Q4 2022 NGL Energy Partners LP Earnings Call
[music].
Yeah.
Good afternoon.
Ladies and gentlemen, and welcome to the NGL Energy partners L. P for Q and year end 2022 earnings call.
At this time, all participants have been placed in a listen only mode and we will open the floor for your questions and comments. After the presentation. It's now my pleasure to turn the floor over to your host Jay.
Bridges CFO the floor is yours.
Hi, and welcome to Ngls fourth quarter and year end fiscal 2022 earnings call to start I would like to call your attention to our safe Harbor language, which can be found towards the end of the partnership's earnings release, which was filed after the market closed this afternoon.
Today's remarks may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 in accordance with the Act I would also like to direct your attention to the management's discussion and analysis section and the risk factors discussed in the partnerships annual report on Form 10-K for the year ended March 31, 2022 and in other SEC.
These filings made by the partnership which are available on our website and on the SEC website.
These together with the Safe Harbor statement in the earnings release set forth important factors that could cause actual results to differ materially from those contained in any such forward looking statements.
Looking back at fiscal 2022, our financial performance has started to produce results that reflect the quality of our asset base and validation of our strategy. Our water solutions segment saw a tremendous growth in fiscal 'twenty, two with adjusted EBITDA of $342 million growing 42% or more than $100 million year over year as under.
Buying volumes grew over 30% on a volume basis and as our skim oil sales benefited from higher realized crude oil prices.
Fourth quarter volumes grew nearly 5% over the preceding fiscal quarter and as expected we exited the year at approximately 2 million barrels of processed volumes per day <unk>.
Additionally, the partnership reported total recycled volumes of approximately 34 million barrels for fiscal 2022.
We expect processed water volumes for fiscal 2023 to average $2 2 million barrels per day, a level that we have already seen in may.
Margin for fiscal 2022 totaled 46 cents.
Per barrel, which includes disposal and skim oil revenue offset by Opex per barrel. We believe this is a reasonable estimate for margin going forward.
The liquids logistics segment reported total adjusted EBITDA for fiscal 2022 of $96 5 million.
Our wholesale propane business had a challenging first quarter and full fiscal year due to lower volumes and margins as we experienced lower demand and increased competition in the areas in which we operate as well as challenging market conditions related to our backward dated propane price curve over the course of our fiscal year.
Despite a difficult year, and propane or butane refined products and biodiesel businesses performed exceptionally well with elevated margins due to tight supply market increases in demand for these products and favorable location differentials.
As a whole this segment should perform slightly better than this past fiscal year as we expect to see some rebound in our propane business in fiscal 2023 based off of current market conditions as well as earnings from Ambassador pipeline, which was not in service during fiscal 2022.
Please remember however, the majority of cash flow for the liquids logistics segment is and will continue to be generated in the second half of our fiscal year drivers include winter weather and agricultural demand for propane gasoline demand refining activity and market disruption.
Crude logistics reported adjusted EBITDA for the year of $146 million, which was higher than expected due to realized gains on the sale of inventory due to rapidly increasing crude oil prices.
These gains are expected to be offset by approximately 12% to $13 million of net realized losses related to commodity derivatives in the first quarter of fiscal 2023.
Similar to what we saw in fiscal 'twenty two going forward should we continue to experience a highly volatile crude price environment. We would expect to continue to see fluctuations in our quarter over quarter adjusted EBITDA numbers due to timing differences between the physical and financial settlements of inventory sales.
Again, these fluctuations relate to timing and any increase or decrease due to timing in a particular fiscal quarter will be offset in subsequent fiscal quarters, leaving the underlying business neutral for fiscal 'twenty. Three we expect the underlying crude logistics business to perform relatively in line with fiscal 2022.
Moving to the balance sheet, we repurchased approximately $86 million of unsecured notes during fifth during the fiscal year.
The remaining majority of free cash flow generated in fiscal 'twenty two remains on the balance sheet driven by an increase in inventory values due to higher commodity prices.
Inventory values decrease we should see this cash flow come back to us at which time, we expect it will be utilized for debt reduction of the 2023 senior notes.
Additionally, our distributable cash flow for fiscal 2022 includes approximately $55 million related to certain realized losses on commodity derivatives related to our previously discussed CMA differential roll hedge strategy that will return to the partnership in the form of realized gains on or before the exploration of the hedge strategy in December .
2023.
Liquidity on March 31 totaled $233 million in light of rapidly increasing commodity prices, we proactively reached out to our bank group to increase our ABL commitment to accommodate higher working capital needs subsequent to the quarter end. Our commitment was temporarily increased from 500 to 600 million with full participation.
From our Bank group this increase along with certain other initiatives being pursued should give us sufficient liquidity to fund elevated working capital requirement as well as repay most if not all of our 2023 notes by the end of this fiscal year.
While we're not prepared to discuss the specifics of these initiatives on this call we hope to have updates in the coming months.
With that I'll turn it over to Mike for his comments.
Thank you Linda.
Well. This is a very exciting time for NGL, we are turning the corner and have strong momentum going into fiscal year 2023.
Our water solutions business is continuing to grow significantly.
Our prior years capital investment is fueling that momentum, allowing us to provide capacity to our upstream customers without delays.
When we get into the specifics to briefly review our current focus.
One prudent management of the balance sheet, reducing absolute debt and leverage 2020 threes are the primary target.
To reduce leverage below 47, five in order to reinstate the preferred dividends and increase our financial flexibility. We will achieve this through a combination of reduced debt and increased EBITDA.
Three generate significant free cash flow from operations to provide the cash to repay the debt.
<unk> enhanced that free cash flow by reducing working capital requirements, decreasing capex and monetizing underutilized assets.
While at the same time continue to pursue growth opportunities leveraging volume capacity in our water solutions network with minimal new investments, we do not turn down any water offered at a reasonable price.
The breadth and redundancy of our water pipeline system, our customers know they can depend on NGL when we commit to take their work.
Now, let's discuss fiscal 'twenty three.
Our EBITDA guidance is in excess of $600 million.
We do not have an upper range as it could vary significantly depending upon the continuing strong commodity price environment.
We are increasing our water solutions EBITDA forecast from $385 million.
To at least $400 million.
The fourth quarter of the recently completed fiscal 'twenty two was the first $90 million EBITDA.
Quarter for water solutions.
We have clarity into the first quarter of fiscal 'twenty, three where it appears we will realize our first $100 million EBITDA per quarter.
In terms of volume to fourth quarter of last year averaged 193 million barrels a day.
And we expect the first quarter of 2023 to average $2 2 million barrels a day, both excluding any recycle volumes.
This is more than a 10% increase in just three months.
Volumes in excess of this level during the subsequent quarters of this year could allow us to further increase EBITDA guidance.
As a result of increased water volumes.
We are capturing additional skim oil and realizing higher revenues due to both more volume and higher crude prices.
At this time, we do not have clarity into the first quarter estimates for crude oil and liquids logistics segments.
As they have significant inventory quantities subject to the timing of physical versus financial results in other words hedge gains or losses versus the offsetting financial gains and losses.
We are cautiously optimistic but conservative conservative at this time with respect to these segments guiding EBITDA roughly flat through fiscal 'twenty three.
We will have the ambassador pipeline fully operational and in service.
Did the Marysville this summer.
We will realize a full winter of performance this year from our investment in Michigan.
Okay.
Continuing with items that determine our free cash flow interest expense is about 95% fixed for NGL. So the increase in interest rates is not impactful.
As we repay indebtedness lower interest costs provide additional free cash flow each year, a 15% to $25 million, depending on the debt reduction.
Regarding regarding capex due to our legacy investments our capex should decrease annually.
In fiscal 'twenty, two maintenance and growth Capex were 47% and $75 million, respectively about a $120 million.
Fiscal 'twenty three is forecasted to be about 20% lower at $39 $60 million respectively.
Approximately 50% of the growth Capex in 'twenty three is committed to the new long term produced water transportation recycling.
Postal agreement announced February 10th of this year.
This agreement contemplates a 24 inch pipeline with four new SW DS and surface facilities.
In addition, we're twinning the 30 inch poker Lake pipeline to provide.
Combined capacity of the $2 30 inch lines of 700000 barrels per day plus.
Plus a 16 inch pipeline in SWT for a third customer.
We are currently negotiating with additional producers that could result in further dedications and thus connections.
Would require some capital.
We continue to monetize underutilized assets as every dollar helps reduce debt, we realized about $20 million of sales in 'twenty, two and we are progressing towards another $20 million this year.
In summary, we are expecting a strong beginning to the current year with the potential for an even stronger back half of the year.
And finally, I would like to tell KJ 65, and <unk> 2020 that yes, I am dancing.
With that we'll open it up for questions.
Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your Touchtone phone.
<unk> start to will remove you from the queue should your question be answered and lastly, while posing your questions. Please pickup your handset of listening on speaker phone to provide optimum sound quality. Please hold while we poll for questions. Once again Thats Star. One if you have a question or comments on the first question is coming from Tarek Hamid with Jpmorgan. Your line is.
Life.
Good afternoon.
Hello.
So on the water business, obviously really really strong performance and it's good to see the guidance.
About $400 million of EBITDA, there you sort of touched on a little bit narrow opening remarks, but that sort of $600 million of total EBITDA.
<unk> $400 million of.
Water EBITDA in the low end would sort of imply $200 million of EBITDA out of crude oil logistics on liquid logistics and that clearly would be sort of down from about a little over $2 40 in 2000 and fiscal 2022. So can you help maybe just bridge us a little bit about how you're thinking about that is that sort of conservatism and sort of being a little bit too precise with those numbers.
Just any other color would be helpful.
I think you're missing the offset of corporate expenses to that.
And that should bridge you.
Okay.
Sure.
Yes, it's it loser corporate overhead we have the number was 30.
I think it was about $39 million, so that would be a $40 million difference.
Yes.
So really just think about it as flattish and the crude and liquids logistics.
Yes.
And then.
Second on the CMA hedge I think you talked about.
$12 million to $13 million or at the Don correctly.
Expected EBITDA impact in the next quarter.
Obviously, the cash flow impact of the overall hedging program was pretty tough this quarter at about 90 million I guess could you sort of give us any color on what you expect the cash flow impact.
Look like of the commodity hedging program in this upcoming quarter.
Yes, So I think we've mixed a couple of items that $12 million to $13 million is the net.
Loss on commodity derivatives that we expect to hit in the first quarter, yes.
That some of the gains so thats not relating necessarily to the CMA differential role.
Without knowing what the price curve is going to do it is difficult to predict.
What the cash flow impact is.
Typically if you're hedging into a backward dated market and prices are realizing on those hedges at higher prices that would be a cash flow outflow.
And vice versa.
Wow.
Okay.
Just sort of a sense of how it should work.
Will look like in this upcoming quarter relative to this last quarter.
Not without knowing what commodity prices are going to do for the next few months.
Okay fair enough.
That's it for me.
Okay. The next question is coming from Jason Mandel with RBC. Your line is live.
Hi, guys. Thanks for taking the question.
So.
Obviously the outlook for the water business is really strong, but it seems like the next couple of quarters could be a little challenging from an outright total cash flow perspective, including settlements that everything which I think is I guess as I understand it is part of $100 million increase on the revolver is are there any other thoughts towards other levers to pull to give yourselves a little bit more.
Our headroom from a liquidity perspective asset sales or other capital structure moves.
Yes, yes, I think we referenced it in the.
Earnings comments, but we are working on a few different initiatives.
From both.
Liquidity and debt pay down perspective, we kind of specifically stated that we're not prepared to talk about those initiatives at this time, but we would hope to provide updates in the coming months.
Okay. Thank you and then the $100 million expansion on the facility it sounds like that is.
Just to give a little bit more breathing room over the next couple of quarters. When when working capital is more challenging and then I guess that facility drops back down early in 'twenty. Three is there any hope for plan, our expectation to extend that date or there's no need.
Based on what we are seeing today.
I would say that so let me back up the agreement is that we will reduce that commitment back down to 500 million by March 31 of this.
Next year, it really depends on what commodity prices do between now and then the initial reason for requesting the additional $100 million.
Was related to just higher working capital needs due to increased in increases in commodity prices. If we continue to see these higher levels.
We would most likely.
Talk with the bank group going into next year.
Okay very good I'll hop back in the queue. Thanks for your help.
Up next we have Robert Kane with <unk> LLC, Robert your lines life. Thank you.
Good afternoon.
Im curious I know the goal on labor.
The leverage ratio is 475, where are we right now.
Right now.
Believes were right around <unk>.
Six two.
Okay.
Just posted an investor presentation that walks through where we expect to be where we ended the year and where we expect to be at the end of next year.
Alright very good.
Do we have on earnings per share number on this quarter.
Okay.
Don't have that pulled up.
It's going to be in our 10-K, though we would have posted that right after market close today.
Okay.
Look at that in that industry.
Alright, I thought you would have that number that are available.
Okay.
We have been.
Yes, not really.
Now I just checked the 10-K.
Okay.
That's not a number we really pay any attention to it but we pay attention to the free cash flow and the EBITDA.
Very good alright, I'll take it I'll take a look at that.
You've answered my questions.
Okay is there any remaining questions or comments. Please indicate so by pressing star one up next we have Robert Stetson private Investor Robert Your line is live.
Robert Gutman your line is live.
Alright, thank you.
Investor primarily in the preferred shares and two.
Typically.
With the preferred shares are in suspension on the dividends being suspended.
Oh.
The preferred shareholders have a right to name.
One or more.
Directors to the board.
Is that the case here.
No no.
Okay.
The largest preferred share investor is AIG and they have the right to appoint one board member, but it came with their investment not because of this suspension of dividends.
And do they have any intention of following through on that.
Yes, <unk> had a board member since the day of the investment.
Yes.
Okay.
So.
What was the dividend suspended at the time they made the investment.
Subsequent to the investment.
Okay.
We invested.
What on a board member you can check our board members that members Mr. Andy Wade.
AIG and Keith.
Currently on the board.
We expect it will be until they are repaid.
Okay.
Great. Thank you.
Yes.
Okay. The next question is coming from John Horton with BMO. Your line is live.
Thank you good afternoon, Michael and Linda I appreciate the opportunity.
Last quarter, you gave a lot more color on the status of the ambassador pipeline do you have a couple of points that you would highlight now as far as the progress there and with the excitement that was noted by some of the retailers in the region.
Do you see a favorable contract situation for this next year, though.
Increase the growth.
Sure Jeff Peter is here, who runs liquid. So we'll just have to give can give an update on both the pipeline connections Marysville et cetera, and then what we're seeing with the response from retailers.
Good afternoon.
Yes.
The reception and in Michigan has been very warm.
Had the Wheeler terminal, which if youll recall was built about halfway up the pipeline and the center of the state total west of Saginaw.
We had.
We completed that and brought it in service February 1st of this year.
<unk>.
Customers were very excited to come to a brand new facility.
Very efficient pump and truck loading system and so we moved I think over 1 million gallons of first month in service and.
The reception has been great.
The <unk>.
Pipeline connection itself, we have the bulk of the line ready to go we're finishing up some of the last pieces of the connection.
With.
With DCP into their Marysville cavern.
As Mike mentioned earlier in the comments, we expect that to be complete.
Complete this summer and ready for winter services.
I might add the importance of it.
The importance of the Marysville connection is thats.
That's a hub that produce a lot of propane and that allows us to move propane up the line two Wheeler and then up to kill task.
This winter, we did not have that ability, we were having to bring real in.
And then we were limited by.
Production at <unk>. In addition to that so this is a big Big change, Michigan has very few supply points.
They're bringing.
Product in from Toledo, Chicago, where else Jeff.
Troy.
Sarnia Sarnia and the vast majorities by rail and truck. So alright. This from an environmental point of view. This is also a great asset because its going to eliminate a lot of truck miles.
And that was kind of a follow up question to that.
Estimates on what is saving from an ecological standpoint.
We look at.
Emissions really from this.
Transports.
I don't know that we've got a number.
Well not that we're ready to share today, we are looking at it from for the ESG benefits the pipeline provides but yes. It is.
Significant amount of efficiency gain if you think about the hall from Chicago or Toledo, Northern Michigan, and then returning empty.
<unk> talked a lot about 200 to 400 miles round trip and half which trucks empty.
And so the exact this much more efficiently brings product up there and I would say much more reliably.
Woods can have potholes and Rex.
Icy conditions, the pipeline are run smoothly and efficiently underground during the bad weather.
Well I was just thinking with the great relationship you have with the governor of Michigan that they ought to appreciate all those efforts.
I guess the next question, it's a very dynamic economic and materials environment that we're in right now.
When we look with many of our economist and the questions of where we have a recession and will it be late this year early next year.
It puts a lot of question marks behind the business. So it's good to hear that you've got an action plan in place that can help pay off a significant amount of debt by the end of March 2023.
But in the.
I guess the.
The forecast you're considering.
Are you seeing anything in particular that youre not able to offset it.
But let's say if you see all go back down to $65 a barrel.
How does that change the dynamics of the management's game plan.
12.
All three businesses, we're seeing because of all these LNG demand, especially going to Europe .
That we anticipate.
At a lower crude price.
Liquids business, we'll still do very well so they're in a lower crude price will affect R. R.
For our crude.
Logistics, which is primarily Grand Mesa.
I guess the flip side of it.
Not seeing a large increase in volume there because the rig count Hasnt flip.
Fluctuated between nine and 12 rigs.
Having a lower crude price probably doesn't affect the amount of crude being produced in that basin.
Anyway. So then it comes down to the water side.
How much of that $65 will water well the rig count drop.
If I knew that I could answer your question.
And I'm not trying to push you on the spot. It's just typically management strategic plans take into account a certain range of variables and not not trying to poke holes that it just trying to understand it.
Many of the people I think wells Fargo showed a very flat future for NGL that would question, we put in minds of investors the viability of investing.
As far as it coming back to paying a dividend.
So that's a challenge for the common shareholder maybe the preferreds are looking and say hey, great we're going to be back into money.
Next year late but for a lot of common shareholders Theres still some questions left there.
And I think you mentioned, maybe three or four quarters ago possibility that we don't see the price go back up until absolute common dividend is put back in place do you have any points, where you can.
<unk> add an opinion there professionally.
We know we are really focused on the press first because you can't do a common increase until you.
Reinstate the press.
Our goal is to get that reinstated.
In 'twenty three.
Obviously, the $4 75 is the key to that.
And then after that we will see.
What we do with the.
The common common units.
Okay.
Okay, just trying to gain a perspective on.
How the common shares will be valued between now and two to three years from now if it doesn't typically youre not looking at the earnings per share.
It's not going to follow a p/e multiple there.
So it may be completely flat then we have a lot of time to accumulate in that case.
Thank you very much okay. Thank you for your call.
Okay next we have Jo mill private Investor Your line is live.
Thank you, Mike how far dancing I appreciate that.
So pretty sight.
Yes. So couple of question I had and John hard Technology code, but question about parked entities in Europe .
I have not heard anything.
From management on that.
And he had significant opportunities you see in coming quarters.
Not from not from Europe , now, we don't export.
So we don't have we don't have any natural gas. So we don't export any LNG, but because of the natural gas exports more gas would be presumably be produced which would produce more liquids, that's where we would come in moving propane and butane around North America.
We do have the butane export facility in Chesapeake.
Virginia.
But yes crude crude we on the crude side, we transport to refineries, we do not export ourselves.
Okay.
Alright, alright, and don't have any further questions. Thank you.
Yes.
Okay next we have James Hughes with Nomura Your line is live.
Hi, Thanks for taking my question I was just wondering in your.
Your guidance, what you guys are assuming to crude oil price what are you guys assuming for crude oil prices and.
Can you provide any sensitivities for EBITDA and free cash flow on what happens with crude oil.
Changes by like five or 10 Bucks.
Okay.
Sure the easy one is the skim oil.
We we've been running 120 230000 barrels a month.
So if.
<unk> 12, Youll see your.
One 5 million barrels.
So then at 10, five Bucks that 10 Bucks that's $15 million.
Right, so at $10 drop would cost $15 million.
Other than that it's.
It's back to what's the impact on the rig count, which would then impact our water volumes.
Got it and then.
What are you guys assuming for.
Crude oil prices in your adjusted EBITDA guidance.
We haven't disclosed that specifically James.
Okay.
Yes, James what we do is we.
Okay.
Grab the <unk>.
Water projections from our customers. So it's not a function of crude prices for us we don't.
No what their drilling plans are different.
Crude prices, but we do have their projections of water volumes for the year.
Got it okay.
And then.
I think.
Capex for 'twenty three is a little bit higher just because you know that new acreage dedication.
Curious if there are any changes to your 2024 guidance you guys had.
Provided late last year.
Yeah.
No we don't have any.
Really changes hopefully it changes.
Increasing but we wanted to increase from a profitability point of view as we get more water. We wanted to decrease from a debt reduction point of view, so Linda we'd like to see a drop and I, probably like to see it go up a little.
No change at this point in time.
Got it okay. Thanks, that's helpful and then.
Just just curious on the economics for the new acreage dedication you guys announced in for the water business.
Just curious like what the economics, there look like for those volumes.
What we should what we should expect for.
Margin per barrel is as those volumes start ramping up.
We under our agreement, we can't disclose anything like that.
I think in general we could talk about.
Where we see margins going as Doug wait on the line.
I am hereby.
Maybe you could talk a little bit about what we're seeing.
We're seeing margins increase.
Obviously, the oil prices vary.
Helpful to that.
On previous I think our previous call in February we were asked about the revenue per barrel.
Seeing that decrease a little bit.
I think if we look now we're seeing that turnaround and increase.
So I think Linda I think it was <unk> 46, a barrel.
Margin in our release.
I think thats that would be a good number to use fewer.
Putting that into your model, but we are seeing obviously revenue per barrel, increasing along with the activity also the limitation of capacity from our competitors, it's put us in a strong position to increase fees.
Got it and I guess.
Is the amount of skim oil you guys are able to.
Grab from from this dedication is that.
Our better than you or is that kind of like better than your current mix or is that like in line with your current mix I guess, how should we think about that going forward.
In line I think we were 15 basis points.
On the last call that has ticked up.
A little bit.
This current quarter and the completions activity drives that of course.
So I think if you take that new dedication.
And just use our averages youre going to be very close to the right output.
Got it okay. Thank you.
All the questions I had.
Okay next we have Oliver Moon with Moon private cap.
Your line is live.
Hey, guys. How are you I'm, calling you from Europe actually I'm hearing in Barcelona, Spain.
So I'm very familiar with what's going on over here with Europe in the LNG market.
You briefly touched on the butane.
Export facility on the Chesapeake I was really interested in knowing about that if you guys didn't have any plans on doing any wholesale to companies out here in in Europe as I am sure.
Next winter.
For butane and propane is going to be quite high here.
Yeah, It's right American gas prices are going through the roof, but if you can't convert its LNG, you're not going to be able to get it over here to Europe , and you guys, producing propane and butane being illiquid already and it's liquid state should be able to get it over here. So excited to hear if you guys are doing anything anything at all to try to get that butane export facility going.
That would be question number one and then the next two are just really quick ones.
Doug Doug White, just wondering do you hold shares in NGL.
Energy partners, because I've seen on the insider trading I've seen Mike buying up about 100000 shares each quarter and John CLEC actually bought up some last quarter, but I haven't seen any I don't see Doug White on the list at all so just wondering if you've had any shares in the company and third question are there any sort of <unk>.
<unk> out.
Any worries that we should have about near term buyouts buyout opportunities of NGL energy partners.
Butane export facility, Doug White do you hold shares in NGL energy partners and are there any sort of major asset sales or buyout conversations that we should know about.
Alright, I'd like when you summarize so I got them all Doug do you want to go first.
I am very invested in NGL and then this company.
Very glad to hear that because I've been looking online trying to find where your shares where and I can't find them. So super stuck them I think unfortunately.
It's not that I don't have to report.
Good to hear that you would have them. That's all I wanted to know, but settles is sold a little bit there Buddy.
Uh huh.
Yes, thanks for that.
So yes, great question on Chesapeake It is.
As you know.
So a closer shot to West Africa, the Mediterranean and Europe from the East coast to the U S than it is from the Gulf Coast. So we like that facility.
Facility is I would say nearly fully subscribed for butane exports through.
The fall, but we do have some capacity is still for the winter.
And so as their epic in and out of there sorry to interrupt what's up there is traffic in and out of that export facility.
Correct, yes.
And.
It to various locations a lot of it lately has been go into West Africa.
Okay.
And but we have sent shipments to South America, and the Mediterranean as well.
So I would say if there are interested parties to reach out to us.
I'd be happy to talk about.
The partnership making money off of selling butane tuned and the like would you guys be interested in more partners.
Because I can hook, you up with Turkey, if you want in Turkey.
I'm, sorry to speak like that but I'm glad I got a lot of money invested in your company I want to help us make money.
How do we how do we make this happen how do we get that butane export facility working more.
We are available how do we sell more propane because what I'm getting at because from what I understand I underlined Ngls.
NGL energy partners has NGL energy wholesale when we sell a 'twenty we have 27 wells I believe that produce butane propane. So we shouldnt wait for wintertime to sell to Michigan, we should be selling.
Year round to everywhere.
Sure we have a.
International trading company.
Yes.
Yes.
Our facility so we're not actually the company that's selling.
<unk>.
Provides a facility in the butane to the trading company so.
Don't know what to tell you, giving us the Turkey connections win just sounds like NGL energy partners as a wholesale we wholesale butane and propane correct.
Yes, well, we just only we only do that in the United States. We don't do that we're not we're not selling into Europe .
That's correct.
Thank you Kevin.
Okay gardener may be Jeff speaking about our partner who is selling to these other kind of correct, yes. Okay.
I'll send you guys want to make a phone call even if I'm not sure. If you guys want to get in there.
And then on nearly just just is that just as a just as a passive I mean, just as an a share fully invested investing.
Person in NGL energy partners.
We're totally out of the woods in bankruptcy right I mean, there's nothing happened and Theres no theres no scares to come in terms of bankruptcy right.
We're covering.
Yes, I mean I'm not.
I am just speaking like AR, but I can tell you I'm a businessman out here I'm not I'm not a banker from from New York I'm, just straight up European Investor and NGL Energy partners sure were solid were good we just need more time.
That is correct if there was a problem.
Outside auditors would have qualified opinion, which they do not.
That's what that's that's what we're trying to do.
So we're just Raj.
Water volumes need to go up propane sales to go up and <unk>.
Patients in time.
Thank you Eric.
That's correct, Hey, it's very good to put a voice.
Your voices to to the call. Thank you for taking my call, but I appreciate it have a wonderful day.
Yeah.
Okay next we have Edward Cabana with country side debentures. Your line is live.
Good afternoon, I have a question about the water solutions business.
As it relates to the recycled water component of it.
My understanding is as many of your customers might want it.
Not only drill for more oil or more complete wells to produce more but also want to be as environmentally friendly as possible.
What are you seeing now in terms of the demand for more recycled water what kind of premiums can you get for that water.
And as a means to enhance margins my sense is is that.
Only about 20% of won't produce water.
Laura <unk> operators like yourself receive.
Alright is actually recycled and this also kind of goes in tandem with that.
More restrictions on permitting USW DS.
Hey, Doug.
Yes, Sir.
That's a very good topic to bring up in <unk>.
Q3, we did 50 53000 barrels a day last year Q4, 146000 barrels a day and in Q1 were already outpacing that.
We hope to get to 20% of all up water that's over 400000 barrels a day.
So we're very excited about that business from a customer demand perspective.
That business continues to accelerate.
Everyone is getting comfortable utilizing produced water even versus a year ago and the completions process.
So I think there is a large runway there you talk about margins.
Theres two sides of that coin and I think you express it in the end.
The less capital we have to expend for growth on on disposal or even maintenance on disposal wells is beneficial to us.
We already see some of that benefit with our ability to sell water off of our system certainly in areas of our system that may be.
Heavily subscribed.
That's a great benefit there.
So in Opex savings that goes along with that on the revenue side.
We continue to see the value increase as demand has increased.
We look there's water out there.
Year ago people were getting water away off their systems, we have never done that.
But we saw a barrel.
We've done deals in.
In May we were selling it for 40 <unk> a barrel.
We're seeing the increase in the value of our water.
Really increase from the revenue side quickly.
And also volumetric Lee so so it is a future.
Keep in mind, we see that as obviously, an ESG benefit. It's also a good fit with our customers because they get to promote their ESG and also because they care and taking the demand off the aquifer.
But it's also been generally accepted in the industry. Most importantly, and it is cheaper than fresh or brackish water. So it's a win win for all parties.
We see that as part of our business as a piece of our business Ngls core business is oncoming revenue barrels.
Which we used to say for disposal, but really we're taking those barrels off the customers hands. So they can produce oil.
What we do with that water subsequent to that is changing.
But our core business and the numbers that we quote like Mike did.
In his opening that.
And that's based on oncoming full fee revenue barrels for what has traditionally been described as disposal.
The recycle and reuse barrels.
Those do comment at a less a lesser fee, so theyre not quite as impactful incrementally to our bottom line, but they are nice staff.
Are you required to provide any reporting back to your customers regarding to delineating between what's being recycled and what's being injected.
There'll be deed.
As the as the.
Water midstream operator, we do not have that in new Mexico, the OCD, which is regulatory body over oil and gas.
They have requirements for operators to report those volumes fresh versus our brackish versus.
<unk>.
Great. Thank you very much.
Yes.
Okay next we have Craig Thomas with C. WT capital Your line is live.
Hi, everyone. Thank you for taking my call could you will help me in.
Water solutions business for water takeaway about what percentage of the business right now is conducted in the spot market.
Yeah.
Very very little on a percentage basis, we would assume that would be trucked water thats the spot business.
Trucked water is maybe.
1%.
101, 5% of our total volumes.
So very small and then is there a goal to get water that flows through pipelines to be more exposed to the spot business.
Given that revenue is climbing.
Yes, and I think Mike mentioned that earlier.
We have we have this calendar year added interruptible agreements to our portfolio that we have not had in the past those continue to roll in.
And they are they will grow while we are in this high commodity environment.
Everyone asks about our system.
How utilized has our system then from a capacity basis.
Where we overbuilt maybe over the last few years.
I think based on what we see with these new interruptible agreements.
These agreements are anywhere from 80 to $1 in a quarter for fee.
That's us capturing water that is committed to our competitors, but their systems are not.
<unk> built with the capacity or the throughput and we're able to capture those barrels ourselves that those very high return fees.
Right. So then those interruptible contracts are not the trucking contracts because you have pipes that go across Texas, New Mexico and multi direction. So.
I guess is there more exposure than maybe I used the wrong word maybe it should be interruptible, how much of our business is now interruptible.
Yes so.
Growing this year, we had very few interruptible pipeline agreements prior to this calendar year.
Now if we are doing in the Delaware and this is speaking Delaware, because thats, where most of our business is.
We probably have about 100000, a day of interruptible barrels are that the average of I would say a dollar.
We are doing.
2 million a day there now so.
We can do that.
Got you.
Yes, the margin it would given the.
Given earthquakes and issues with permitting disposal wells. So that's a great strategic asset you all have so I guess, congratulations on having a great system.
And then one little clean up from the last quarter call. You all indicated on that call that the water solutions did or was doing $30 million.
January and February and then was on rate to kind of get to that $32 million level in March so I calculate that at $92 million and the call was at the beginning of February when oil was substantially lower than obviously, you were able to sell skim oil at higher prices for at least a month and a half higher than.
It was when you had that call I'm, just curious was there something one time in the.
Water solutions business.
The last six weeks of the quarter.
Or were there expenses that maybe you saw your prepaid expenses declined pretty dramatically.
Was there something that was kind of pulled forward from from this now fiscal year that suppressed the EBITDA number a bit.
Doug.
Speak to the April <unk> or I'm, sorry, the March actual Mike limiter.
So March March actual was $34 million.
EBITDA.
And to answer your question were there any onetime events or other accounting majors.
It being year end.
GAAP accounting it gets pretty focused on making sure that we've captured all of our accruals.
And there were some of those we would have even outpaced $34 million in March.
But there were some one timers that.
In the quarter.
Related to GAAP accounting, nothing strategic or operational.
Just to wrap up the fiscal year.
Got it and so are those things normal normal every year or they just kind of we're under maybe accrued in the first nine months and then you caught up all in the fourth quarter.
It would be the ladder and those are not typical or normal to the magnitude that we had they were just cleanups and catch ups.
From priors, but we would not expect the same magnitude in this new physical year.
Got it well that's good it sounds like Youre doing quite well so the exit rate of 34 was better than the 32.
And.
It would seem that if thats the exit rate 34, you should do better than 400 million probably dramatically so given where crude is now.
So it seems like in your numbers you are assuming a very low number for <unk>.
The price of oil.
And skim oil your realization is it like 90 Bucks youre, assuming it seems it could be that low.
No. We're just trying to be make sure we'd beat our numbers this year.
Okay, I get it I understand and I know you have some things in your business that keep you propane as a wildcard always you never know what youre going to get.
So I understand that one is a hard one to predict.
And we as investors certainly appreciate you hitting your numbers so.
Yes.
So I appreciate the conservatism and.
And one final question and I'll, let you go did you all say youre going to pay off the $500 million notes due in at the end of 2023 by the end of this fiscal year did I hear that right.
I think there were 475 million outstanding at $3 31.
We would expect free cash flow generated this year as well as cash flow generated from some of the initiatives that we.
I alluded to earlier to get us to a point, where we can either pay off or substantially pay off the 2023 notes by the end of this fiscal year.
That's fantastic news. So then then there is nothing in the pipeline until when 26 in terms of maturities is a 25.
There is a small tranche in 'twenty five.
Oh Wow, Okay, that's impressive.
And then final question I'll open up the queue for the people heavy pay how much debt has been paid off through kind of the end of May have you gone back into the market to purchase repurchase the notes.
That's not a number that we've disclosed that will come out in our first quarter 10-Q.
Yeah.
Okay.
Wonderful thank you very much.
Thank you and I'd like to turn the floor back to management for closing remarks.
Alright, well. Thank you guys for your participation in today's call. We'll look forward to talking to you guys in August when we discuss our first quarter 2023 numbers.
Thank you thanks guys.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.