EX-99.1 2 exhibit991q32019earningsre.htm EXHIBIT 99.1 Exhibit


EXHIBIT 99.1

NGL Energy Partners LP Announces Third Quarter Fiscal 2019 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--February 11, 2019--NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported net income for the quarter ended December 31, 2018 of $110.5 million, compared to net income of $56.8 million for the quarter ended December 31, 2017.

Highlights include:

•
Adjusted EBITDA for the third quarter of Fiscal 2019 was $132.6 million, compared to $122.6 million for the third quarter of Fiscal 2018; Fiscal 2019 year-to-date Adjusted EBITDA totals $308.3 million
•
Confirms Fiscal 2019 Adjusted EBITDA guidance of $450 million
•
Reduced indebtedness by $462.8 million since March 31, 2018 and significantly improved leverage
•
Redeemed all of our $367.0 million of outstanding 6.875% Senior Notes due 2021 in October 2018 and expects to redeem all outstanding 5.125% Senior Notes due 2019 in March 2019
•
Received approval from lenders to repurchase up to $150 million in common units
•
Growth capital expenditures and other investments totaled approximately $113.2 million during the third fiscal quarter and $303.6 million during the nine months ended December 31, 2018
•
Completed the sale of our Bakken saltwater disposal business for $91 million in gross cash proceeds on November 30, 2018
•
Entered into definitive agreements to sell our South Pecos water disposal assets for $238.8 million and to purchase DCP’s natural gas liquids terminal business, both of which are expected to close by March 31, 2019

“We are pleased to announce another strong quarter of results with Adjusted EBITDA for the fiscal third quarter growing to $132.6 million. We are reaffirming our Adjusted EBITDA guidance of $450 million for this fiscal year. The steps we have taken over the past year to focus our business strategy and improve our balance sheet are clearly reflected in our financial results,” stated Mike Krimbill, NGL’s CEO. “Our compliance leverage is below our 3.25x target while our distribution coverage is improving and we expect will continue to do so. We now have the means and the authority to repurchase a significant amount of our own equity should the opportunity present itself, but we will remain prudent in our allocation of capital and management of our balance sheet. We are focused on delivering significant value to our unitholders now and in the foreseeable future.”

Quarterly Results of Operations

The following table summarizes operating income (loss) and Adjusted EBITDA by operating segment for the periods indicated:
 
 
Quarter Ended
 
 
December 31, 2018
 
December 31, 2017
 
 
Operating Income (Loss)
 
Adjusted EBITDA
 
Operating Income (Loss)
 
Adjusted EBITDA
 
 
(in thousands)
Crude Oil Logistics
 
$
32,022

 
$
50,693

 
$
106,279

 
$
30,320

Refined Products and Renewables
 
33,680

 
10,541

 
(4,791
)
 
9,194

Liquids
 
21,532

 
26,992

 
22,290

 
19,957

Water Solutions
 
86,737

 
48,250

 
(1,373
)
 
34,886

Corporate and Other
 
(16,394
)
 
(3,728
)
 
(21,846
)
 
(7,028
)
Discontinued Operations
 
—

 
(158
)
 
—

 
35,319

Total
 
$
157,577

 
$
132,590

 
$
100,559

 
$
122,648






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 $50.7 million during the quarter ended December 31, 2018, compared to Adjusted EBITDA of $30.3 million during the quarter ended December 31, 2017. Results for the third quarter of Fiscal 2019 improved compared to the same quarter in Fiscal 2018 primarily due to increased volumes on Grand Mesa Pipeline. Financial volumes averaged approximately 129,000 barrels per day during the quarter ended December 31, 2018, compared to approximately 106,000 barrels per day in the same quarter of the prior year.

The Partnership’s Grand Mesa Pipeline contributed Adjusted EBITDA of approximately $55.1 million during the third quarter of Fiscal 2019, an increase of $11.9 million when compared to Adjusted EBITDA of approximately $43.2 million during the same quarter of last year.

Refined Products and Renewables

The Partnership’s Refined Products and Renewables segment generated Adjusted EBITDA of $10.5 million during the quarter ended December 31, 2018, compared to Adjusted EBITDA of $9.2 million during the quarter ended December 31, 2017. The results for the quarter ended December 31, 2018 were positively impacted by stronger demand at our wholesale locations, especially in the Southeast and West Texas, offset by lower Gulf Coast gasoline and diesel prices.

Refined product barrels sold during the quarter ended December 31, 2018 totaled approximately 58.8 million barrels, an increase of approximately 20.9 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 December 31, 2018 totaled approximately 0.8 million, a decrease of approximately 0.5 million barrels compared to the same period in the prior year.

Liquids

The Partnership’s Liquids segment generated Adjusted EBITDA of $27.0 million during the quarter ended December 31, 2018, compared to Adjusted EBITDA of $20.0 million during the quarter ended December 31, 2017. This increase was the result of increased volumes and improved railcar utilization driven by the Partnership’s efforts to right size its railcar fleet and to continue to grow its business. Total product margin per gallon was $0.049 for the quarter ended December 31, 2018, compared to $0.047 for the quarter ended December 31, 2017.

Propane volumes increased by approximately 29.8 million gallons, or 7.5%, during the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017. Butane volumes increased by approximately 10.4 million gallons, or 5.4%, during the quarter ended December 31, 2018 compared to the quarter ended December 31, 2017. Other Liquids volumes increased by approximately 26.2 million gallons, or 25.2%, during the quarter ended December 31, 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, our business development efforts, and third-party pipeline infrastructure issues.

Water Solutions

The Partnership’s Water Solutions segment generated Adjusted EBITDA of $48.3 million during the quarter ended December 31, 2018, compared to Adjusted EBITDA of $34.9 million during the quarter ended December 31, 2017. The Partnership processed approximately 999,000 barrels of wastewater per day during the quarter ended December 31, 2018, a 26.5% increase when compared to approximately 789,000 barrels of wastewater per day during the quarter ended December 31, 2017. The Partnership completed the sale of its Bakken saltwater disposal business on November 30, 2018.

Processed water volumes have increased, as compared to the same quarter in the prior year, as the segment continued to benefit from crude oil activity, including increased rig activity and crude oil production compared to the prior period. Processed water volumes decreased, as compared to the previous quarter, primarily due to the sale of our assets in the Bakken, well workovers and other maintenance at certain of our facilities. Revenues from recovered hydrocarbons totaled $17.2 million for the quarter ended December 31, 2018, an increase of $0.2 million over the prior year period. Revenues from recovered hydrocarbons were negatively impacted by lower skim oil volumes recovered per wastewater barrel processed. Lower skim oil volumes were due primarily to an increase in wastewater transported through pipelines (which contains less oil per barrel of wastewater), as well as operational changes in the DJ basin.





Corporate and Other

Adjusted EBITDA for Corporate and Other was $(3.7) million during the quarter ended December 31, 2018, compared to Adjusted EBITDA of $(7.0) million during the quarter ended December 31, 2017. The reduction in costs was due primarily to the sale of our retail propane business and lower legal costs related to certain litigation matters that were resolved or litigated in prior quarters.

Capitalization and Liquidity

Total debt outstanding, excluding working capital borrowings, was $1.329 billion at December 31, 2018 compared to $1.711 billion at March 31, 2018, a decrease of $382.3 million. The Partnership’s Leverage Ratio (as defined in our Credit Agreement) is now approximately 2.96x. On October 16, 2018, we redeemed all of our outstanding 6.875% Senior Notes due 2021 using amounts available under our revolving credit facility. We expect to redeem our 5.125% Senior Notes due 2019 by the end of March 2019 using proceeds from our South Pecos sale and borrowings under our revolving credit facility.

Working capital borrowings totaled $889.0 million at December 31, 2018 compared to $969.5 million at March 31, 2018, a decrease of $80.5 million. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $741.1 million as of December 31, 2018, which does not include the $238.8 million in gross proceeds from our South Pecos sale, which is expected to close by our fiscal year-end.

On February 6, 2019, we amended our Credit Agreement to, among other things, reset the basket for the repurchase of common units with a limit of $150 million in aggregate during the remaining term of the Credit Agreement, not to exceed $50 million per fiscal quarter, so long as, both immediately before and after giving pro forma effect to the repurchases, the Partnership’s Leverage Ratio (as defined in our Credit Agreement) is less than 3.25x and Revolving Availability (also as defined in our Credit Agreement) is greater than or equal to $200 million. The Partnership currently meets these thresholds and expects to maintain them for the remaining term of the agreement.

Third Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled for 10:00 am Central Time on Monday, February 11, 2019. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 9478607. An archived audio replay of the conference call will be available for 7 days beginning at 10:00 am Central Time on February 12, 2019, which can be accessed by dialing (855) 859-2056 and providing access code 9478607.

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), income (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)
 
December 31, 2018
 
March 31, 2018
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
23,025

 
$
22,094

Accounts receivable-trade, net of allowance for doubtful accounts of $4,463 and $4,201, respectively
1,006,033

 
1,026,764

Accounts receivable-affiliates
12,564

 
4,772

Inventories
572,931

 
551,303

Prepaid expenses and other current assets
210,452

 
128,742

Assets held for sale
124,509

 
517,604

Total current assets
1,949,514

 
2,251,279

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $402,025 and $343,345, respectively
1,726,162

 
1,518,607

GOODWILL
1,182,614

 
1,204,607

INTANGIBLE ASSETS, net of accumulated amortization of $492,892 and $433,565, respectively
922,763

 
913,154

INVESTMENTS IN UNCONSOLIDATED ENTITIES
4,797

 
17,236

LOAN RECEIVABLE-AFFILIATE
—

 
1,200

OTHER NONCURRENT ASSETS
170,097

 
245,039

Total assets
$
5,955,947

 
$
6,151,122

LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES AND REDEEMABLE NONCONTROLLING INTEREST:
 
 
 
Accounts payable-trade
$
905,958

 
$
852,839

Accounts payable-affiliates
23,410

 
1,254

Accrued expenses and other payables
263,732

 
223,504

Advance payments received from customers
21,437

 
8,374

Current maturities of long-term debt, net of debt issuance costs of $666 and $0, respectively
339,867

 
646

Liabilities and redeemable noncontrolling interest held for sale
10,564

 
42,580

Total current liabilities and redeemable noncontrolling interest
1,564,968

 
1,129,197

LONG-TERM DEBT, net of debt issuance costs of $12,602 and $20,645, respectively, and current maturities
1,877,701

 
2,679,740

OTHER NONCURRENT LIABILITIES
74,903

 
173,514

 
 
 
 
CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 19,942,169 and 19,942,169 preferred units issued and outstanding, respectively
122,934

 
82,576

 
 
 
 
EQUITY:
 
 
 
General partner, representing a 0.1% interest, 124,158 and 121,594 notional units, respectively
(50,581
)
 
(50,819
)
Limited partners, representing a 99.9% interest, 124,033,723 and 121,472,725 common units issued and outstanding, respectively
2,085,780

 
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
(273
)
 
(1,815
)
Noncontrolling interests
77,784

 
83,503

Total equity
2,315,441

 
2,086,095

Total liabilities and equity
$
5,955,947

 
$
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 December 31,
 
Nine Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
REVENUES:
 
 
 
 
 
 
 
 
Crude Oil Logistics
 
$
751,180

 
$
585,007

 
$
2,395,064

 
$
1,526,944

Water Solutions
 
75,458

 
64,024

 
231,367

 
162,023

Liquids
 
749,433

 
759,589

 
1,759,772

 
1,464,784

Refined Products and Renewables
 
4,800,430

 
2,944,874

 
14,488,619

 
8,806,717

Other
 
319

 
289

 
1,066

 
696

Total Revenues
 
6,376,820

 
4,353,783

 
18,875,888

 
11,961,164

COST OF SALES:
 
 
 
 
 
 
 
 
Crude Oil Logistics
 
685,417

 
552,871

 
2,226,397

 
1,423,511

Water Solutions
 
(39,470
)
 
10,192

 
(17,309
)
 
13,019

Liquids
 
707,187

 
721,246

 
1,668,646

 
1,404,147

Refined Products and Renewables
 
4,760,756

 
2,951,440

 
14,440,852

 
8,781,009

Other
 
494

 
117

 
1,481

 
311

Total Cost of Sales
 
6,114,384

 
4,235,866

 
18,320,067

 
11,621,997

OPERATING COSTS AND EXPENSES:
 
 
 
 
 
 
 
 
Operating
 
62,892

 
51,140

 
179,463

 
146,768

General and administrative
 
24,779

 
26,396

 
86,538

 
69,939

Depreciation and amortization
 
53,434

 
52,210

 
158,229

 
158,222

(Gain) loss on disposal or impairment of assets, net
 
(36,246
)
 
(112,388
)
 
71,077

 
(13,246
)
Revaluation of liabilities
 
—

 
—

 
800

 
5,600

Operating Income (Loss)
 
157,577

 
100,559

 
59,714

 
(28,116
)
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
 
1,777

 
2,588

 
2,375

 
6,677

Interest expense
 
(39,151
)
 
(51,696
)
 
(126,777
)
 
(150,918
)
Loss on early extinguishment of liabilities, net
 
(10,083
)
 
(21,141
)
 
(10,220
)
 
(22,479
)
Other income (expense), net
 
1,292

 
1,881

 
(31,006
)
 
5,251

Income (Loss) From Continuing Operations Before Income Taxes
 
111,412

 
32,191

 
(105,914
)
 
(189,585
)
INCOME TAX EXPENSE
 
(980
)
 
(364
)
 
(2,322
)
 
(869
)
Income (Loss) From Continuing Operations
 
110,432

 
31,827

 
(108,236
)
 
(190,454
)
Income From Discontinued Operations, net of Tax
 
96

 
24,942

 
404,414

 
9,937

Net Income (Loss)
 
110,528

 
56,769

 
296,178

 
(180,517
)
LESS: NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
307

 
(89
)
 
1,170

 
(221
)
LESS: NET (INCOME) LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS
 
—

 
(424
)
 
446

 
261

NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP
 
$
110,835

 
$
56,256

 
$
297,794

 
$
(180,477
)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
 
$
80,876

 
$
15,470

 
$
(180,870
)
 
$
(232,893
)
NET INCOME FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS
 
$
96

 
$
24,494

 
$
404,455

 
$
10,187

NET INCOME (LOSS) ALLOCATED TO COMMON UNITHOLDERS
 
$
80,972

 
$
39,964

 
$
223,585

 
$
(222,706
)
BASIC INCOME (LOSS) PER COMMON UNIT
 
 
 
 
 
 
 
 
Income (Loss) From Continuing Operations
 
$
0.65

 
$
0.13

 
$
(1.48
)
 
$
(1.92
)
Income From Discontinued Operations, net of Tax
 
0.00

 
0.20

 
3.30

 
0.08

Net Income (Loss)
 
$
0.65

 
$
0.33

 
$
1.82

 
$
(1.84
)
DILUTED INCOME (LOSS) PER COMMON UNIT
 
 
 
 
 
 
 
 
Income (Loss) From Continuing Operations
 
$
0.64

 
$
0.12

 
$
(1.48
)
 
$
(1.92
)
Income From Discontinued Operations, net of Tax
 
0.00

 
0.20

 
3.30

 
0.08

Net Income (Loss)
 
$
0.64

 
$
0.32

 
$
1.82

 
$
(1.84
)
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
 
123,892,680

 
120,844,008

 
122,609,625

 
120,899,502

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
 
125,959,751

 
124,161,966

 
122,609,625

 
120,899,502





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 December 31,
 
Nine Months Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Net income (loss)
$
110,528

 
$
56,769

 
$
296,178

 
$
(180,517
)
Less: Net loss (income) attributable to noncontrolling interests
307

 
(89
)
 
1,170

 
(221
)
Less: Net (income) loss attributable to redeemable noncontrolling interests
—

 
(424
)
 
446

 
261

Net income (loss) attributable to NGL Energy Partners LP
110,835

 
56,256

 
297,794

 
(180,477
)
Interest expense
39,151

 
51,825

 
126,930

 
151,391

Income tax expense
988

 
364

 
2,454

 
934

Depreciation and amortization
54,153

 
67,025

 
169,235

 
204,514

EBITDA
205,127

 
175,470

 
596,413

 
176,362

Net unrealized (gains) losses on derivatives
(47,909
)
 
775

 
(30,849
)
 
16,851

Inventory valuation adjustment (1)
(61,665
)
 
27,786

 
(60,497
)
 
6,439

Lower of cost or market adjustments
48,198

 
(3,907
)
 
47,785

 
5,504

Gain on disposal or impairment of assets, net
(36,507
)
 
(112,520
)
 
(337,925
)
 
(12,282
)
Loss on early extinguishment of liabilities, net
10,083

 
21,141

 
10,220

 
22,479

Equity-based compensation expense (2)
7,845

 
12,228

 
32,575

 
27,114

Acquisition expense (3)
5,155

 
186

 
9,270

 
132

Revaluation of liabilities (4)
—

 
—

 
800

 
5,600

Gavilon legal matter settlement (5)
(212
)
 
—

 
34,788

 
—

Other (6)
2,475

 
1,489

 
5,694

 
4,130

Adjusted EBITDA
132,590

 
122,648

 
308,274

 
252,329

Less: Cash interest expense (7)
36,922

 
49,043

 
119,654

 
142,758

Less: Income tax expense
988

 
364

 
2,454

 
934

Less: Maintenance capital expenditures
9,521

 
12,156

 
37,210

 
26,677

Less: Other (8)
237

 
316

 
546

 
549

Distributable Cash Flow
$
84,922

 
$
60,769

 
$
148,410

 
$
81,411

 
(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 December 31, 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 December 31, 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 December 31, 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 nine months ended December 31, 2018 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations. Amounts for the three months and nine months ended December 31, 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 December 31, 2018
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating income (loss)
 
$
32,022

 
$
86,737

 
$
21,532

 
$
33,680

 
$
(16,394
)
 
$
—

 
$
157,577

Depreciation and amortization
 
18,387

 
27,561

 
6,412

 
321

 
753

 
—

 
53,434

Amortization recorded to cost of sales
 
—

 
—

 
37

 
1,348

 
—

 
—

 
1,385

Net unrealized gains on derivatives
 
(13,165
)
 
(34,114
)
 
(630
)
 
—

 
—

 
—

 
(47,909
)
Inventory valuation adjustment
 
—

 
—

 
—

 
(61,665
)
 
—

 
—

 
(61,665
)
Lower of cost or market adjustments
 
11,446

 
—

 
—

 
36,752

 
—

 
—

 
48,198

Gain on disposal or impairment of assets, net
 
(75
)
 
(36,171
)
 
—

 
—

 
—

 
—

 
(36,246
)
Equity-based compensation expense
 
—

 
—

 
—

 
—

 
7,845

 
—

 
7,845

Acquisition expense
 
—

 
3,459

 
—

 
—

 
1,696

 
—

 
5,155

Other income (expense), net
 
3

 
(1,134
)
 
19

 
(180
)
 
2,584

 
—

 
1,292

Adjusted EBITDA attributable to unconsolidated entities
 
—

 
1,845

 
—

 
—

 
—

 
—

 
1,845

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
(33
)
 
(394
)
 
—

 
—

 
—

 
(427
)
Gavilon legal matter settlement
 
—

 
—

 
—

 
—

 
(212
)
 
—

 
(212
)
Other
 
2,075

 
100

 
16

 
285

 
—

 
—

 
2,476

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
(158
)
 
(158
)
Adjusted EBITDA
 
$
50,693

 
$
48,250

 
$
26,992

 
$
10,541

 
$
(3,728
)
 
$
(158
)
 
$
132,590






 
 
Three Months Ended December 31, 2017
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating income (loss)
 
$
106,279

 
$
(1,373
)
 
$
22,290

 
$
(4,791
)
 
$
(21,846
)
 
$
—

 
$
100,559

Depreciation and amortization
 
20,092

 
24,586

 
6,247

 
323

 
962

 
—

 
52,210

Amortization recorded to cost of sales
 
85

 
—

 
70

 
1,350

 
—

 
—

 
1,505

Net unrealized losses (gains) on derivatives
 
962

 
8,504

 
(8,550
)
 
—

 
—

 
—

 
916

Inventory valuation adjustment
 
—

 
—

 
—

 
27,786

 
—

 
—

 
27,786

Lower of cost or market adjustments
 
5,207

 
—

 
—

 
(9,114
)
 
—

 
—

 
(3,907
)
(Gain) loss on disposal or impairment of assets, net
 
(107,574
)
 
2,929

 
(214
)
 
(7,529
)
 
—

 
—

 
(112,388
)
Equity-based compensation expense
 
—

 
—

 
—

 
—

 
12,228

 
—

 
12,228

Acquisition expense
 
—

 
—

 
—

 
—

 
186

 
—

 
186

Other income, net
 
5

 
190

 
93

 
151

 
1,442

 
—

 
1,881

Adjusted EBITDA attributable to unconsolidated entities
 
3,887

 
144

 
—

 
1,018

 
—

 
—

 
5,049

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
(185
)
 
—

 
—

 
—

 
—

 
(185
)
Other
 
1,377

 
91

 
21

 
—

 
—

 
—

 
1,489

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
35,319

 
35,319

Adjusted EBITDA
 
$
30,320

 
$
34,886

 
$
19,957

 
$
9,194

 
$
(7,028
)
 
$
35,319

 
$
122,648






 
 
Nine Months Ended December 31, 2018
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating (loss) income
 
$
(36,694
)
 
$
97,476

 
$
34,913

 
$
33,195

 
$
(69,176
)
 
$
—

 
$
59,714

Depreciation and amortization
 
56,486

 
79,212

 
19,339

 
962

 
2,230

 
—

 
158,229

Amortization recorded to cost of sales
 
80

 
—

 
110

 
4,044

 
—

 
—

 
4,234

Net unrealized (gains) losses on derivatives
 
(11,895
)
 
(23,216
)
 
4,183

 
—

 
—

 
—

 
(30,928
)
Inventory valuation adjustment
 
—

 
—

 
—

 
(60,497
)
 
—

 
—

 
(60,497
)
Lower of cost or market adjustments
 
11,446

 
—

 
(504
)
 
36,843

 
—

 
—

 
47,785

Loss (gain) on disposal or impairment of assets, net
 
105,186

 
(32,966
)
 
994

 
(3,026
)
 
889

 
—

 
71,077

Equity-based compensation expense
 
—

 
—

 
—

 
—

 
32,575

 
—

 
32,575

Acquisition expense
 
—

 
3,459

 
161

 
—

 
5,696

 
—

 
9,316

Other income (expense), net
 
26

 
(1,504
)
 
63

 
66

 
(29,657
)
 
—

 
(31,006
)
Adjusted EBITDA attributable to unconsolidated entities
 
—

 
2,214

 
—

 
476

 
—

 
—

 
2,690

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
(119
)
 
(945
)
 
—

 
—

 
—

 
(1,064
)
Revaluation of liabilities
 
—

 
800

 
—

 
—

 
—

 
—

 
800

Gavilon legal matter settlement
 
—

 
—

 
—

 
—

 
34,788

 
—

 
34,788

Other
 
4,976

 
304

 
49

 
365

 
—

 
—

 
5,694

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
4,867

 
4,867

Adjusted EBITDA
 
$
129,611

 
$
125,660

 
$
58,363

 
$
12,428

 
$
(22,655
)
 
$
4,867

 
$
308,274





 
 
Nine Months Ended December 31, 2017
 
 
Crude Oil
Logistics
 
Water
Solutions
 
Liquids
 
Refined
Products
and
Renewables
 
Corporate
and
Other
 
Discontinued Operations
 
Consolidated
 
 
(in thousands)
Operating income (loss)
 
$
111,832

 
$
(10,075
)
 
$
(104,589
)
 
$
30,747

 
$
(56,031
)
 
$
—

 
$
(28,116
)
Depreciation and amortization
 
61,885

 
73,847

 
18,718

 
971

 
2,801

 
—

 
158,222

Amortization recorded to cost of sales
 
254

 
—

 
211

 
4,131

 
—

 
—

 
4,596

Net unrealized losses on derivatives
 
2,473

 
11,526

 
2,763

 
—

 
—

 
—

 
16,762

Inventory valuation adjustment
 
—

 
—

 
—

 
6,439

 
—

 
—

 
6,439

Lower of cost or market adjustments
 
5,207

 
—

 
—

 
297

 
—

 
—

 
5,504

(Gain) loss on disposal or impairment of assets, net
 
(111,290
)
 
3,114

 
117,515

 
(22,585
)
 
—

 
—

 
(13,246
)
Equity-based compensation expense
 
—

 
—

 
—

 
—

 
27,114

 
—

 
27,114

Acquisition expense
 
—

 
—

 
—

 
—

 
132

 
—

 
132

Other income, net
 
99

 
210

 
100

 
486

 
4,356

 
—

 
5,251

Adjusted EBITDA attributable to unconsolidated entities
 
11,507

 
425

 
—

 
3,125

 
—

 
—

 
15,057

Adjusted EBITDA attributable to noncontrolling interest
 
—

 
(619
)
 
—

 
—

 
—

 
—

 
(619
)
Revaluation of liabilities
 
—

 
5,600

 
—

 
—

 
—

 
—

 
5,600

Other
 
3,790

 
276

 
64

 
—

 
—

 
—

 
4,130

Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
45,503

 
45,503

Adjusted EBITDA
 
$
85,757

 
$
84,304

 
$
34,782

 
$
23,611

 
$
(21,628
)
 
$
45,503

 
$
252,329








OPERATIONAL DATA
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
December 31,
 
December 31,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except per day amounts)
Crude Oil Logistics:
 
 
 
 
 

 
 

Crude oil sold (barrels)
12,333

 
10,006

 
35,449

 
28,588

Crude oil transported on owned pipelines (barrels)
11,820

 
9,228

 
31,385

 
24,176

Crude oil storage capacity - owned and leased (barrels) (1)
 
 
 
 
5,362

 
6,362

Crude oil inventory (barrels) (1)
 
 
 
 
1,204

 
1,356

 
 
 
 
 
 
 
 
Water Solutions:
 
 
 
 
 
 
 
Wastewater processed (barrels per day)
 
 
 
 
 
 
 
Eagle Ford Basin
282,070

 
255,634

 
277,431

 
228,698

Permian Basin
461,722

 
334,556

 
455,211

 
280,158

DJ Basin
177,412

 
121,061

 
159,980

 
114,156

Other Basins
77,320

 
78,144

 
82,928

 
66,884

Total
998,524

 
789,395

 
975,550

 
689,896

Solids processed (barrels per day)
7,284

 
6,095

 
6,728

 
5,357

Skim oil sold (barrels per day)
3,609

 
3,623

 
3,516

 
2,923

 
 
 
 
 
 
 
 
Liquids:
 
 
 
 
 
 
 
Propane sold (gallons)
428,961

 
399,211

 
929,401

 
881,719

Butane sold (gallons)
201,891

 
191,504

 
446,340

 
408,440

Other products sold (gallons)
130,362

 
104,136

 
372,282

 
296,756

Liquids storage capacity - owned and leased (gallons) (1)
 
 
 
 
399,757

 
453,971

Propane inventory (gallons) (1)
 
 
 
 
120,239

 
130,940

Butane inventory (gallons) (1)
 
 
 
 
34,488

 
41,941

Other products inventory (gallons) (1)
 
 
 
 
8,367

 
9,616

 
 
 
 
 
 
 
 
Refined Products and Renewables:
 
 
 
 
 
 
 
Gasoline sold (barrels)
42,882

 
22,902

 
130,687

 
77,877

Diesel sold (barrels)
15,931

 
15,004

 
39,765

 
43,792

Ethanol sold (barrels)
592

 
900

 
1,757

 
2,892

Biodiesel sold (barrels)
237

 
477

 
815

 
1,672

Refined Products and Renewables storage capacity - leased (barrels) (1)
 
 
 
 
10,293

 
9,046

Gasoline inventory (barrels) (1)
 
 
 
 
3,942

 
3,007

Diesel inventory (barrels) (1)
 
 
 
 
1,815

 
1,605

Ethanol inventory (barrels) (1)
 
 
 
 
1,292

 
684

Biodiesel inventory (barrels) (1)
 
 
 
 
162

 
153

 
(1)
Information is presented as of December 31, 2018 and December 31, 2017, respectively.