NGL-PB — NGL Energy Partners LP

NGL Energy Partners Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted EBITDA: $167.3 million for Q2 2026, up 12% from $149.4 million in Q2 2025.
• Water Solutions Segment: Adjusted EBITDA increased to $151.9 million (up 18% YoY).
• Physical Water Disposal Volumes: Averaged 2.8 million barrels per day, a 4% increase YoY.
• Total Volumes for Disposal: Increased by 14% YoY to 3.15 million barrels per day.
• Operating Expenses: Remained stable at $0.22 per barrel.
• Leverage: Projected to be approximately 4x by fiscal year-end, with a zero ABL balance anticipated.

2. Strategic Updates and Business Highlights

• Growth in Water Solutions: Record water volumes and a 30% increase in Grand Mesa volumes.
• Capital Structure Management: Purchased 88,506 units of Class D preferred stock, saving $10.4 million annually in distributions. Repriced Term Loan B, achieving $15 million in annual interest savings.
• Unit Repurchase Program: Acquired 6.8 million units (5% of outstanding units) at an average price of $4.57.
• New Growth Projects: Underwritten new projects for 750,000 barrels per day of contracted volume, expected to be operational by year-end 2026.

3. Forward Guidance and Outlook

• Adjusted EBITDA Guidance: Increased for FY 2026 from $615-$625 million to $650-$660 million. Initial guidance for FY 2027 set at a minimum of $700 million.
• Growth Expectations: Anticipated growth of approximately 10% for FY 2026 and another 10% for FY 2027.

4. Bad News, Challenges, or Points of Concern

• Market Competition: Increased competition in the water midstream sector, particularly following the acquisition of Aris by WES, could impact customer acquisition and pricing.
• Capital Expenditure: The increase in growth capital from $60 million to $160 million may strain resources, although it is aimed at expanding water operations.
• Regulatory Risks: The permitting process for new projects and environmental regulations could pose challenges.

5. Notable Q&A Insights

• Customer Acquisition: Growth is driven by larger producers committing to NGL's services, attributed to improved infrastructure and economic efficiencies in the Delaware Basin.
• Pore Space Development: Significant growth opportunities exist with 4 million barrels of pore space in Andrews County, with capital requirements for accessing this space ranging from $50 million to $150 million.
• New Drilling Plans: Plans to drill 15 to 20 new saltwater disposal (SWD) wells this fiscal year, leveraging a backlog of legacy permits.

Overall, NGL Energy Partners reported a strong quarter with significant growth in water disposal volumes and adjusted EBITDA, while also outlining ambitious plans for future expansion and capital management. However, competitive pressures and the need for increased capital expenditures present potential challenges.