Earnings call transcript: NGL Energy Partners LP reports Q4 2025 earnings miss

NGL Energy Partners LP reported a Q4 2025 EPS of -$0.12, significantly missing the expected $0.21, and revenue of $971.07 million, falling short of the $1.37 billion forecast, causing a stock decline of 6.67% in regular trading and 0.62% in aftermarket trading. Despite the earnings miss, adjusted EBITDA increased 20% year-over-year to $176.8 million, driven by the Water Solutions segment, which now accounts for 85% of adjusted EBITDA, and the company reaffirmed its focus on deleveraging and expanding its water solutions business with a fiscal 2026 EBITDA guidance of $615 million to $625 million.

Analysis

NGL Energy Partners LP (NGL) reported a significant Q4 2025 earnings miss, with an EPS of -$0.12 against a forecast of $0.21, and revenue of $971.07 million, substantially below the anticipated $1.37 billion. This underperformance triggered a 6.67% drop in its stock price during regular trading, followed by an additional 0.62% decline in aftermarket trading. Despite these headline misses, the company demonstrated operational strength in certain areas, achieving a 20% year-over-year increase in consolidated adjusted EBITDA from continuing operations to $176.8 million, primarily driven by its Water Solutions segment, which now contributes 85% of its adjusted EBITDA. Full-year fiscal 2025 adjusted EBITDA reached $622.9 million, surpassing the company's guidance of $620 million. Management is strategically pivoting towards this Water Solutions business, divesting non-core assets like NGL terminals and the biodiesel business for approximately $270 million, which has reduced working capital needs by an average of $75 million and paid off ABL indebtedness. InvestingPro data indicates NGL trades below its Fair Value, though weak gross profit margins of 15.4% and anticipated continued sales decline are concerns. For fiscal 2026, NGL projects an EBITDA range of $615 million to $625 million, which accounts for an approximate $40 million headwind from lower skim oil revenues and divested assets. Capital expenditures are planned at $105 million, with $60 million dedicated to Water Solutions growth. The company emphasized its commitment to lowering leverage and improving its capital structure, including repurchasing Class D Preferred Units, and confirmed no immediate plans to reinstate common unit distributions. Regulatory concerns regarding new Railroad Commission water disposal guidelines are deemed to have no significant impact on NGL's current permit portfolio, as the company has secured numerous legacy permits and is focused on 'out of basin' growth.

Key Decisions for Investors

• Investors should weigh the Q4 earnings and revenue miss against the robust growth and strategic prioritization of the Water Solutions segment, which now forms the core of NGL's EBITDA generation.
• Monitor NGL's ability to execute its deleveraging strategy, particularly the reduction of Class D Preferred Units, and achieve its fiscal 2026 EBITDA guidance despite headwinds from asset sales and potentially lower skim oil prices.
• Consider the stock's significant year-to-date decline and trading near its 52-week low, alongside InvestingPro's indication of trading below Fair Value, but remain cautious due to weak gross profit margins and the absence of common unit distributions.
• Evaluate the company's successful divestiture of non-core assets and the resulting simplification of its business model, which management expects to reduce earnings volatility and seasonality.
• Note management's confidence in the Water Solutions segment's resilience, with current volumes exceeding expectations and minimal anticipated impact from new regulatory guidelines on existing operations, though overall market volatility and oil price uncertainty remain key risks.