NGL Energy Partners LP

For the first quarter, consolidated adjusted EBITDA from continuing operations was $186.2 million versus $143.9 million in the prior-year first quarter, nearly 30% higher. Water Solutions adjusted EBITDA was $179.9 million versus $142.9 million, a 26% increase, and it represented 91% of partnership EBITDA. Physical water disposal volumes were 3.32 million barrels per day versus 2.77 million barrels per day, up 19.6%; total paid-to-dispose volumes were 3.43 million barrels per day versus 3.06 million, up about 12%. Water Solutions operating expense was $0.21 per barrel, and Crude Oil Logistics adjusted EBITDA was $8.6 million versus $9.6 million, while Liquids Logistics adjusted EBITDA was $10.3 million versus $2.9 million. Management raised fiscal 2027 adjusted EBITDA guidance to $725 million-$735 million from $715 million and said growth capital spend this fiscal year will exceed $200 million, with a significant portion of EBITDA from those projects not recognized until fiscal 2028. They also said they expect to redeem about 50% of the remaining Class D preferreds this fiscal year and see line of sight to being 4x levered at fiscal year-end, excluding preferreds.

Mike Krimbill framed the quarter as very strong and said if performance continues, EBITDA guidance could move higher again. He emphasized steady margins in Water Solutions, reliable customer service, and a plan to spend heavily on growth projects in the first half of the year, with leverage declining each quarter. On capital allocation, he said paying down all Class D preferreds is not the highest and best use of cash, and described a path where NGL could redeem about half this year, leave the rest outstanding, and still keep options open for a future distribution reinstatement, more pipeline investment, and M&A.

Brad Cooper highlighted the operating beat: consolidated adjusted EBITDA of $186.2 million, Water Solutions EBITDA of $179.9 million, and Water Solutions volumes of 3.32 million barrels per day, with operating expense at $0.21 per barrel. He said the increase in EBITDA was driven by contracted producer volumes and higher skim oil revenue, helped by higher crude prices on unhedged barrels, and noted over 90% of produced water comes from investment-grade counterparties. On the balance sheet, he said leverage was reduced in the quarter despite heavy front-loaded growth capex, expects deleveraging to continue, and said the company has line of sight to being 4x levered at the end of the fiscal year, excluding preferreds.

Analysts pressed on the durability of Water Solutions growth, and management said it has already added 200,000 barrels per day of new capacity and plans another 300,000 barrels per day for a total of 500,000 barrels per day this year, with new deals expected to land before fiscal 2028 but mostly contributing in that next fiscal year. They also asked about beneficial reuse and mineral extraction, and management said it is actively engaged in talks around both, with mineral extraction ahead on the timeline and a TPDES permit expected this month, which they believe will be economic. On distributions, management said a reinstatement could come back on the table if about half of the Class Ds are removed this fiscal year, and for now they see it as possibly happening in 2027.