Q1 2027 NGL Energy Partners LP Earnings Call

August 4, 2026

Speaker #1: NMS calls tonight to the. Good morning.

Operator: Greetings. Welcome to the NGL Energy Partners 1Q27 Earnings Call. At this time, all participants are in a listen-only mode. A 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.

Speaker #2: Welcome to the NGL Energy Partners 1Q27 earnings call. At this time, all participants are to listen only mode. A question and answer session will follow the formal presentation.

Speaker #2: 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.

Speaker #2: You may begin.

Brad Cooper: Good afternoon. Thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts, and estimates that are forward-looking statements under the US securities law. These comments are subject to assumptions, risks, and uncertainties that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials. We are pleased to report a strong start to fiscal 2027 and continued execution on our multi-year strategy of deleveraging the balance sheet through high-return water growth projects. This positions the partnership to continue to address the Class C Preferreds later this fiscal year.

Speaker #3: Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts, and estimates that are forward-looking statements under the US Securities Law.

Speaker #3: These comments are subject to assumptions, risks, and uncertainties, that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials.

Speaker #3: We are pleased to report a strong start to fiscal 2027 and continued execution on our multi-year strategy of deleveraging the balance sheet through high return, water growth projects.

Speaker #3: This positions the partnership to continue to address the Class D preferreds later this fiscal year. During the first quarter, we hit record produced water volumes physically disposing of approximately 3.32 million barrels per day during the first quarter, growing 19.6% from the first quarter of fiscal 2026.

Brad Cooper: During Q1, we hit record produced water volumes, physically disposing of approximately 3.32 million barrels per day during Q1, growing 19.6% from Q1 of fiscal 2026. The record water volumes also generated record Water Solutions adjusted EBITDA for a single quarter. We are seeing the growth capital spend and the 500,000 barrels per day of producer commitments signed in fiscal 2026 flowing through our fiscal 2027 financials. These results validate the highly accretive investments we made throughout fiscal 2026 and further demonstrate the strength of the long-term customer commitments supporting our business. We believe fiscal 2028 could mirror this fiscal year as we continue to execute on additional growth capital projects in H1 of fiscal 2027.

Brad Cooper: During Q1, we hit record produced water volumes, physically disposing of approximately 3.32MBpd during Q1, growing 19.6% from Q1 of fiscal 2026. The record water volumes also generated record Water Solutions adjusted EBITDA for a single quarter. We are seeing the growth capital spend and the 500,000 barrels per day of producer commitments signed in fiscal 2026 flowing through our fiscal 2027 financials. These results validate the highly accretive investments we made throughout fiscal 2026 and further demonstrate the strength of the long-term customer commitments supporting our business. We believe fiscal 2028 could mirror this fiscal year as we continue to execute on additional growth capital projects in H1 of fiscal 2027.

Speaker #3: The record water volumes also generated record water solutions adjusted EBITDA for a single quarter. We are seeing the growth capital spend and the $500,000 barrels per day of producer commitments signed in fiscal 2026 flowing through our fiscal 2027 financials.

Speaker #3: These results validate the highly accretive investments we made throughout fiscal 2026 and further demonstrate the strength of the long-term customer commitments supporting our business.

Speaker #3: We believe fiscal 2028 could mirror this fiscal year as we continue to execute on additional growth capital projects in the first half of fiscal 2027.

Brad Cooper: During the quarter, we executed the LEX II Extension project, expanding the current long-haul LEX Pipeline System to 81 miles, with a capability to transport approximately 560,000 barrels per day of produced water from Eddy and Lea counties in New Mexico to Andrews County in Texas. The LEX II Extension is underwritten by a newly executed long-term volume commitment contract that includes increased volume commitments and an additional four-township committed area in Eddy County. The LEX II Extension is expected to be in service by the end of this calendar year. This contract, along with additional volume commitments recently executed, brings our total produced water volume commitments to approximately 1.77 million barrels a day, roughly 53% of our total volumes. Permitted injection capacity increased by approximately 200,000 barrels during Q1 of fiscal 2027.

Speaker #3: During the quarter, we executed the next two extension project expanding the current long-haul LEX pipeline system to 81 miles with a capability to transport approximately 560,000 barrels per day of produced water from Eddie and Lee counties in New Mexico to Andrews County in Texas.

Speaker #3: The LEX 2 extension is underwritten by a newly executed long-term volume commitment contract that includes increased volume commitments and an additional four township committed area in Eddie County.

Speaker #3: The LEX 2 extension is expected to be in service by the end of this calendar year. This contract, along with additional volume commitments, recently executed, brings our total produced water volume commitments to approximately 1.77 million barrels a day, roughly 53% of our total volumes.

Speaker #3: Permitted injection capacity increased by approximately 200,000 barrels during the first quarter of fiscal 2027. This brings our total permitted capacity up to 5.62 million barrels per day.

Brad Cooper: This brings our total permitted capacity up to 5.62 million barrels per day in the year. With the additional growth projects planned for this fiscal year, we will be adding to this capacity. We continue to improve the credit profile of our customer base with over 90% of our produced water delivered from investment-grade counterparties and over 85% of our trailing 12 adjusted EBITDA generated from our Water Solutions segment. We reduced leverage in Q1, even with our growth capital spend heavily weighted to H1 of this fiscal year. We expect the delevering trend to continue the remainder of the fiscal year while we manage our growth capital spend and liquidity. With our outperformance this quarter and the confidence we have in our customers' execution, we are raising the fiscal 2027 adjusted EBITDA guidance by $10 million.

Speaker #3: With the additional growth projects planned for this fiscal year, we will be adding to this capacity. We continue to improve the credit profile of our customer base with over 90% of our produced water delivered from investment-grade counterparties and over 85% of our trailing 12 adjusted EBITDA generated from our water solution segment.

Speaker #3: We reduced leverage in the first quarter even with our growth capital spend heavily weighted to the first half of this fiscal year. We expect the delevering trend to continue the remainder of the fiscal year while we manage our growth capital spend and liquidity.

Speaker #3: With our outperformance this quarter and the confidence we have in our customers' execution, we are raising the fiscal 2027 adjusted EBITDA guidance by $10 million.

Brad Cooper: From $715 to 725 million to the new guidance range of $725 to 735 million. Turning to our quarterly results, our consolidated adjusted EBITDA from continuing operations for the quarter came in at $186.2 million, versus $143.9 million in the prior Q1, nearly 30% higher than the prior Q1. This increase was primarily driven by the performance of our Water Solutions business segment. Water Solutions adjusted EBITDA was $179.9 million in Q1 versus $142.9 million in the prior Q1, a 26% increase. For the quarter, Water Solutions generated 91% of the EBITDA for the partnership. Physical water disposal volumes were 3.32 million barrels per day in Q1 versus 2.77 million barrels per day in the prior year Q1, a 19.6% increase.

Speaker #3: From $715 million to $725 million, to the new guidance range of $725 million to $735 million. Turning to our quarterly results, our consolidated adjusted EBITDA from continuing operations for the quarter came in at $186.2 million.

Speaker #3: Versus $143.9 million in the prior first quarter, nearly 30% higher than the prior first quarter. This increase was primarily driven by the performance of our water solutions business segment.

Speaker #3: Water Solutions adjusted EBITDA was $179.9 million in the first quarter, versus $142.9 million in the prior first quarter, a 26% increase. For the quarter, Water Solutions generated 91% of the EBITDA for the partnership.

Speaker #3: Physical water disposal volumes were 3.32 million barrels per day in the first quarter, versus 2.77 million barrels per day in the prior year first quarter.

Speaker #3: A 19.6% increase. Total volumes we were paid to dispose, which includes deficiency volumes, were 3.43 million barrels per day in the first quarter, versus 3.06 million barrels per day in the prior-year first quarter.

Brad Cooper: Total volumes we were paid to dispose, that includes deficiency volumes, were 3.43 million barrels per day in the first quarter versus 3.06 million barrels per day in the prior year first quarter. Total volumes we were paid to dispose of were up approximately 12% first quarter of fiscal 2027 over the first quarter of fiscal 2026. The increase in EBITDA is primarily driven by higher disposal volumes from contracted producer customers and skim oil revenue due to significantly higher skim oil volumes. The skim oil volumes are driven by an increase in physical water volumes disposed. We also saw a slight increase to the skim oil percentage, and we benefited from higher crude prices during the quarter on the unhedged skim oil barrels. Operating expenses for the quarter on a per-barrel basis were lower by $0.01 when compared to the same quarter the previous year.

Speaker #3: So total volumes we were paid to dispose of were up approximately 12% first quarter of fiscal 27 over the first quarter of fiscal 2026.

Speaker #3: The increase in EBITDA is primarily driven by higher disposal volumes from contracted producer customers and skim oil revenue, due to significantly higher skim oil volumes.

Speaker #3: The skim oil volumes are driven by an increase in physical water volumes disposed, but we also saw a slight increase of the skim oil percentage and we benefited from higher crude prices during the quarter on the England Hedge skim oil barrels.

Speaker #3: Operating expenses for the quarter, on a per-barrel basis, were lower by $0.01 compared to the same quarter in the previous year. For the first quarter, our operating expenses in the Water Solution segment were $0.21 per barrel.

Brad Cooper: For the first quarter, our operating expenses in the Water Solutions segment was $0.21 per barrel. The increase in volume will continue to dilute the fixed cost component of our cost structure over time. We have continuous conversations with the producers to monitor activity levels and the potential impacts the macro backdrop could have on our Water Solutions segment. Even with the macro volatility, we continue to have a high level of interest in takeaway and disposal capacity and have signed over 200,000 barrels per day in volume commits this quarter alone. Crude Oil Logistics adjusted EBITDA was $8.6 million in the first quarter of fiscal 2027 versus $9.6 million in the prior year's first quarter. During the quarter, volumes on the Grand Mesa Pipeline averaged approximately 74,000 barrels per day, compared to 55,000 barrels per day for the first quarter of 2026.

Speaker #3: The increase in volume will continue to dilute the fixed cost component of our cost structure over time. We have continuous conversations with the producers to monitor activity levels.

Speaker #3: And the potential impacts the macro backdrop could have on our Water Solutions segment. Even with the macro volatility, we continue to have a high level of interest in takeaway and disposal capacity.

Speaker #3: And have signed over 200,000 barrels per day in volume commitments this quarter alone. Crude oil logistics adjusted EBITDA was 8.6 million in the first quarter of fiscal 27 versus 9.6 million in the prior year's first quarter.

Speaker #3: During the quarter, volumes on the Grand Maesa pipeline averaged approximately $74,000 barrels per day compared to $55,000 barrels per day for the first quarter of 2026.

Brad Cooper: Liquids Logistics adjusted EBITDA was $10.3 million the first quarter versus $2.9 million in the prior first quarter. The largest driver for the increase year over year was additional contracted activity through our few remaining butane terminals. This is adjusted for the previously announced asset sales that closed in the prior year quarter. The primary EBITDA contributor of the Liquids Logistics segment going forward will be our butane blending business. Recall that a majority of that EBITDA from this segment occurs in the back half of the fiscal year. With that, I would now like to turn the call over to our CEO, Mike Krimbill.

Speaker #3: Liquids logistics adjusted EBITDA was 10.3 million in the first quarter versus 2.9 million in the prior first quarter. The largest driver for the increase year over year was additional contracted activity through our few remaining butane terminals.

Speaker #3: This is adjusted for the previously announced asset sales that closed in the prior year quarter. The primary EBITDA contributor of the liquids logistics segment going forward will be our butane blending business.

Speaker #3: And recall that a majority of that EBITDA from this segment occurs in the back half of the fiscal year. With that, I would now like to turn the call over to our CEO, Mike Krimbill.

H. Michael Krimbill: Thanks, Brad. Well, obviously, this was a very strong quarter, and if it continues, we anticipate further increases in EBITDA guidance. Operationally, we're experiencing 10% annual growth in our Water Solutions business while margins remain steady. We are focused on performing reliably and consistently for our customers, especially during peak flow back periods. Growth CapEx this fiscal year will exceed $200 million. A significant portion of the EBITDA generated will not be recognized until fiscal 2028. We will see long-term debt relatively flat until the back half of the year, while leverage decreases each quarter. I would like to talk about the Class Ds here in particular.

Mike Krimbill: Thanks, Brad. Well, obviously, this was a very strong quarter, and if it continues, we anticipate further increases in EBITDA guidance. Operationally, we're experiencing 10% annual growth in our Water Solutions business while margins remain steady. We are focused on performing reliably and consistently for our customers, especially during peak flow back periods. Growth CapEx this fiscal year will exceed $200 million. A significant portion of the EBITDA generated will not be recognized until fiscal 2028. We will see long-term debt relatively flat until the back half of the year, while leverage decreases each quarter. I would like to talk about the Class Ds here in particular.

Speaker #2: Thanks, Brad. Well, obviously this was a very strong quarter, and if it continues, we anticipate further increases in EBITDA guidance. Operationally, we're experiencing 10% annual growth in our Water Solutions business, while margins remain steady.

Speaker #2: We are focused on performing reliably and consistently for our customers, especially during peak flowback periods. Growth capex this fiscal year will exceed $200 million.

Speaker #2: A significant portion of the EBITDA generated will not be recognized until fiscal 2028. The majority of the capital will be spent in our first two quarters so we will see long-term debt relatively flat until the back half of the year while leverage decreases each quarter.

Speaker #2: I would like to talk about the Class Ds here, in particular with respect to these. Class Ds outstanding—we have several hundreds of millions of dollars of investment opportunities that are expected to generate a rate of return in excess of the cost of the Class D preferred.

H. Michael Krimbill: With respect to these Class Ds outstanding, we have several hundreds of millions of dollars of investment opportunities that are expected to generate a rate of return in excess of the cost of the Class D Preferred. Therefore, reducing the Class Ds is not our highest and best use of cash. The holders of this security have an option to put them to us no sooner than 1 January 2028, and we must prepare for that possibility. Thus, we expect to redeem about 50% of the remaining Class D Preferreds this fiscal year and leave the balance outstanding. If they are put to us, they will be easily financed. If they are not put to us, we can take advantage of these attractive opportunities or further reduce leverage.

Mike Krimbill: With respect to these Class Ds outstanding, we have several hundreds of millions of dollars of investment opportunities that are expected to generate a rate of return in excess of the cost of the Class D Preferred. Therefore, reducing the Class Ds is not our highest and best use of cash. The holders of this security have an option to put them to us no sooner than 1 January 2028, and we must prepare for that possibility. Thus, we expect to redeem about 50% of the remaining Class D Preferreds this fiscal year and leave the balance outstanding. If they are put to us, they will be easily financed. If they are not put to us, we can take advantage of these attractive opportunities or further reduce leverage.

Speaker #2: Therefore, reducing the Class Ds is not our highest and best use of cash. The holders of this security have an option to put them to us, no sooner than January 1 of 2028.

Speaker #2: And we must prepare for that possibility. Thus, we expect to redeem about 50% of the remaining Class D preferreds this fiscal year. And leave the balance outstanding.

Speaker #2: If they are put to us, they will be easily financed. If they're not put to us, then we can take advantage of these attractive opportunities or further reduce leverage.

H. Michael Krimbill: I think the key here is it is not necessary to eliminate all the Class D Preferreds before reinstating the common unit distribution. Looking forward to the next couple of years, we are positioning NGL to potentially build another large-diameter water pipeline, pursue M&A opportunities, and reinstate the common unit distribution. With that, let's break for questions.

Mike Krimbill: I think the key here is it is not necessary to eliminate all the Class D Preferreds before reinstating the common unit distribution. Looking forward to the next couple of years, we are positioning NGL to potentially build another large-diameter water pipeline, pursue M&A opportunities, and reinstate the common unit distribution. With that, let's break for questions.

Speaker #2: I think the key here is it is not necessary to eliminate all the Class D preferreds before reinstating the common unit distribution. Looking forward to the next couple of years, we are positioning NGL to potentially build another large diameter water pipeline.

Speaker #2: Pursue M&A opportunities and reinstate the common unit distribution. So with that, let's break for questions.

Brad Cooper: 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 would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you 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 a comment. The first question comes from Derrick Whitfield with Texas Capital. Please proceed.

Operator: 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 would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you 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 a comment. The first question comes from Derrick Whitfield with Texas Capital. Please proceed.

Speaker #1: Thank you. At this time, we will be conducting a question and answers session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker #1: A confirmation tone will indicate you're line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #1: Once again, please press star 1 if you have a question or a comment. The first question comes from Derek Whitfield with Texas Capital. Please proceed.

Derrick Whitfield: Good afternoon, all, congrats on a very strong brand.

Speaker #4: Good afternoon, all, and congrats on a very strong front. With regard to your with regard to your growth outlook, for water solutions, how do you guys view the opportunity set as you see it today for additional growth investments in the Delaware?

H. Michael Krimbill: Thanks, Derrick.

Mike Krimbill: Thanks, Derrick.

Derrick Whitfield: With regard to your growth outlook, for Water Solutions, how do you guys view the opportunity set as you see it today for additional growth investments in the Delaware? Sounds like the H2 of this year might be somewhat constrained, but as you look a little further out, it seems like there's a lot of opportunity that you're assessing today.

Speaker #4: It sounds like the second half of this year might be somewhat constrained, but as you look a little further out, it seems like there's a lot of opportunity that you're assessing today.

H. Michael Krimbill: Doug, you want to take that one?

Brad Cooper: Doug, you want to take that one?

Speaker #3: Doug, you want to take that one?

Doug White: Sure, Brad. Thanks, Derrick, for the question. As we presented, we grew by 200,000 barrels a day of new capacity for new deals last quarter. That capacity, we accelerated that development for those deals because there was a big demand for the water, even in our existing contracts. We're going to develop another 300,000 barrels a day the balance of this year, for a total of 500,000 barrels a day. That is contracted capacity, which is a lot. The growth we're showing this Q1, we continue to see additional growth through the balance of the year. You look and say, well, there's a little bit of a constraint on the back end of the year. Really, it's the large development, 500,000 barrels a day. It's a pretty big growth number. We expect that capacity to fill up.

Speaker #5: Sure, Brad. Thanks, Derek, for the question. As we've presented, we grew by $200,000 barrels a day of new capacity. For New Deals, this last quarter, that capacity we accelerated that development for those deals because there was a big demand for the water, even in our existing contracts.

Speaker #5: We're going to develop another 300,000 barrels a day through the balance of this year, for a total of 500,000 barrels a day. That is contracted capacity, which is a lot.

Speaker #5: So the growth we’re showing this first quarter, we continue to see additional growth through the balance of the year. So then you look and say, well, there’s a little bit of a constraint on the back end of the year.

Speaker #5: Really, it's the large development—500,000 barrels a day. It's a pretty big growth number. We expect that capacity to fill up. We are working on fiscal '28 deals as we speak.

Doug White: We are working on fiscal 2028 deals as we speak. Really, it is just a timing opportunity here for us. As we continue to develop, we continue to develop faster, bringing on 16, 18 wells this year, plus all the surface and the pipeline expansions. We are not constrained really by anything in that matter. Really more than anything, it is just execution, and looking to the new deals that are currently in process that will land, we think, prior to fiscal 2028, but most likely be in spend and EBITDA in that next fiscal year.

Speaker #5: So really, it's just a timing—it's a timing opportunity here for us as we continue to develop. We continue to develop faster, bringing on 16 to 18 wells this year, plus all the surface and pipeline expansions.

Speaker #5: We're not constrained really by anything in that matter. Really, more than anything, it's just execution and looking to the New Deals that are currently in process that will land, we think, prior to fiscal 28.

Speaker #5: But most likely being in spend and EBITDA in that next fiscal year.

Derrick Whitfield: Terrific. No, that makes complete sense. Then as my follow-up, could you maybe speak to the opportunities that you guys are seeing for beneficial reuse and mineral extraction? I am thinking about that on the back of TPL's water sourcing deal for Chevron and Select's mineral extraction announcement they announced this year and a little bit later last year as well. Are you guys looking, seeing those kinds of opportunities in the marketplace today?

Speaker #4: That's perfect. No, that makes complete sense. And then as my follow-up, could you maybe speak to the opportunities that you guys are seeing for beneficial reuse and mineral extraction?

Speaker #4: And I'm thinking about that on the back of TPL's water sourcing deal for Chevron and Select's mineral extraction and Alton Safe. Now, it's this year and a little bit later last year as well.

Speaker #4: Are you guys looking seeing those kinds of opportunities in the marketplace today?

Doug White: Yes. I will take that, Brad. Yes, we are. It is interesting, the past year, there was a lot of talk about it. This calendar year, I really think all of us, including our peers, are either in talks on establishing MOUs or moving forward in contracts around both beneficial reuse or mineral extraction. I would say mineral extraction is ahead on the timeline because everyone has been working on lithium and iodine for several years now. We are engaged in those talks, and we expect, some point in the future, we will be able to talk about those as they firm up. Then on the beneficial reuse side, once again, the same idea.

Speaker #5: Yes. I'll take that, Brad. Yes, we are. It's interesting. The past year, there was a lot of talk about it. Now this calendar year, I really think all of us, including our peers, are either in talks, establishing MOUs, or moving forward in contracts around both beneficial reuse or mineral extraction.

Speaker #5: I would say mineral extraction is ahead on the timeline, because everyone's been working on lithium and iodine for several years now. We are engaged in those talks, and we expect at some point in the future, we'll be able to talk about those as they firm up.

Speaker #5: And then on the beneficial reuse side, once again, the same idea. Everyone is in talks with multiple hyperscalers or data centers pushback, they've received or are receiving on their developments on groundwater it's becoming really a fulfilling prophecy that produced water is the answer in West Texas around getting these projects off the ground.

Doug White: Everyone is in talks with multiple hyperscalers or data centers that, because of the pushback they have received or are receiving on their developments on groundwater, it is becoming really a self-fulfilling prophecy that produced water is the answer in West Texas around getting these projects off the ground. There are dozens and dozens of these projects out there. We would expect, the same as the critical minerals, we are going to make some announcements, as time goes on, around being able to supply that water. Then we cannot forget our TPDES permit through TCEQ. We are kind of growing weary of talking about it, October will be 3 years since we applied for it. Our efforts, I think, are going to pay off.

Speaker #5: And there are dozens and dozens of these projects out there. We would expect as the same as a critical minerals we're going to make some announcements as time goes on around being able to supply that water.

Speaker #5: And then we can't forget our TIPDs permit through TCEQ. We kind of growing weary of talking about it, but it's October, we'll be three years since we applied for it.

Speaker #5: But our efforts, I think, are going to pay off. We expect and have received updates that this month, we will receive our permit. And it's going to be a very good permit, and it's going to be a permit that we believe will be economic which is the first step.

Doug White: We expect, have received updates that this month we will receive our permit, it's going to be a very good permit, it's going to be a permit that we believe will be economic, which is the first step. If we have an economic permit with things that really run up the tab on the expenses, you have a gap to fill there, that's where we've been for the last 18 months, I'd say. We think we'll get a good one, I think others will as well. We have some very exciting projects scoped around that permit, that we can't talk about this time. There's still a lot of competitive advantage out there of being first movers. As time goes on with that as well, I think we'll be able to talk a lot more about it, but we're pretty excited about it.

Speaker #5: If we have an economic permit with things that really run up the tab on the expenses, and then you have a gap to fill there, that's where we've been for the last 18 months, I'd say.

Speaker #5: We think we're going to get one. And I think others will as well. So we have some very exciting projects scoped around that permit that we can't talk about this time.

Speaker #5: There's still a lot of competitive advantage out there of being first movers. But as time goes on with that as well, I think we'll be able to talk a lot more about it.

Speaker #5: But we're pretty excited about it.

Derrick Whitfield: Great. One last for Brad, if I could, just on the balance sheet. You guys have made meaningful progress in strengthening your balance sheet over the last couple of years. If we look further out on the curve, when might you be, or when you might first be in a position to reinstate your dividend? Because that's a pretty meaningful landmark development when it occurs, I know that there's a lot of investors who have an interest in that development.

Speaker #4: Great. And one last for Brad, if I could, just on the balance sheet. You guys have made meaningful progress in strengthening your balance sheet over the last couple of years.

Speaker #4: If we look further out on the curve, when might you be or when you might first kind of be in a position to reinstate your dividend?

Speaker #4: Because that's a pretty meaningful landmark development when it occurs. And I know that there's a lot of investors who have an interest in that development.

H. Michael Krimbill: Sure. Well, Derek, we've been hesitant to talk about it till we could really see the light at the end of the tunnel. If we get rid of about half of these Ds this fiscal year I think a distribution reinstatement comes back on the table. It'll just be more perhaps a leverage question. How much capital do we have to spend for these big event opportunities that would be better on the short-term spend building something than paying out a distribution? I think what's significant is this is the first call we've talked about it, we see it possibly happening in 2027.

Brad Cooper: Sure. Well, Derek, we've been hesitant to talk about it till we could really see the light at the end of the tunnel. If we get rid of about half of these Ds this fiscal year I think a distribution reinstatement comes back on the table. It'll just be more perhaps a leverage question. How much capital do we have to spend for these big event opportunities that would be better on the short-term spend building something than paying out a distribution? I think what's significant is this is the first call we've talked about it, we see it possibly happening in 2027.

Speaker #2: Sure. Well, to Derek, we've been hesitant to talk about it until we could really see the light at the end of the tunnel. If we get rid of about half of these Ds this fiscal year, then I think a distribution reinstatement comes back on the table.

Speaker #2: So then it'll just be, or perhaps a leverage question: how much capital do we have to spend for these big EBITDA opportunities that would be better in the short term to spend building something, rather than paying out a distribution?

Speaker #2: But I think what's significant is this is the first call we've talked about it. And we see it possibly happening in 2027.

Derrick Whitfield: Terrific. Again, hats off to you guys on progress on all parts of your business and the balance sheet. Thanks for your time.

Speaker #4: Terrific. Again, hats off to you guys on progress on all parts of your business and the balance sheet. Thanks for your time.

Speaker #5: Thanks, Derek.

H. Michael Krimbill: Thanks, Terry.

Mike Krimbill: Thanks, Derrick.

Speaker #1: The next question comes from Greg Brody with Bank of America. Please proceed.

Operator: The next question comes from Gregg Brody with Bank of America. Please proceed.

Speaker #4: Good afternoon, guys, and thanks for the update. You listed M&A in the three pillars, between building another pipeline and dividends. Can you talk a little bit about the environment out there, and is that something that's likely, given all the organic growth opportunities you have?

Gregg Brody: Good afternoon, guys, and thanks for the update. You listed M&A in those three pillars between building on the pipeline and dividends. Can you talk a little bit about the environment out there and is that something that's likely given all the organic growth opportunities you have?

H. Michael Krimbill: In the water space, just like others, consolidation makes sense. There just aren't a lot of competitors. We are preparing ourselves for that opportunity. We are not in discussions with anyone. Clearly, in M&A, and one reason we haven't been involved is we didn't have a lot of extra cash to do an all-cash deal. Doing a deal with equity, we were not excited, and I don't think our unit holders wanted us to give away $10 equity. I think as our equity price increases, then it's more accretive, using an old term, to get back in the M&A game.

Mike Krimbill: In the water space, just like others, consolidation makes sense. There just aren't a lot of competitors. We are preparing ourselves for that opportunity. We are not in discussions with anyone. Clearly, in M&A, and one reason we haven't been involved is we didn't have a lot of extra cash to do an all-cash deal. Doing a deal with equity, we were not excited, and I don't think our unit holders wanted us to give away $10 equity. I think as our equity price increases, then it's more accretive, using an old term, to get back in the M&A game.

Speaker #2: In the water space, just like others, consolidation makes sense. But there just aren't a lot of competitors. So we are preparing ourselves for that opportunity.

Speaker #2: We're not in discussions with anyone. But clearly, in M&A and one reason we haven't been involved is we didn't have a lot of extra cash to do an all-cash deal.

Speaker #2: And doing a deal with equity, we were not excited. And I don't think our shareholders unit holders wanted us to give away $10 equity.

Speaker #2: So I think as our equity price increases, then it's more accretive using an old term, to get back in the M&A game.

Gregg Brody: Got it. Then you highlighted getting down to about half the Ds. You think you can bring that into your capital structure. You're just assuming you can get to the leverage numbers, so you can potentially raise more secure debt, or are you thinking about potentially the unsecured bond market at some point?

Speaker #4: Got it. And then is our you highlighted getting down to about half the Ds. Do you think you can bring that into your capital structure?

Speaker #4: Is that just you're just assuming you can get to the leverage number so you can put more you can potentially raise more secure debt, or are you thinking about potentially the unsecured bond market at some point?

Speaker #2: No, I think just being criminal debt and/or asset sales could clean up that half of the Ds that Mike spoke to. Kind of the same strategy we've been deploying here the last couple of years.

Brad Cooper: No, I think it just be incremental debt, and/or asset sales could clean up that half of the Ds that Mike spoke to. Kind of the same strategy we've been deploying here the last couple of years. Line of sight to being four times levered at the end of this fiscal year, and we would be in position to do something if the market was there for us to chip away at the Ds some more.

Speaker #2: Line of sight to being four times levered at the end of this fiscal year, and we're positioned to we would be in position to do something if the market was there for us to chip away at the Ds some more.

Speaker #4: Got it. And just remind us, the four times leverage, you're excluding the preferreds from that, correct?

Gregg Brody: Yeah. Just remind us, the four times leverage, you're excluding the preferreds from that, correct?

Speaker #2: Yeah, correct. That's just through the debt. That's correct.

Brad Cooper: Yeah, correct. That's just through the debt. That's correct.

Gregg Brody: Great. Last, Nick, for you. I saw you sold about $12 million of assets this quarter. In what business was that in? Was that part of NGL Logistics or Oil Logistics?

Gregg Brody: Great. Last, Brad, for you. I saw you sold about $12 million of assets this quarter. In what business was that in? Was that part of NGL Logistics or Oil Logistics?

Speaker #4: Great. And last minute for you. I saw you sold about 12 million of assets this quarter. What part and what business was that in?

Speaker #4: Was that part of NGL Logistics or Oil Logistics?

Brad Cooper: I just think that's some line fill that got monetized when a crude contract rolled off. It wasn't a hard physical asset in the liquids business or anything like that, just a timing of line fill. We sold and received the cash this quarter.

Speaker #2: I just think that's some line fill that got monetized when a crude contract rolled off. It wasn't a hard physical asset in the liquids business or anything like that.

Speaker #2: Just a timing of line fill. We sold and received the cash this quarter.

Gregg Brody: Great. Thanks for the time, guys.

Speaker #4: Great. Thanks for the time, guys.

Operator: We have reached the end of the question and answer session. I will now turn the call over to Brad Cooper for closing remarks.

Speaker #1: We have reached the end of the question and answers session. And I will now turn the call over to Brad Cooper for a closing remarks.

Brad Cooper: Yeah. Thanks, everyone, for your interest in NGL today, and we look forward to catching up with you in early November during our Q2 call for 2027. Thank you.

Speaker #5: Yeah, thanks, everyone for your interest in NGL today. And we look forward to catching up with you in early November during our second quarter call for 2027.

Speaker #5: Thank you.

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Q1 2027 NGL Energy Partners LP Earnings Call

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