter ended September 30, 2018 compared to the quarter ended September 30, 2017. Other Liquids volumes increased by approximately 22.9 million gallons, or 22.5%, during the quarter ended September 30, 2018 compared to the same period in the prior year. The increase in overall volumes is primarily attributable to an increase in natural gas liquids volumes being transported by railcars due to increased production and third-party pipeline infrastructure issues.

Water Solutions

The Partnership’s Water Solutions segment generated Adjusted EBITDA of $38.8 million during the quarter ended September 30, 2018, compared to Adjusted EBITDA of $27.3 million during the quarter ended September 30, 2017. The Partnership processed approximately 1,008,000 barrels of wastewater per day during the quarter ended September 30, 2018, a 53.7% increase when compared to approximately 655,000 barrels of wastewater per day during the quarter ended September 30, 2017.

Processed water volumes have increased in each basin in which the segment operates as the segment continued to benefit from high crude oil prices, increased rig activity and crude oil production. Revenues from recovered hydrocarbons totaled $18.3 million for the quarter ended September 30, 2018, an increase of $7.8 million over the prior year period, related to an increase in the volume of wastewater processed and increased crude oil prices; however, these revenues were negatively impacted by lower skim oil volumes recovered per wastewater barrel processed and basin differentials impacting the net price received for the skim oil sales.





Maintenance capital expenditures for the Water Solutions segment have also increased compared to prior periods due to costs incurred for the replacement and repair of facilities that have been struck by lightning, the installation of new lightning prevention equipment and upgrades or replacement of smaller/obsolete tubing and pumps which are not expected to be recurring.

Retail Propane - Discontinued Operations

The Partnership’s Retail Propane segment generated Adjusted EBITDA of $(0.5) million during the quarter ended September 30, 2018, compared to Adjusted EBITDA of $3.2 million during the quarter ended September 30, 2017. On July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior Plus.

Corporate and Other

Adjusted EBITDA for Corporate and Other was $(10.1) million during the quarter ended September 30, 2018, compared to Adjusted EBITDA of $(7.8) million during the quarter ended September 30, 2017. The increased cost was due primarily to increased legal costs related to certain litigation matters.

Capitalization and Liquidity

On July 10, 2018, the Partnership completed the sale of virtually all of its remaining Retail Propane segment and received total consideration of $896.5 million in cash. Proceeds were used to reduce outstanding borrowings on the Partnership’s revolving credit facility and to fund growth capital expenditures and acquisitions during the quarter, primarily in the Water Solutions segment.

Total debt outstanding, excluding working capital borrowings, was $1.773 billion at September 30, 2018 compared to $1.711 billion at March 31, 2018, an increase of $62.2 million, due primarily to the Partnership temporarily paying down a portion of its working capital borrowings with proceeds from the Retail Propane sale. During the quarter ended September 30, 2018, the Partnership issued a notice of redemption of all of its outstanding 6.875% Senior Notes due 2021, which are included in current maturities of debt in the September 30, 2018 balance sheet. On October 16, 2018, we redeemed all of our outstanding 6.875% Senior Notes due 2021 using amounts available under our revolving credit facility. The registered holders received a redemption payment of 101.719% of the principal amount, plus accrued and unpaid interest, which equaled $0.19 per $1,000 of the redeemed notes.

Working capital borrowings totaled $759.0 million at September 30, 2018 compared to $969.5 million at March 31, 2018, a decrease of $210.5 million driven primarily by the use of funds from the sale of our Retail Propane segment to repay debt, which was partially offset by higher accounts receivable and inventory balances. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $775.0 million as of September 30, 2018.

Second Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled for 11:00 am Eastern Time (10:00 am Central Time) on Thursday, November 8, 2018. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 5983587. An archived audio replay of the conference call will be available for 7 days beginning at 11:00 am Eastern Time (10:00 am Central Time) on November 9, 2018, which can be accessed by dialing (855) 859-2056 and providing access code 5983587.

Non-GAAP Financial Measures

NGL defines EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. NGL defines Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or market adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other. We also include in Adjusted EBITDA certain inventory valuation adjustments related to our Refined Products and Renewables segment, as discussed below. EBITDA and Adjusted EBITDA should not be considered alternatives to net income (loss), loss from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. NGL believes that EBITDA provides additional information to investors for evaluating NGL’s ability to make quarterly distributions to NGL’s unitholders and is




presented solely as a supplemental measure. NGL believes that Adjusted EBITDA provides additional information to investors for evaluating NGL’s financial performance without regard to NGL’s financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as NGL defines them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities.

Other than for NGL’s Refined Products and Renewables segment, for purposes of the Adjusted EBITDA calculation, NGL makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, NGL records changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, NGL reverses the previously recorded unrealized gain or loss and records a realized gain or loss. NGL does not draw such a distinction between realized and unrealized gains and losses on derivatives of NGL’s Refined Products and Renewables segment. The primary hedging strategy of NGL’s Refined Products and Renewables segment is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges are six months to one year in duration at inception. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of NGL’s Refined Products and Renewables segment at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. We include this in Adjusted EBITDA because the unrealized gains and losses associated with derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA.

Distributable Cash Flow is defined as Adjusted EBITDA minus maintenance capital expenditures, income tax expense, cash interest expense and other. Maintenance capital expenditures represent capital expenditures necessary to maintain the Partnership’s operating capacity. Distributable Cash Flow is a performance metric used by senior management to compare cash flows generated by the Partnership (excluding growth capital expenditures and prior to the establishment of any retained cash reserves by the Board of Directors) to the cash distributions expected to be paid to unitholders. Using this metric, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions. This financial measure also is important to investors as an indicator of whether the Partnership is generating cash flow at a level that can sustain, or support an increase in, quarterly distribution rates. Actual distribution amounts are set by the Board of Directors.

Forward Looking Statements

This press release includes “forward-looking statements.” All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. While NGL believes such forward-looking statements are reasonable, NGL cannot assure they will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings with the Securities and Exchange Commission. Other factors that could impact any forward-looking statements are those risks described in NGL’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other public filings. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” NGL undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.

NGL provides Adjusted EBITDA guidance that does not include certain charges and costs, which in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as income taxes, interest and other non-operating items, depreciation and amortization, net unrealized gains and losses on derivatives, lower of cost or market adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities and items that are unusual in nature or infrequently occurring. The exclusion of these charges and costs in future periods will have a significant impact on the Partnership’s Adjusted EBITDA, and the Partnership is not able to provide a reconciliation of its Adjusted EBITDA guidance to net income (loss) without unreasonable efforts due to the uncertainty and variability of the nature and amount of these future charges and costs and the Partnership believes that such reconciliation, if possible, would imply a degree of precision that would be potentially confusing or misleading to investors.

About NGL Energy Partners LP

NGL Energy Partners LP is a Delaware limited partnership. NGL owns and operates a vertically integrated energy business with four primary businesses: Crude Oil Logistics, Water Solutions, Liquids, and Refined Products and Renewables. NGL completed its initial public offering in May 2011. For further information, visit the Partnership’s website at www.nglenergypartners.com.

NGL Energy Partners LP




Trey Karlovich, 918-481-1119
Chief Financial Officer and Executive Vice President
Trey.Karlovich@nglep.com

or

Linda Bridges, 918-481-1119
Senior Vice President - Finance and Treasurer
Linda.Bridges@nglep.com




NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in Thousands, except unit amounts)
 
September 30, 2018
 
March 31, 2018
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
36,374

 
$
22,094

Accounts receivable-trade, net of allowance for doubtful accounts of $4,225 and $4,201, respectively
1,366,597

 
1,026,764

Accounts receivable-affiliates
17,888

 
4,772

Inventories
679,125

 
551,303

Prepaid expenses and other current assets
159,617

 
128,742

Assets held for sale
—

 
517,604

Total current assets
2,259,601

 
2,251,279

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $388,557 and $343,345, respectively
1,706,612

 
1,518,607

GOODWILL
1,271,648

 
1,204,607

INTANGIBLE ASSETS, net of accumulated amortization of $481,691 and $433,565, respectively
966,929

 
913,154

INVESTMENTS IN UNCONSOLIDATED ENTITIES
4,520

 
17,236

LOAN RECEIVABLE-AFFILIATE
—

 
1,200

OTHER NONCURRENT ASSETS
176,129

 
245,039

Total assets
$
6,385,439

 
$
6,151,122

LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES AND REDEEMABLE NONCONTROLLING INTEREST:
 
 
 
Accounts payable-trade
$
1,045,415

 
$
852,839

Accounts payable-affiliates
42,798

 
1,254

Accrued expenses and other payables
267,296

 
223,504

Advance payments received from customers
29,658

 
8,374

Current maturities of long-term debt, net of debt issuance costs of $4,874 and $0, respectively
716,245

 
646

Liabilities and redeemable noncontrolling interest held for sale
—

 
42,580

Total current liabilities and redeemable noncontrolling interest
2,101,412

 
1,129,197

LONG-TERM DEBT, net of debt issuance costs of $13,234 and $20,645, respectively, and current maturities
1,815,855

 
2,679,740

OTHER NONCURRENT LIABILITIES
86,396

 
173,514

 
 
 
 
CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 19,942,169 and 19,942,169 preferred units issued and outstanding, respectively
104,362

 
82,576

 
 
 
 
EQUITY:
 
 
 
General partner, representing a 0.1% interest, 123,865 and 121,594 notional units, respectively
(50,613
)
 
(50,819
)
Limited partners, representing a 99.9% interest, 123,741,462 and 121,472,725 common units issued and outstanding, respectively
2,046,621

 
1,852,495

Class B preferred limited partners, 8,400,000 and 8,400,000 preferred units issued and outstanding, respectively
202,731

 
202,731

Accumulated other comprehensive loss
(270
)
 
(1,815
)
Noncontrolling interests
78,945

 
83,503

Total equity
2,277,414

 
2,086,095

Total liabilities and equity
$
6,385,439

 
$
6,151,122






NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in Thousands, except unit and per unit amounts)
 
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
REVENUES:
 
 
 
 
 
 
 
 
Crude Oil Logistics
 
$
860,054

 
$
437,022

 
$
1,643,884

 
$
941,937

Water Solutions
 
79,764

 
51,032

 
155,909

 
97,999

Liquids
 
550,442

 
411,170

 
1,010,339

 
705,195

Refined Products and Renewables
 
5,163,782

 
2,977,206

 
9,688,189

 
5,861,843

Other
 
592

 
246

 
747

 
407

Total Revenues
 
6,654,634

 
3,876,676

 
12,499,068

 
7,607,381

COST OF SALES:
 
 
 
 
 
 
 
 
Crude Oil Logistics
 
792,735

 
401,170

 
1,540,980

 
870,640

Water Solutions
 
7,892

 
2,674

 
22,161

 
2,827

Liquids
 
520,944

 
395,616

 
961,459

 
682,901

Refined Products and Renewables
 
5,187,238

 
2,957,867

 
9,680,096

 
5,829,569

Other
 
718

 
121

 
987

 
194

Total Cost of Sales
 
6,509,527

 
3,757,448

 
12,205,683

 
7,386,131

OPERATING COSTS AND EXPENSES:
 
 
 
 
 
 
 
 
Operating
 
60,309

 
47,792

 
116,571

 
95,628

General and administrative
 
39,369

 
21,158

 
61,759

 
43,543

Depreciation and amortization
 
52,750

 
53,595

 
104,795

 
106,012

Loss on disposal or impairment of assets, net
 
5,988

 
110,959

 
107,323

 
99,142

Revaluation of liabilities
 
—

 
5,600

 
800

 
5,600

Operating Loss
 
(13,309
)
 
(119,876
)
 
(97,863
)
 
(128,675
)
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
 
379

 
2,170

 
598

 
4,089

Interest expense
 
(41,358
)
 
(50,118
)
 
(87,626
)
 
(99,222
)
Gain (loss) on early extinguishment of liabilities, net
 
—

 
1,943

 
(137
)
 
(1,338
)
Other income (expense), net
 
1,471

 
1,637

 
(32,298
)
 
3,370

Loss From Continuing Operations Before Income Taxes
 
(52,817
)
 
(164,244
)
 
(217,326
)
 
(221,776
)
INCOME TAX EXPENSE
 
(691
)
 
(49
)
 
(1,342
)
 
(505
)
Loss From Continuing Operations
 
(53,508
)
 
(164,293
)
 
(218,668
)
 
(222,281
)
Income (Loss) From Discontinued Operations, net of Tax
 
408,447

 
(9,286
)
 
404,318

 
(15,005
)
Net Income (Loss)
 
354,939

 
(173,579
)
 
185,650

 
(237,286
)
LESS: NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
518

 
(80
)
 
863

 
(132
)
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS
 
48

 
288

 
446

 
685

NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
 
$
355,505

 
$
(173,371
)
 
$
186,959

 
$
(236,733
)
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
 
$
(76,925
)
 
$
(180,325
)
 
$
(261,746
)
 
$
(248,363
)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
 
$
408,086

 
$
(8,990
)
 
$
404,359

 
$
(14,307
)
NET INCOME (LOSS) ALLOCATED TO COMMON UNITHOLDERS
 
$
331,161

 
$
(189,315
)
 
$
142,613

 
$
(262,670
)
BASIC INCOME (LOSS) PER COMMON UNIT
 
 
 
 
 
 
 
 
Loss From Continuing Operations
 
$
(0.63
)
 
$
(1.49
)
 
$
(2.15
)
 
$
(2.05
)
Income (Loss) From Discontinued Operations, net of Tax
 
3.33

 
(0.07
)
 
3.32

 
(0.12
)
Net Income (Loss)
 
$
2.70

 
$
(1.56
)
 
$
1.17

 
$
(2.17
)
DILUTED INCOME (LOSS) PER COMMON UNIT
 
 
 
 
 
 
 
 
Loss From Continuing Operations
 
$
(0.63
)
 
$
(1.49
)
 
$
(2.15
)
 
$
(2.05
)
Income (Loss) From Discontinued Operations, net of Tax
 
3.33

 
(0.07
)
 
3.32

 
(0.12
)
Net Income (Loss)
 
$
2.70

 
$
(1.56
)
 
$
1.17

 
$
(2.17
)
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
 
122,380,197

 
121,314,636

 
121,964,593

 
120,927,400

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
 
122,380,197

 
121,314,636

 
121,964,593

 
120,927,400





EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION
(Unaudited)
 
The following table reconciles NGL’s net income (loss) to NGL’s EBITDA, Adjusted EBITDA and Distributable Cash Flow:
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Net income (loss)
$
354,939

 
$
(173,579
)
 
$
185,650

 
$
(237,286
)
Less: Net loss (income) attributable to noncontrolling interests
518

 
(80
)
 
863

 
(132
)
Less: Net loss attributable to redeemable noncontrolling interests
48

 
288

 
446

 
685

Net income (loss) attributable to NGL Energy Partners LP
355,505

 
(173,371
)
 
186,959

 
(236,733
)
Interest expense
41,367

 
50,288

 
87,779

 
99,566

Income tax expense
815

 
111

 
1,466

 
570

Depreciation and amortization
53,507

 
69,426

 
115,082

 
137,489

EBITDA
451,194

 
(53,546
)
 
391,286

 
892

Net unrealized (gains) losses on derivatives
(1,893
)
 
18,077

 
17,060

 
16,076

Inventory valuation adjustment (1)
25,770

 
(2,165
)
 
1,168

 
(21,347
)
Lower of cost or market adjustments
—

 
5,333

 
(413
)
 
9,411

(Gain) loss on disposal or impairment of assets, net
(403,185
)
 
111,451

 
(301,418
)
 
100,238

(Gain) loss on early extinguishment of liabilities, net
—

 
(1,943
)
 
137

 
1,338

Equity-based compensation expense (2)
19,219

 
6,065

 
24,730

 
14,886

Acquisition expense (3)
2,863

 
264

 
4,115

 
(54
)
Revaluation of liabilities (4)
—

 
5,600

 
800

 
5,600

Gavilon legal matter settlement (5)
—

 
—

 
35,000

 
—

Other (6)
1,402

 
1,616

 
3,219

 
2,641

Adjusted EBITDA
95,370

 
90,752

 
175,684

 
129,681

Less: Cash interest expense (7)
38,892

 
47,344

 
82,732

 
93,715

Less: Income tax expense
815

 
111

 
1,466

 
570

Less: Maintenance capital expenditures
15,299

 
7,994

 
27,689

 
14,521

Less: Other (8)
309

 
233

 
309

 
233

Distributable Cash Flow
$
40,055

 
$
35,070

 
$
63,488

 
$
20,642

 
(1)
Amount reflects the difference between the market value of the inventory of NGL’s Refined Products and Renewables segment at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. See “Non-GAAP Financial Measures” section above for a further discussion.
(2)
Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in the footnotes to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.
(3)
Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including amounts accrued related to the LCT Capital, LLC legal matter (as discussed in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018), partially offset by reimbursement for certain legal costs incurred in prior periods.
(4)
Amounts represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.
(5)
Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018). We have excluded this amount from Adjusted EBITDA as it relates to transactions that occurred prior to our acquisition of Gavilon LLC in December 2013.
(6)
Amounts for the three months and six months ended September 30, 2018 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized loss on marketable securities and accretion expense for asset retirement obligations. Amounts for the three months and six months ended September 30, 2017 represent non-cash operating expenses related to our Grand Mesa Pipeline and accretion expense for asset retirement obligations.
(7)
Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.
(8)
Amounts represents cash paid to settle asset retirement obligations.




ADJUSTED EBITDA RECONCILIATION BY SEGMENT
 
 
Three Months Ended September 30, 2018
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating income (loss)
 
$
31,022

 
$
9,770

 
$
10,758

 
$
(29,507
)
 
$
(35,352
)
 
$
—

 
$
(13,309
)
Depreciation and amortization
 
18,870

 
26,342

 
6,459

 
320

 
759

 
—

 
52,750

Amortization recorded to cost of sales
 
—

 
—

 
36

 
1,348

 
—

 
—

 
1,384

Net unrealized (gains) losses on derivatives
 
(6,142
)
 
1,788

 
2,476

 
—

 
—

 
—

 
(1,878
)
Inventory valuation adjustment
 
—

 
—

 
—

 
25,770

 
—

 
—

 
25,770

Loss on disposal or impairment of assets, net
 
3,367

 
730

 
1,004

 
—

 
887

 
—

 
5,988

Equity-based compensation expense
 
—

 
—

 
—

 
—

 
19,219

 
—

 
19,219

Acquisition expense
 
—

 
—

 
1

 
—

 
2,864

 
—

 
2,865

Other income (expense), net
 
9

 
(370
)
 
9

 
263

 
1,560

 
—

 
1,471

Adjusted EBITDA attributable to unconsolidated entities
 
—

 
423

 
—

 
—

 
—

 
—

 
423

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
26

 
(229
)
 
—

 
—

 
—

 
(203
)
Other
 
1,351

 
104

 
16

 
(70
)
 
—

 
—

 
1,401

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
(511
)
 
(511
)
Adjusted EBITDA
 
$
48,477

 
$
38,813

 
$
20,530

 
$
(1,876
)
 
$
(10,063
)
 
$
(511
)
 
$
95,370






 
 
Three Months Ended September 30, 2017
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating income (loss)
 
$
1,196

 
$
(7,548
)
 
$
(118,107
)
 
$
21,042

 
$
(16,459
)
 
$
—

 
$
(119,876
)
Depreciation and amortization
 
20,958

 
25,253

 
6,141

 
324

 
919

 
—

 
53,595

Amortization recorded to cost of sales
 
84

 
—

 
71

 
1,351

 
—

 
—

 
1,506

Net unrealized losses on derivatives
 
2,170

 
3,022

 
12,682

 
—

 
—

 
—

 
17,874

Inventory valuation adjustment
 
—

 
—

 
—

 
(2,165
)
 
—

 
—

 
(2,165
)
Lower of cost or market adjustments
 
—

 
—

 
(2,476
)
 
7,809

 
—

 
—

 
5,333

(Gain) loss on disposal or impairment of assets, net
 
(157
)
 
915

 
117,729

 
(7,528
)
 
—

 
—

 
110,959

Equity-based compensation expense
 
—

 
—

 
—

 
—

 
6,065

 
—

 
6,065

Acquisition expense
 
—

 
—

 
—

 
—

 
264

 
—

 
264

Other income, net
 
50

 
2

 
3

 
167

 
1,415

 
—

 
1,637

Adjusted EBITDA attributable to unconsolidated entities
 
3,798

 
127

 
—

 
1,216

 
1

 
—

 
5,142

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
(190
)
 
—

 
—

 
—

 
—

 
(190
)
Revaluation of liabilities
 
—

 
5,600

 
—

 
—

 
—

 
—

 
5,600

Other
 
1,502

 
92

 
22

 
—

 
—

 
—

 
1,616

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
3,392

 
3,392

Adjusted EBITDA
 
$
29,601

 
$
27,273

 
$
16,065

 
$
22,216

 
$
(7,795
)
 
$
3,392

 
$
90,752






 
 
Six Months Ended September 30, 2018
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating (loss) income
 
$
(68,716
)
 
$
10,739

 
$
13,381

 
$
(485
)
 
$
(52,782
)
 
$
—

 
$
(97,863
)
Depreciation and amortization
 
38,099

 
51,651

 
12,927

 
641

 
1,477

 
—

 
104,795

Amortization recorded to cost of sales
 
80

 
—

 
73

 
2,696

 
—

 
—

 
2,849

Net unrealized losses on derivatives
 
1,270

 
10,898

 
4,813

 
—

 
—

 
—

 
16,981

Inventory valuation adjustment
 
—

 
—

 
—

 
1,168

 
—

 
—

 
1,168

Lower of cost or market adjustments
 
—

 
—

 
(504
)
 
91

 
—

 
—

 
(413
)
Loss (gain) on disposal or impairment of assets, net
 
105,261

 
3,205

 
994

 
(3,026
)
 
889

 
—

 
107,323

Equity-based compensation expense
 
—

 
—

 
—

 
—

 
24,730

 
—

 
24,730

Acquisition expense
 
—

 
—

 
161

 
—

 
4,000

 
—

 
4,161

Other income (expense), net
 
23

 
(370
)
 
44

 
246

 
(32,241
)
 
—

 
(32,298
)
Adjusted EBITDA attributable to unconsolidated entities
 
—

 
369

 
—

 
476

 
—

 
—

 
845

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
(86
)
 
(551
)
 
—

 
—

 
—

 
(637
)
Revaluation of liabilities
 
—

 
800

 
—

 
—

 
—

 
—

 
800

Gavilon legal matter settlement
 
—

 
—

 
—

 
—

 
35,000

 
—

 
35,000

Other
 
2,901

 
204

 
33

 
80

 
—

 
—

 
3,218

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
5,025

 
5,025

Adjusted EBITDA
 
$
78,918

 
$
77,410

 
$
31,371

 
$
1,887

 
$
(18,927
)
 
$
5,025

 
$
175,684





 
 
Six Months Ended September 30, 2017
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating income (loss)
 
$
5,553

 
$
(8,702
)
 
$
(126,879
)
 
$
35,538

 
$
(34,185
)
 
$
—

 
$
(128,675
)
Depreciation and amortization
 
41,793

 
49,261

 
12,471

 
648

 
1,839

 
—

 
106,012

Amortization recorded to cost of sales
 
169

 
—

 
141

 
2,781

 
—

 
—

 
3,091

Net unrealized losses on derivatives
 
1,511

 
3,022

 
11,313

 
—

 
—

 
—

 
15,846

Inventory valuation adjustment
 
—

 
—

 
—

 
(21,347
)
 
—

 
—

 
(21,347
)
Lower of cost or market adjustments
 
—

 
—

 
—

 
9,411

 
—

 
—

 
9,411

(Gain) loss on disposal or impairment of assets, net
 
(3,716
)
 
185

 
117,729

 
(15,056
)
 
—

 
—

 
99,142

Equity-based compensation expense
 
—

 
—

 
—

 
—

 
14,886

 
—

 
14,886

Acquisition expense
 
—

 
—

 
—

 
—

 
(54
)
 
—

 
(54
)
Other income, net
 
94

 
20

 
7

 
335

 
2,914

 
—

 
3,370

Adjusted EBITDA attributable to unconsolidated entities
 
7,620

 
281

 
—

 
2,107

 
—

 
—

 
10,008

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
(434
)
 
—

 
—

 
—

 
—

 
(434
)
Revaluation of liabilities
 
—

 
5,600

 
—

 
—

 
—

 
—

 
5,600

Other
 
2,413

 
185

 
43

 
—

 
—

 
—

 
2,641

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
10,184

 
10,184

Adjusted EBITDA
 
$
55,437

 
$
49,418

 
$
14,825

 
$
14,417

 
$
(14,600
)
 
$
10,184

 
$
129,681








OPERATIONAL DATA
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except per day amounts)
Crude Oil Logistics:
 
 
 
 
 

 
 

Crude oil sold (barrels)
11,891

 
8,562

 
23,116

 
18,582

Crude oil transported on owned pipelines (barrels)
9,578

 
8,182

 
19,565

 
14,948

Crude oil storage capacity - owned and leased (barrels) (1)
 
 
 
 
7,287

 
6,159

Crude oil inventory (barrels) (1)
 
 
 
 
681

 
1,682

 
 
 
 
 
 
 
 
Water Solutions:
 
 
 
 
 
 
 
Wastewater processed (barrels per day)
 
 
 
 
 
 
 
Eagle Ford Basin
271,059

 
209,792

 
275,099

 
215,156

Permian Basin
489,861

 
273,290

 
455,885

 
252,810

DJ Basin
166,152

 
108,952

 
151,216

 
110,685

Other Basins
80,577

 
63,443

 
81,801

 
61,223

Total
1,007,649

 
655,477

 
964,001

 
639,874

Solids processed (barrels per day)
6,995

 
5,794

 
6,450

 
4,986

Skim oil sold (barrels per day)
3,326

 
2,618

 
3,470

 
2,572

 
 
 
 
 
 
 
 
Liquids:
 
 
 
 
 
 
 
Propane sold (gallons)
266,654

 
257,775

 
500,440

 
482,508

Butane sold (gallons)
131,424

 
125,419

 
244,449

 
216,936

Other products sold (gallons)
124,935

 
102,009

 
241,920

 
192,620

Liquids storage capacity - owned and leased (gallons) (1)
 
 
 
 
399,967

 
453,971

Propane inventory (gallons) (1)
 
 
 
 
117,206

 
136,980

Butane inventory (gallons) (1)
 
 
 
 
67,448

 
111,632

Other products inventory (gallons) (1)
 
 
 
 
7,658

 
8,810

 
 
 
 
 
 
 
 
Refined Products and Renewables:
 
 
 
 
 
 
 
Gasoline sold (barrels)
47,067

 
26,459

 
87,805

 
54,975

Diesel sold (barrels)
12,057

 
14,990

 
23,834

 
28,788

Ethanol sold (barrels)
621

 
978

 
1,165

 
1,992

Biodiesel sold (barrels)
250

 
568

 
578

 
1,195

Refined Products and Renewables storage capacity - leased (barrels) (1)
 
 
 
 
10,037

 
9,070

Gasoline inventory (barrels) (1)
 
 
 
 
3,187

 
1,862

Diesel inventory (barrels) (1)
 
 
 
 
1,428

 
1,148

Ethanol inventory (barrels) (1)
 
 
 
 
1,072

 
513

Biodiesel inventory (barrels) (1)
 
 
 
 
942

 
375

 
(1)
Information is presented as of September 30, 2018 and September 30, 2017, respectively.