Q4 2024 NGL Energy Partners LP Earnings Call
Operator: Greetings. Welcome to the NGL Energy Partners 4Q24 earnings call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the NGL Energy partners for <unk> 24 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation, but he won't should require operator assistance during the conference. Please press star zero.
So on your telephone keypad. Please note this conference is being recorded.
Operator: Question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Brad Cooper, CFO. You may begin. Good afternoon, and thank you to everyone for joining us on the call today.
I'll now turn the conference over to your host Bradley Cooper CFO you may begin.
Bradley P. Cooper: Good afternoon, and thank you to everyone for joining us on the call today.
Bradley P. Cooper: Our comments today will include plans, forecasts, and estimates that are forward-looking statements under the U.S. Securities Law. These comments are subject to assumptions, risks, and uncertainties that could cause actual results to differ from those forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials.
I promise you. They will include plans forecasts and estimates that are forward looking statements under the U S Securities law.
These comments are subject to assumptions risks and uncertainties that could cause actual results to differ from forward looking statements.
Bradley P. Cooper: Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials.
Bradley P. Cooper: Fiscal 2024 was a transformational year for NGL. These are some of the key highlights from the year. In the first quarter, we purchased approximately $100 million of notes with the proceeds from the Marine Asset Sale that closed on March 30, 2023. In the third quarter, we launched an open season on the Grand Mesa Pipeline, resulting in a 20,000 barrels per day MVC for five years. In the fourth quarter, the LEX II project was announced.
Bradley P. Cooper: Fiscal 2024, it was a transformational year for NGL. These are some of the key highlights from the year end.
Bradley P. Cooper: The first quarter, we purchased approximately $100 million of notes with the proceeds from the asset sale to close on March 30 of 2023.
Bradley P. Cooper: The third quarter, we launched an open season on the Grand Mesa pipeline, resulting in a 20000 barrel per day NBC for five years.
Bradley P. Cooper: In the fourth quarter the likes to project was announced recall. This project is underwritten by the M. D C with an investment grade counterparty and an extension of an existing acreage dedication with the same counterparty during.
Bradley P. Cooper: Recall this project is underwritten by an MBC with an investment grade counterparty and an extension of an existing acreage dedication with the same counterparty. During the third quarter, we internally kicked off our global refinancing that we officially launched to the market in the fiscal fourth quarter. As part of the global refinancing, we amended and extended the ABL with the same commitment level of $600 million, adding a few more banks than we previously had, as well as negotiating with the bank group relief on key covenants that provided us with more operational flexibility than we previously had.
Bradley P. Cooper: During the third quarter, we internally kicked off our global refinancing that we officially launched to the market in fiscal fourth quarter.
Bradley P. Cooper: As part of the global refinancing, we amended and extended the ABL with the same commitment level of $600 million.
Bradley P. Cooper: I got a few more banks than we previously had as well as negotiating with the bakery relief on key covenants to provide us more operational flexibility than we previously had.
Bradley P. Cooper: Our permanent refinancing included $2.2 billion of senior secured notes, with $900 million of five-year non-call-to notes at eighth and one-eighth interest due 2029, and $1.3 billion, eight-year non-call-three notes at eight and three-eighths due 2032. In addition to the secured notes, we entered into a seven-year, $700 million term loan B facility.
Bradley P. Cooper: Our permanent refinancing included $2 $2 billion of senior secured notes with $900 million of five year non call two notes at eight and one eighth interest due 2029 and.
Bradley P. Cooper: At $1.3 billion eight year non call three notes at eight and three eighths due 2032.
Bradley P. Cooper: In addition to the secured notes we had a seven year $700 million term loan B facility.
Bradley P. Cooper: The Term Loan Facility is a floating rate debt instrument that gives us the ability to both repay and reprice the facility after the six-month soft call window expires, which is early August. The net proceeds from the refinancing were used to fund the redemption of the 2025 and 2026 unsecured notes and the 2026 senior secured notes, including any applicable call premiums and accrued and unpaid interest. After completing the refinancing and retiring our previous notes, we quickly turned our focus to the preferred securities in our capital structure, specifically the Class B, C, and D preferred arrearage.
Bradley P. Cooper: The term loan facility has a floating rate debt instruments that gives us the ability to both repay and repriced the facilities I think a six month soft call window expires, which is in early August.
Bradley P. Cooper: The net proceeds from the refinancing were used to fund the redemption of the 2025 and 2026 unsecured notes and the 22006 senior secured notes, including any applicable call premiums and accrued and unpaid interest.
Bradley P. Cooper: After completing the refinancing and retired our previous notes we quickly turned our focus to the preferred securities in our capital structure, specifically the class B C and D preferred arrearages.
Bradley P. Cooper: In February, we paid 50% of the outstanding outstanding arrearages as of December 31, 2023, which was paid to the holders of record as of February 16 and distributed to the holders on February 27. In April, we made two additional distributions to the Class B, C, and D holders, which made NGL current on all preferred classes as of April 25th.
Bradley P. Cooper: In February we paid 50% disturbing outstanding Arrearages as of December 31, 2023, which was paid to the holders of record as of February 16th and distributed to the holders on February 27th.
Bradley P. Cooper: In April we made two additional distributions to the class B C and D holders, which made NGL current on all preferred classes as of April 22.
Bradley P. Cooper: Being current on all three preferred classes opens the doors for us to further address the capital structure that Mike will speak to shortly. We executed on our plan to attack the capital structure and address our maturities during the fiscal year, and I believe being current on the preferred arrearages by the end of April exceeded all internal expectations, and we believe it exceeded most external expectations. We've been clear in our messaging to address our maturities and preferred security. Getting to this point hasn't been easy.
Speaker Change: Being current on all three preferred classes opens the doors for us to further address the capital structure that Mike will speak to shortly.
Mike: We executed on our plan to attack the capital structure and address our maturities during the fiscal year.
Mike: I believe being current on the preferred area just by the end of April exceeded all internal expectations and we believe exceeded most of the external like mutations we'd.
Mike: We've been clear on our messaging to address our maturities and our preferred securities getting those point hasn't been easy it's involved everyone across the company executing on their respective job functions and I would like to thank all the employees for getting us to this fall.
Bradley P. Cooper: It involved everyone across the company executing on their respective job functions. I would like to thank all the employees for getting us to this point. Our full-year adjusted EBITDA for fiscal 2024 was $610 million, which is a lot of what we got for the year. The weakness was driven by liquids logistics and our crude logistics segment. Liquid Logistics' full year adjusted EBITDA was $70 million. This segment continues to be impacted by warmer than normal winters in our key operating areas. Reducing Demand for Propane and Reducing Margin. Also, the closure and sale of several terminals earlier in the fiscal year impacted our full year volume. Crude Oil Logistics' full-year adjusted EBITDA was $86.9 million.
Mike: Our full year adjusted EBITDA for fiscal 'twenty 'twenty, four was $610 million, which is lagging what we got it to for the year.
Mike: The weakness was driven by liquids logistics at our crude logistics segment.
Mike: Liquid logistics full year, adjusted EBITDA was $70 million.
Mike: It continues to be impacted by warmer than normal winters in our key operating areas, reducing demand for propane and reducing margins also the closure and sale of several terminals earlier in the fiscal year impacted our full year volumes.
Mike: The crude oil logistics full year, adjusted EBITDA was $86 9 million.
Bradley P. Cooper: The results for fiscal 2024 were primarily driven by lower volume shipped and sold on the Grand Mesa pipeline and wider than expected differentials, especially in the first half of fiscal 2024. However, our water solution segment continues to deliver strong year-over-year performance. Water Solutions achieved record full-year adjusted EBITDA of $508.3 million, a 10% increase over the prior year. Also, Water Solutions achieved record physical annual water disposal volumes of 884.6 million barrels, a 4.1% increase over the prior year.
Mike: The results for fiscal 'twenty 'twenty, four were primarily driven by lower volumes shipped and sold on the Grand Mesa pipeline and wider than expected differentials, especially in the first half of fiscal 2024.
Mike: Our water solutions segment continues to deliver strong year over year performance water solutions achieved record full year, adjusted EBITDA of $508 $3 million, a 10% increase over the prior year.
Mike: Also water solutions achieved record physical annual water disposal volumes of 884 6 million barrels a $4, 1% increase over the prior year.
Bradley P. Cooper: Our total capital incurred for fiscal 2024 was $152 million for both maintenance and growth. Our fiscal 2024 guidance was $150 million, so our capital spend was in line with our guidance for fiscal 2024. We also closed on over $280 million of asset sales, inclusive of working capital for the fiscal year, when you include the marine assets that closed on March 30, 2023, through the most recent ranch closing in the first week of April 2024, much higher than the market expected.
Mike: Our total capital incurred for fiscal 'twenty 'twenty, four was $152 million for both maintenance and growth.
Mike: The fiscal 'twenty 'twenty four guidance was $150 million. So our capital spend was in line with our guidance for fiscal 2024.
Mike: We also closed on over $280 million of asset sales inclusive of working capital for the fiscal year. When you include the marine assets that closed on March 30 of 2023 through the most recent branch closing in the first week of April 'twenty 'twenty four.
Mike: It's higher than the market expected.
Bradley P. Cooper: These dispositions were a critical achievement for the year, allowing us to attack the capital structure quickly. Let's now get into the fourth quarter results. Water solutions adjusted EBITDA was $123.4 million in the fourth quarter versus $131.6 million in the prior fourth quarter. Physical water disposal volumes were 2.39 million barrels per day in the fourth quarter versus 2.46 million barrels per day in the prior fourth quarter.
Mike: These disposition dispositions were a critical achievement for the year, allowing us to attack the capital structure quickly.
Mike: Let's now get into the fourth quarter results.
Mike: Water solutions adjusted EBITDA was $123 4 million in the fourth quarter versus a $131 6 billion in the prior fourth quarter.
Mike: Water disposal volumes were 2.39 million barrels per day in the fourth quarter versus 2.46 million barrels a day per day in the prior fourth quarter.
Bradley P. Cooper: For the full year, average fiscal produced water disposed was up by 4%, fiscal 2024 versus 2023. Total volumes we were paid to dispose, which includes deficiency volumes, were 2.59 million barrels per day in fiscal 2024 versus 2.43 million barrels per day in fiscal 2023. So total volumes we were paid to dispose were up 7% in fiscal 24 over fiscal 23. On the revenue side of the ledger, revenue per barrel was lower during the quarter due to rate changes for certain existing contracts and the expiration of certain higher fee per barrel contracts.
Mike: For the full year average physical produced water disposal was up by 4% fiscal 'twenty 'twenty four versus 2023.
Mike: Total volumes, we were paid to dispose, which includes deficiency volumes were 2.59 million barrels per day in fiscal 'twenty 'twenty four versus $2 four 3 million barrels per day in fiscal 2023.
Mike: So total volumes, we were paid the disposals were up 7% in fiscal 'twenty four over fiscal 'twenty three.
Mike: On the revenue side of the ledger revenue per barrel was lower during the quarter due to rate changes for certain existing contracts and the exports and the exploration of certain higher fee per barrel contracts.
Bradley P. Cooper: Water Solutions continues to do a great, great job controlling their industry-leading operating expenses, achieving 23 cents per barrel in the fourth quarter and averaging 24 cents per barrel operating expense for fiscal 2024. In January, we announced the LEX II project.
Mike: Water solutions continues to do a great great job controlling their industry, leading operating expenses.
Mike: Leaving 23 cents per barrel in the fourth quarter, and averaging 24 cents per barrel operating expenses for fiscal 2024.
Bradley P. Cooper: As I mentioned earlier, this project is approximately 27 miles of 30-inch diameter water pipeline with an initial capacity of 200,000 barrels per day. The Lee County Express Pipeline Systems are expandable to 500,000 barrels per day. The construction of this project is underway, and the anticipated end service date is October. Remember, this project is underwritten by a minimum volume commitment and includes an acreage dedication extension with investment grade oil and gas produced. Crude oil logistics adjusted EBITDA was $15.3 million in the fourth quarter versus $29.7 million in the prior fourth quarter.
Mike: In January we announced the likes to project as I mentioned earlier. This project is approximately 27 miles of 30 inch diameter water pipeline with initial capacity of 200000 barrels per day.
Mike: The Lea County Express pipeline systems are expandable up to 500000 barrels per day.
Mike: The construction of this project is underway and the anticipated in service date is October.
Mike: Remember this project is underwritten by a minimum volume commitment and includes an acreage dedication extension with an investment grade oil and gas producer.
Mike: Crude oil logistics adjusted EBITDA was $15 3 million in the fourth quarter versus $29 7 million in the prior fourth quarter.
Bradley P. Cooper: Product margin for crude oil sales impacted the quarter and full year results due to lower production on acreage dedicated to us that has historically been higher-margin barrels, as well as lower margins realized as a result of a contract expiration on December 31, 2023, as well as the sale of our marine business in March of 23. During the three months ended March 31st, 2024, physical volumes on the Grand Mesa pipeline averaged approximately 67,000 barrels per day, compared to approximately 76,000 barrels per day for the three months ended March 31st, 2023.
Mike: Product margin for crude oil sales impacted the quarter and full year results due to lower production at <unk>.
Mike: On acreage dedicated to us that has historically been higher margin barrels as well as lower margins realized.
Mike: Bolt of a contract expiration on December 31, 2023, as well as the sale of our marine business in March of 'twenty three.
Mike: During the three months ended March 31, 2024, physical volumes on Grand Mesa pipeline averaged approximately 67000 barrels per day compared to approximately 76000 barrels per day for the three months ended March 31 2023.
Bradley P. Cooper: Liquid's logistics adjusted EBITDA was $21.8 million in the fourth quarter versus $28.5 million in the prior year's fourth quarter. This decrease is primarily due to lower propane margins and a decrease in volumes as a result of the closure or sale of several terminals earlier in the fiscal year and warmer than average temperatures compared to the prior year quarter. The fine products decreased as the demand for gasoline was weak relative to supply, which led to lower margins.
Liquids logistics adjusted EBITDA was $21 8 million in the fourth quarter versus $28 5 million in the prior fourth quarter.
This decrease is primarily due to lower propane margins and a decrease in volumes as a result of the closure or sale.
Mike: Several terminals further in the fiscal year and warmer than average temperatures compared to the prior year quarter.
Mike: Refined products decreased demand for gasoline was weak relative to supply, which led to lower margins.
Bradley P. Cooper: Our biodiesel business, while small in the grand scheme of EBITDA generation, did have a weaker year than anticipated due to weaker RFS mandates finalized in late June that pressured biodiesel pricing in the back half of fiscal 2024. Our butane team had a strong year, as a stronger blending market from January through mid-February during the quarter ended March 31st, 2024, drove higher margins than we This trend has carried into the early months of fiscal 2025, and they are off to a strong start again. I would now like to turn the call over to Mike Krimble, our CEO. Thanks, Brad. Good afternoon, everyone.
Mike: Our biodiesel business, while small in the Grand scheme of the EBITA generation did have a weaker than weaker year than anticipated due to weaker RFS mandates finalized in late June that pressured biodiesel pricing pricing to the back half of fiscal 2024.
Mike: Our butane team had a strong year as a stronger blending market from January through mid February during the quarter ended March 31, 2024 drove higher margins than we anticipated. This trend has carried into the early months of fiscal 2025, and they are off to a strong start again.
Speaker Change: I would now like to turn the call over my Trimble our CEO.
Mike Krimble: Let's start out with EBITDA guidance. Our Fiscal 2025 Consolidated Adjusted EBITDA guidance is $665 million. This guidance implies year-over-year adjusted EBITDA growth of 9%.
Brad: Brad Good afternoon, everyone.
Brad: Let's start out with EBITDA guidance.
Brad: Our fiscal 2025 consolidated adjusted EBITDA guidance of 665 million.
This guidance implies year over year, adjusted EBITDA growth of 9%.
Mike Krimble: Our water solutions segment is the primary driver of this year's growth over Eureka Dog Grove, and we expect 8% to 10% growth in fiscal 2025 from water. When you consider the EBITDA impact of the recently announced North-South Ranch transaction and the associated adjusted EBITDA recorded in fiscal 2024, which will not recur in fiscal 2025, the year over year growth is an additional 1 to 2% higher. With respect to water solutions, on Jan 1 of 2024, our commitment at Poker Lake increased 100,000 barrels per day to a total of 450,000 barrels per day.
Brad: Our water solutions segment is the primary driver of this year over year EBITDA growth.
Brad: And we expect 8% to 10% growth in fiscal 2025 from water.
Brad: When you consider the EBITDA impact of the recently announced North South Ranch transaction.
Brad: And the associated adjusted EBITDA recorded in fiscal 'twenty, 'twenty, four which will not recur in fiscal 2025, the year over year growth as an additional 1% to 2% higher.
Brad: With respect to water solutions Jan one of 2024, our commitment at Poker Lake increased 100000 barrels per day to a total of 450000 barrels per day as.
Mike Krimble: As Brad mentioned earlier, the LEX II project will add 200,000 barrels per day that will go into service in October this year. So in other words, our adjusted EBITDA growth for water solutions is further de-risked with these known contract volume increases. And as a reminder, our combined capacity... Lee County Express Pipeline is $500,000 per day. Additionally, just like our competitors, we are working on ways to derive additional value from our water, such as reuse, mineral extraction, and desalination.
Speaker Change: As Brad mentioned earlier, the let's do project will add 200000 barrels per day that will go into service in October this year.
Speaker Change: So in other words, our adjusted EBITDA growth for water solutions is further derisked with these known contract volume increases and as a reminder, our combined capacity Lea County Express pipeline is 500000 per day.
Speaker Change: Secondarily, just like our competitors, we are working on ways to derive additional value from our water.
Speaker Change: Such as reuse.
Speaker Change: Mineral extraction D. Desalination, we just don't talk about it until the economic viability has been proven.
Mike Krimble: We just don't talk about it until the economic viability has been proven regarding crude logistics. We believe we're at the low point of volumes and tariff on the Grand Mesa pipeline in fiscal 2024. There is upside to this segment this fiscal year. We have been contacted by several producers who have interest in shipping on Grand Mesa beginning sometime in the next six to twelve months.
Speaker Change: Regarding crude logistics we've.
Speaker Change: We believe we are at the low point of volumes and tariff on the Grand Mesa pipeline in fiscal 'twenty 'twenty four there.
Speaker Change: There is upside to this segment.
Speaker Change: In this fiscal year, we have been contacted by several producers who have interest in shipping on Grand Mesa, beginning sometime in the next six to 12 months.
Mike Krimble: Concerning liquids logistics, this segment has had some disappointing results historically, so we are exploring strategic alternatives on portions of that segment, with respect to asset sales. As for any further potential asset monetizations in fiscal 2025, we're not guiding to a number like we did in previous years. We believe that we have identified and sold most of our idle and underutilized assets.
Speaker Change: Concerning liquids logistics. This segment has had some disappointing results historically.
Speaker Change: So we are exploring strategic alternatives on portions of that sudden.
Speaker Change: With respect to asset sales.
Speaker Change: For any further potential asset monetization in fiscal 2025, we're not guiding to a number like we did in previous years.
Speaker Change: We believe that we have identified and sold most of our idle and under utilized assets.
Mike Krimble: That said, we are open to monetizing assets that attract valuations if the opportunity presents itself. CapEx Outlook. Looking at our capital expenditure guidance, we're targeting $210 million for fiscal 2025, and that's total growth and maintenance. Approximately 60% of the capital expenditure is related to the LEX II project.
Speaker Change: That said, we are open to monetizing assets at attractive valuations if the opportunity presents itself.
Speaker Change: Our capex outlook.
Speaker Change: Looking at our capital expenditure guidance, we're targeting $210 million.
Speaker Change: For fiscal 2025, and that's total both growth and maintenance approximately 60% of the capital expenditure is related to the Lex two project.
Speaker Change: So excluding the Lex two project, we're guiding to about a 40% decrease in total capital spend versus last year.
Mike Krimble: So, excluding the LEX II project, we're guiding to about a 40% decrease in total capital spend versus last year. Capital structure. Today, we announced the board approved a common unit repurchase program of up to $50 million. We now have the ability to attack any part of our capital structure. We have a soft call at 101 on the term loan B through July. Thereafter, we can repay debt with no additional cost.
Speaker Change: Cap structure today, we announced the board approved a common unit repurchase program.
Speaker Change: Up to $50 million, we now have the ability to attack any part of our capital structure.
Speaker Change: We have a soft call. It 101 in that term loan b through July thereafter, we can repay debt with no additional cost I.
Mike Krimble: Preferred Dividend Arrearages and Outcurrents. We are allowed to purchase Class B, C, and D preferred shares. We have the ability to pay a common unit distribution, and now we have authorization to buy up to $50 million of our common units. This gives us significant flexibility. Despite the common unit price increasing significantly in the past year, we still view the unit price as being undervalued based on our cash flow generation from our assets. As such, we believe that at the current common unit price... The repurchase program is the most attractive option to create value for our common unit holders.
Speaker Change: Preferred dividends Arrearages an occurrence.
Speaker Change: We are allowed to purchase the class B C and D. Preferreds, we have the ability to pay a common unit distribution and now we have authorization to buy up to $50 million of our common yes. This gives us significant flexibility.
Speaker Change: Despite the common unit price increasing significantly in the past year, we still view the unit price as being undervalued based on our cash flow generation from our assets as such we believe that the current current common unit price. The repurchase program is the most attractive option to create value for our common unit.
Speaker Change: <unk>.
Operator: So with that, operator, please open up the line for Q&A. Absolutely. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your line from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Speaker Change: So with that operator, please open up the line for Q&A.
Speaker Change: Absolutely. Thank you.
Speaker Change: This time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: Press Star two if you'd like to remove your line from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. One moment. Please while we poll for questions. Once again. Please press star one if you have a question or comment.
Operator: One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. The first question comes from Tariq Hamid with JP Morgan. Please proceed. Good afternoon.
Speaker Change: Question comes from two week Hammett with J P. Morgan. Please proceed.
Speaker Change: Good afternoon.
Speaker Change: Thank you.
Tariq Hamid: Thank you. On the common unit repurchase program, we'd love to get a little bit more flavor on sort of how you're thinking about the timing of using it. Is that something that you're looking at?
Speaker Change: On the common unit repurchase program I would love to get a little bit more flavor on sort of how youre thinking about the timing of using it is that something that you're looking to sort of put to work now or is that something that you just want to have in place in case of an even more attractive opportunities show up down the road.
Mike Krimble: work now, or is that something that you just want to have in place in case? [inaudible] We could, depending on the unit price, use it right away. Yes. And then, I guess, um... You know, on Grand Mesa, you talked about... a handful of potential opportunities to increase volumes over that. I guess we'd just love to get kind of your sense of the magnitude of that and sort of how you think about the exit volumes on Grand Mesa year-end, year-end 25.
Speaker Change: Yeah.
Speaker Change: We are depending on the unit price, we could use it right away.
Speaker Change: Yes.
Speaker Change: Uh huh.
Speaker Change: And then I guess.
Speaker Change: You know on Grand Mesa, you talked about sort of you know a handful of potential opportunities to increase volumes over the next few months.
Speaker Change: I guess, we're just love to get kind of your sense on sort of the magnitude of that and sort of how do you think about kind of the exit volumes on Grand Mesa yearend versus kind of a year end 25 versus year end 'twenty four.
Mike Krimble: Yeah, I think with what Don and his team are working on right now, you know, line of sight, we're probably in the 70,000 barrels a day range today. You know, call it a 50% uptick from there. I think north of 100 with the potential to get to 110, 115 barrels a day over the next 6 to 12 months.
Speaker Change: Yeah, I think it was what Don and his team are working on right now and a line of sight to.
Speaker Change: We're probably in the 70000 barrel a day range today.
Speaker Change: You know call it 50% uptick from there I.
Speaker Change: Are they north of 100.
Speaker Change: With the potential to get to 110 115 per day.
Speaker Change: Over the next six to 12 months.
Mike Krimble: So potentially, very material growth there. Yeah. And then, you know, just the last one for me.
Speaker Change: So potentially very material growth there.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: And then just last one for me you talked about you know looking at potential strategic alternatives for the liquids business just would love to get any kind of additional flavor you have there you're thinking kind of acquisitions divestitures and joint ventures sort of where is your head at on that.
Mike Krimble: We talked about, you know, looking at potential strategic alternatives for the liquid. We'd love to get any kind of additional flavor you have there. Are you thinking of acquisitions, divestitures, joint ventures? Where is your head at?
Mike Krimble: Yeah, I think it's more on the divestiture side. And you know, we've got a suite of assets in that liquids business, hard assets that could fetch a nice multiple for the right buyer. We don't need to do anything.
Speaker Change: Yeah, I think it's more on the divestiture side, we've got a suite of of assets in that liquids business hard assets that could fetch a nice multiple for the right buyer, we don't need to do anything I think it's just a continue rationalization.
Mike Krimble: I think it's just a continued rationalization of each business unit and each segment and what assets we have at our disposal. Got it. Thank you. I'll jump back into queue.
Speaker Change: Of each business unit in each segment and what assets, we have at our disposal.
Speaker Change: Got it thank you I'll jump back in the queue.
Speaker Change: Thank you.
Gregg William Brody: Thank you. Once again, if you have a question or a comment, please indicate so by pressing star 1. The next question comes from Gregg Brody with Bank of America. Good afternoon, guys, and congrats for getting a card on those preferred notes. It's a lot of hard work.
Speaker Change: Once again, if you have a question or comment please indicate so by pressing star one. The next question comes from Gregg Brody with Bank of America. Please proceed.
Gregg William Brody: Good afternoon, guys and congrats to be forgetting card on those preferreds I know a lot of hardware.
Bradley P. Cooper: Thanks, Gregg. [inaudible] Just on the preferred, I know you have some payments coming after the quarter, just remind us what that is and to get to complete, just to be current, and then also just as part of the repurchase program, is it still the same leverage guidance that's driving you when you think about that? When you were talking about, previously, we were talking about buying back preferreds with sort of a leverage target, can you just talk to us about how you're thinking about, Yeah, on the preferreds, we are current as of April 25, we are caught up. We made the q1 calendar payment.
Speaker Change: Thanks, Greg.
Speaker Change:
Gregg William Brody: Just on the preferred I know you have some payments coming in after the quarter.
Gregg William Brody: Could you just remind us what that is.
Gregg William Brody: Get to completely just to being current.
Speaker Change: And then just also just as part of the repurchase program.
Speaker Change: It is it still the same leverage guidance, what's driving you when you think about that.
Speaker Change: When you were talking about previously you talked about buying back preferred with sort of leverage target can you just talk to us about how youre thinking about that.
Speaker Change: Yeah on the preferreds, we are current as of April 25th we are caught up we made the Q1 calendar payment.
Bradley P. Cooper: On April 25th, so we'll have, we'll just now get into the normal cycle of making quarterly payments to all three classes of the B's, the C's, and D's a few weeks after the quarter ends. So we're current, in terms of the common unit buyback program. Yeah, I mean, the same leverage governors we've had are in place.
Speaker Change: On April 25th So we'll have we'll just now get into the normal cycle of making quarterly payments to all.
Speaker Change: All three classes of beat up the BS and CS and DS.
Speaker Change: A few weeks after the quarter end so work her out.
Speaker Change: In terms of the common unit.
Mike: Buyback program, Yes, I mean, the same leverage governors. We've had are in place we will manage to the leverage targets, we discussed publicly and the bondholders during the refinance I think to Mike's opening comments. This is really just another tool in the tool allows it allows us to address the capital structure, if we see a pullback in the unit price.
Bradley P. Cooper: You know, we will manage to the leverage targets we've discussed publicly and the bondholders during the refinance. I think, in Mike's opening comments, this is really just another tool in the toolbox that allows us to address the capital structure. If we see a pullback in the unit price, and we have the capacity to step in and buy units and do something for the common human holders here, and then just remind me on the preferreds, does the coupon move back to the lower fixed rate?
Mike: We have the capacity to step in and buy units and.
Mike: Do something for the common unit holders here.
Speaker Change: And then just remind me on the preferreds that coupon move back to back to the lower fixed rate does that is that right.
Bradley P. Cooper: Is that right? [inaudible] $28 million per quarter across all three classes, in terms of the distribution. Got it. And then just going back to water, could you talk about the underlying volume growth you're assuming, excluding the last two. And then how does Lex-2 layer it?
Versus the floating rates on them.
Speaker Change: The yeah, we've got the bees are floating today the CS go to floating here pretty soon that he has got a floating the summer and recall, that's on a quarterly basis somewhere around $28 million per quarter across all three classes.
Speaker Change: In terms of the distribution.
Speaker Change: Got it.
Speaker Change: And then just just coming back to water could you talk about the underlying volume growth, you're assuming excluding lax too.
Speaker Change: And then how does how does left to layer in how should we think about how volumes are there.
Bradley P. Cooper: How should we think about how volumes are going to ramp up there? Well, if let's let's say we choose 200 if we're at 26 ish, I mean, 10% is $2.60. So that's kind of Lex 2 plus what we, the other contract we talked about, that goes from $350,000 to $450,000. So it's really, I mean, there's good news. It's that it's really what we've already got in our pop-back pocket.
Speaker Change: Going to ramp there.
Speaker Change: Yeah.
Speaker Change: Well, if flex, let's say, let's say, it's 200, if we're at two six ish.
Speaker Change: 10% to 60.
Speaker Change: So that's kind of alleged two plus what we the other.
Speaker Change: Contract, we talked about that goes from $3 50 to $4 50.
So it's really I mean, there's good news is that it's really what we've already got in our pop back pocket. So if there are additional.
Bradley P. Cooper: So, if there are additional deals, contracts, volumes, that'll, it would be a higher rate of increase than that. 9, 10%. Just to remind me, is all that, is all that minimum volume commitments on that, on WEX-2? And then I'm just wondering if there's an opportunity for.., for access, or beyond that. I think we said they're both both minimum volume.
Speaker Change:
Speaker Change: Deals contracts volumes that'll it it would be a higher rate of increase than that.
Speaker Change: 9% to 10%.
Speaker Change: Just to remind me. So it was all of that is all of that minimum volume commitments on that on.
Speaker Change: On the next two and then I'm just I was just wondering if there is opportunity for.
Speaker Change: For access.
Speaker Change: Beyond that.
Speaker Change: I think we said, they're both both minimum volume.
Bradley P. Cooper: Yeah, commitments, that's correct. And you'll be, I guess you won't be above that or on any of that, it's just you'll be earning that initially, right? Just trying to figure out when you can maybe get above that or what, if that's, if that's factored in. Yeah, that's you're right.
Speaker Change: Commitments that's correct.
Speaker Change: You'll be missed.
Speaker Change: You won't be above that or on any of that interest youll be earning that.
Speaker Change: Surely right just trying to figure out.
Speaker Change: When you can maybe get above that or what if thats.
Speaker Change: After launching yeah yeah.
Bradley P. Cooper: That is just the beginning. And we just have to see more frack crews and drilling in those areas to see if the volume is going to increase. But yeah, I think that's just what we're anticipating. And what's in our guidance is that number for the full year. Well, not really. It's from January 24 to 3-31-25, and then for the other, it's November through.
Speaker Change: Yeah, that's you're right that is just the beginning and we just have to see more.
Speaker Change: The frac crews and drilling.
Speaker Change: In those areas to see if the probably half the volume is going to increase but yeah. I think that's just what we're anticipating and what's in our guidance is that number for the full year well not.
Speaker Change: It's the full little bits from Jan one of 24 to 331 25, and then for the other since November through.
Bradley P. Cooper: March, so about a half year. And just last question, those volume increases you're talking about at Mesa are pretty significant. What's the dynamic that's driving that type of volume that's coming to you?
Speaker Change: March so about a half a year.
Speaker Change: Got it and just last question those volume increases you're talking about it if I may so pretty significant.
Speaker Change: What's the dynamic that's the dynamic that's driving that's a dynamic that's driving.
Speaker Change: That type of rank volume's coming towards you.
Bradley P. Cooper: OK. We've, I think we've been, pretty clear and open that when the basin gets back to about 500,000 barrels a day, that's where we historically saw tightness within the basin on the pipeline. I think December production was north of 500,000 barrels, 509.
Speaker Change: We I think we've been.
Speaker Change: Pretty clear and open them when the basin gets back to about 500000 barrels a day.
That's where we historically saw tightness within the basin on the pipeline I think December production was north of 500000 barrels 509.
Bradley P. Cooper: I think that, coupled with just the amount of calls and discussions Don Robinson is having with producers, gives us confidence that we can grow the volumes from where they are today out of this current draw. I appreciate the time, guys, and congrats again on the preferred. Thank you, Gregg. Okay, the next question comes from Jason Mandel with RBC. Jason, please proceed. Hi, good afternoon.
Speaker Change: I think that coupled with just the amount of calls and discussions daughter, Robinsons, having with producers.
Speaker Change: US confidence that we can grow the volumes from where they are today.
Speaker Change: Out of this current trough.
Speaker Change: I appreciate the time guys.
Speaker Change: Perhaps I got on the preferred.
Greg: Thank you Greg.
Speaker Change: Okay. The next question comes from Jason Mandel with RBC, Jason. Please proceed.
Hi, Good afternoon, I'm, just wondering on the water solutions business you guys gave some commentary for the decreases are on a year over year basis, just curious if if on a sequential basis from third quarter to fourth quarter. The decline if it's the same.
Jason Darren Mandel: Just wondering, on the water solutions business, you guys gave some commentary on the decreases on a year-over-year basis. Just curious if, on a sequential basis, from third quarter to fourth quarter, the decline is the same issues, or if there's anything else to talk about on more of a sequential basis. No, I think it's the same sequential.
Speaker Change: Issues or if there's if there's anything else to talk about on a more of a sequential basis.
Speaker Change: No I think it's the same sequential.
Bradley P. Cooper: Issues, or not an issue, but topic quarter over quarter. I think we look at total volumes that we get paid on. I mean, we're very diligent in how we contract and ensure that we've got MVCs behind big capital spends and or acreage dedication.
Speaker Change: Issues or not issue about topic quarter over quarter I think we look at total volumes that we get paid on I mean, we're very diligent in how we contract and ensure that we've got Mb.
Bradley P. Cooper: And so we look at, you know, total disposal plus paid, and we're up year over year. 8-9%, I think is what we had in the press release. Okay, gotcha. Great. Thank you. And then just one quick follow-up on the liquids business. To the extent that you have good success with exiting or with selling parts of that business, does that likely come with meaningful amounts of working capital release? It does, yes.
Speaker Change: N V C's behind Big capital spends <unk> acreage dedication and so we look at total disposed plus paid and we're up year over here.
Speaker Change: 89% I think is what we had in the in the press release.
Speaker Change: Okay got you great. Thank you and then just one quick follow up on the liquids business to the extent that you have a good success with them exiting or selling parts of that business does that likely come with meaningful amounts of working capital release.
Speaker Change: It does yes.
Speaker Change: Okay, any way to put that in context or wait and see.
Bradley P. Cooper: Any way to put that in context or wait and see? Yeah, let's wait and see maybe an update on the next call, which is a short eight, nine weeks away. All right, thank you. Thanks for your time. Up next, we have Ned Baramov with Wells Fargo. Please proceed.
Speaker Change: Yeah, let's can we wait and see maybe an update on our next call. The next call.
Speaker Change: Sure eight nine weeks away.
Speaker Change: Alright, thank you.
Speaker Change: Thanks for that.
Speaker Change: Up next we have NAD bare them off with Wells Fargo. Please proceed.
Ned Antonov Baramov: Hey, thanks for taking the questions. On water, is M&A something you guys spend time on, or is growth in water going to be primarily driven by continued organic investments? And then separately, on the water OPEX side, is the 23 to 24 cents per barrel sustainable going forward?
Speaker Change: Hey, thanks for taking the questions.
Speaker Change: On the on the water is M&A something you guys spend time on is growth in water going to be primarily driven by continued organic investments and then separately on the water Opex societies. The 23 to 24 cents per barrel is sustainable going forward.
Mike Krimble: I think on the M&A side, you know, when we've got organic growth opportunities like LEX II staring us in the face, those will be, I think, the first projects we look at. I think we've been very clear over the years that we wanted to get the capital structure addressed. We still have the preferreds in front of us.
Speaker Change: I think on the M&A side as you know when we've got organic growth opportunities like legs to staring us in the face of those will be I think the first projects we look at.
Mike Krimble: I think there'll be a time for M&A here in the future, but as Doug continues to bring the returns he's bringing, we're going to deploy capital on those to the extent we can ahead of M&A. And on operating expenses, I think we've seen in the last couple of quarters and maybe even over the last fiscal year sub-25 cents, so I believe it's a sustainable number. I don't think we've seen a lot of volatility in that number over the last handful of quarters.
Speaker Change: I think we've been very clear over the years, we wanted to get the capital structure address.
Speaker Change: Still have the preferreds in front of US I think there'll be a time frame it out here in the future, but as we dug continues to bring.
Speaker Change: The returns he is bringing we're going to deploy capital those to the extent, we can out of M&A.
Speaker Change: And on the operating expenses I think we've seen it the last couple of quarters and maybe even over the last fiscal year sub 25 cents. So I believe its a sustainable number.
Speaker Change: I don't think we've seen a lot of volatility in that number over the last handful of quarters.
Mike Krimble: I think we've kind of fought off any inflation impacts along the way, and the team does a great job managing the cost side of the equation. Yeah, Mike's got a good point. Probably not a lot of further move downward from where it is today. We've always kind of signaled this 23 to 25 cents as the landing zone for operating expenses.
Speaker Change: But I think we've got a fall off any inflation impacts.
Speaker Change: Along the way and the team does a great job managing the cost side of the equation.
Speaker Change: I don't know call it further.
Speaker Change: Yeah.
Speaker Change: Good put Mike's got a good point, probably not a lot of further move downward from where it is today. We've always kind of signaled is 23 to 25 sensors the landing zone for per operating expenses.
Speaker Change: Okay. Thanks for that color and then maybe can you can you talk about some of the growth projects that you have identified outside of legs to.
Mike Krimble: Okay, thanks for that, Keller. And then maybe, can you talk about some of the growth projects that you've identified outside of LEX II, or basically the remaining 40% of your CapEx budget? We probably cannot until we get the deals signed up.
Mike Krimble: Okay, thanks for that. Okay, we have no further questions in queue. I'd like to turn the floor back to management for any closing remarks. Thank you everyone for your interest in NGL. We look forward to catching up in a couple months on the fiscal 2025 first quarter call. Thanks, and have a nice weekend. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Or basically the remaining 40% of your Capex budget.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: We probably cannot until we get the deal signed up.
Speaker Change: Okay. Thanks for that.
Speaker Change: Okay. We have no further questions in queue I'd like to turn the floor back to management for any closing remarks.
Thanks, everyone for your interest in NGL, we look forward to catching up in a couple of months in the fiscal 2025 first quarter call. Thanks and have a nice weekend.
Speaker Change: Yeah.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.