OREANDA-NEWS. NGL Energy Partners LP (NYSE:NGL) (“NGL” or the “Partnership”) today reported a net loss for the quarter ended March 31, 2016 of $207.0 million including gains related to the sale of the TLP GP and the early extinguishment of debt totaling $158.9 million offset by a non-cash impairment charge of $380.2 million related to the Water Solutions segment. Adjusted EBITDA was $154.0 million for the quarter ended March 31, 2016, compared to Adjusted EBITDA of $185.0 million during the quarter ended March 31, 2015. This represents a decrease of 17% year over year driven by the decline in commodity prices and warmer weather. Distributable Cash Flow was $128.3 million for the quarter ended March 31, 2016, compared to $153.5 million for the quarter ended March 31, 2015. Net loss for the fiscal year ended March 31, 2016 was $187.1 million with Adjusted EBITDA for the year of $424.1 million, compared to net income and Adjusted EBITDA of $50.2 million and $443.3 million, respectively, for the year ended March 31, 2015. The current year was impacted by the significant decline in commodity prices and the goodwill impairment offset by a portion of the gain on the sale of the TLP GP and early extinguishment of debt compared to the prior year.

“We are very pleased with our fiscal year 2016 EBITDA performance and recent delevering events given the challenging energy environment. Our fourth quarter results were impacted by the continued decline in commodity prices compounded by a continuing unseasonably warm winter. We were able to offset those impacts by increasing volumes in our Refined Products business, optimizing our operations and taking advantage of a contango commodities market. This is a testament to our strategy of having an integrated and diversified portfolio of midstream businesses which serve as natural hedges against commodity price declines,” said Mike Krimbill, CEO of NGL. “Additionally, we have made tremendous progress over the past six months to improve our balance sheet, enhance our liquidity and continue to focus on the opportunities to grow our five business segments.”

Capitalization and Liquidity

NGL had total liquidity (cash plus available capacity on its revolving credit facility) of $329.9 million as of March 31, 2016. Total long-term debt outstanding, excluding the working capital borrowings, was $2,294.3 million at March 31, 2016, compared to $2,720.0 million at December 31, 2015, a decrease of $425.7 million. Total debt outstanding has been reduced further by the proceeds from the TLP LP unit sale, the Class A Preferred Units proceeds and a portion of the Senior Note repurchases, all of which occurred subsequent to March 31, 2016.

On February 1, 2016, we closed on the sale of the general partner of TLP for approximately $350 million, and as a result, we no longer consolidate TLP’s outstanding long-term debt. The proceeds from the sale were used to repay amounts outstanding under our revolving credit facility. Additionally, we repurchased $61.7 million of our 6.875% Senior Notes for $36.4 million and $11.5 million of our 5.125% Senior Notes for $7.0 million during the quarter ended March 31, 2016.

In April 2016, we sold all of the 3.2 million common units we held in TLP LP for approximately $112.4 million in proceeds, announced that we entered into a $200 million private placement of 10.75% Class A Preferred Units with Oaktree Capital Management L.P. and repurchased an additional $5.0 million of our 5.125% Senior Notes and $19.2 million of our 6.875% Senior Notes for an aggregate purchase price of $15.1 million. The first closing of the Class A Preferred Unit transaction occurred on May 11, 2016, at which time we received gross proceeds of $100 million. We expect the second closing of $100 million to occur prior to June 30, 2016.

Quarterly Results of Operations

The Partnership reported a net loss of $207.0 million for the quarter ended March 31, 2016, compared to net income of $111.3 million during the quarter ended March 31, 2015. During the quarter ended March 31, 2016, the Partnership recorded an impairment charge to goodwill of $380.2 million related to the Water Solutions segment and recorded losses on the disposal or impairment of long-lived assets of $67.9 million. These losses were offset by a gain recorded on the sale of the Partnership’s general partner interest in TLP of $130.4 million, a revaluation gain of $36.3 million and a gain of $28.5 million due to the early extinguishment of a portion of its Senior Notes. Additionally, approximately $199.5 million of gain related to the sale of the TLP GP is being deferred and will be recognized ratably through 2023. This amount is included in current and noncurrent liabilities on our March 31, 2016 balance sheet. Excluding these one-time items, the Partnership would have recognized net income of $46.0 million during the quarter. The following table summarizes operating income (loss) by operating segment for the fourth quarter ended (in thousands):

         
    March 31, 2016   March 31, 2015
Crude Oil Logistics   $ (53,434 )   $ (10,519 )
Refined Products & Renewables     167,473       18,042  
Liquids     23,353       49,104  
Retail Propane     32,111       47,246  
Water Solutions     (357,973 )     16,950  
Corporate and Other     (15,775 )     (18,697 )
Total Operating Income (Loss)   $ (204,245 )   $ 102,126  
                 

The tables included in this release reconcile operating income to Adjusted EBITDA for each of our operating segments.

Crude Oil Logistics

The Partnership’s Crude Oil Logistics segment generated Adjusted EBITDA of $16.9 million for the quarter ended March 31, 2016, compared to Adjusted EBITDA of $30.2 million for the quarter ended March 31, 2015. The current quarter results were benefited by a contango market supporting demand for storage and offset by lower crude oil volumes transported as prices and production in the United States continued to decline. During the quarter ended March 31, 2016, we incurred non-cash impairment charges and losses on disposal of assets of $52.8 million, compared to $3.5 million of charges during the quarter ended March 31, 2015, including the sale of a portion of our crude oil trucking fleet and a reduction in the value of steel and pipe inventories to current market.

The Partnership’s Grand Mesa project is on schedule and it anticipates crude oil shipments to begin by November 1, 2016. The Partnership currently expects year one EBITDA related to this project to be approximately $120 million and year two EBITDA to be approximately $150 million. The average contract term on the pipeline is approximately nine years and all contracts are fee-based with minimum volume commitments. The Partnership expects remaining capital expenditures for the project to total approximately $110 million.

Refined Products and Renewables

The Partnership’s Refined Products and Renewables segment generated Adjusted EBITDA of $52.3 million during the quarter ended March 31, 2016. During the quarter ended March 31, 2015, the Partnership generated Adjusted EBITDA of $25.3 million. The number of refined product barrels sold during the quarter ended March 31, 2016 increased by approximately 8.8 million barrels compared to the same period in the prior year driven by increased demand for motor fuels in the current low gasoline price environment. Renewable barrels sold during the quarter ended March 31, 2016 were approximately 1.7 million compared to approximately 1.4 million for the quarter ended March 31, 2015. The sale of the TLP GP and TLP common units is not expected to have any negative impact on our normal, recurring refined products and renewables operations going forward and we expect this segment to meet or exceed its fiscal year 2016 performance in the upcoming year.

Liquids

The Partnership’s Liquids segment generated Adjusted EBITDA of $37.9 million for the quarter ended March 31, 2016, compared to Adjusted EBITDA of $48.3 million for the quarter ended March 31, 2015. Propane volumes decreased by 56.8 million gallons, or 11.8%, during the quarter ended March 31, 2016, compared to the quarter ended March 31, 2015 primarily driven by the warmer than normal winter weather. Other Liquids volumes decreased by 17.0 million gallons, or 8.0%, for the quarter ended March 31, 2016, compared to the same period in the prior year. Total product margin per gallon was $0.07 for the quarter ended March 31, 2016, compared to $0.09 for the quarter ended March 31, 2015.

Retail Propane

The Partnership’s Retail Propane segment generated Adjusted EBITDA of $40.8 million for the quarter ended March 31, 2016, compared to Adjusted EBITDA of $56.4 million for the quarter ended March 31, 2015. Propane sold during the quarter ended March 31, 2016 decreased by 11.5 million gallons compared to the quarter ended March 31, 2015. Distillates sold during the quarter ended March 31, 2016 decreased by approximately 3.8 million gallons compared to the quarter ended March 31, 2015. The Partnership’s Retail Propane segment was also negatively impacted by the warmer winter weather with an overall volume decrease of 16.9% compared to the same period in the prior year. The margin per gallon was $0.91 for the quarter ended March 31, 2016, compared to $0.96 for the quarter ended March 31, 2015, which resulted from a higher percentage of volumes in prepaid, fixed price programs being delivered compared to spot volumes.

Water Solutions

The Partnership’s Water Solutions segment generated Adjusted EBITDA of $11.6 million for the quarter ended March 31, 2016, compared to Adjusted EBITDA of $33.0 million during the quarter ended March 31, 2015. Water barrels processed during the quarter ended March 31, 2016 were 43.6 million, compared to 48.9 million for the quarter ended March 31, 2015. Revenues from recovered hydrocarbons decreased by $8.9 million for the quarter ended March 31, 2016, compared to the quarter ended March 31, 2015. Our Water Solutions segment continues to be negatively impacted by the reduction in crude oil production as a result of the continued depressed crude oil price environment.

Corporate and Other

The Adjusted EBITDA for Corporate and Other was a loss of $5.5 million during the quarter ended March 31, 2016, compared to a loss of $8.2 million for the quarter ended March 31, 2015. Compensation expense decreased by $4.3 million during the quarter ended March 31, 2016, compared to the quarter ended March 31, 2015. Acquisition related expenses decreased by approximately $1.3 million during the quarter compared to the same period in the prior year. Growth capital expenditures totaled $154.5 million for the quarter and $613.6 million for the year ended March 31, 2016 primarily related to the Grand Mesa pipeline project. Management continues to focus on cost management while also taking advantage of market opportunities in the current environment.

Fiscal Year 2017 Guidance

For fiscal year 2017, the Partnership expects to generate Adjusted EBITDA of approximately $500 million, which includes Adjusted EBITDA for the Grand Mesa project for five months at approximately $10 million per month. Distributable Cash Flow is expected to be over $350 million and would generate approximately $175 million, or about 2.0x coverage at our current annualized distribution rate, including distributions on the Class A Preferred units. The Partnership currently expects to spend between $200 million and $300 million on growth capital expenditures during fiscal year 2017, including approximately $110 million related to the completion of Grand Mesa.