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NGL Q2 Earnings Call Spotlights Water Growth and Deleveraging
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Key Takeaways
NGL raised fiscal 2027 adjusted EBITDA guidance to $735M-$745M as Water Solutions delivered record earnings.
Water disposal volumes rose 23% to 3.45 million barrels daily, while NGL raised growth capital spending plans.
NGL targets year-end leverage near 4x, with contracted water projects expected to fuel 2028 EBITDA growth.
NGL Energy Partners LP (NGL - Free Report) raised its fiscal 2027 outlook on the strength of its produced-water operations. Executives also positioned new infrastructure spending as a driver of fiscal 2028 earnings.
The call underscored the balance between expansion, debt reduction and eventually restoring common distributions.
NGL Raises Fiscal 2027 Outlook on Water Strength
Chief financial officer Brad Cooper raised adjusted EBITDA guidance to $735-$745 million from $725-$735 million, its second increase this fiscal year.
Water Solutions posted record adjusted EBITDA of $178.3 million, up 17% year over year, and accounted for 93% of consolidated adjusted EBITDA from continuing operations.
Chief executive officer Mike Krimbill clarified during questions that Water Solutions exceeded its budget by more than $20 million in the first half. Guidance reflects existing earnings, not projected contributions from new contracts.
For the second quarter of fiscal 2027, the company reported EPS of $0.24, topping the Zacks Consensus Estimate of $0.22. Revenues of $984.6 million also exceeded the $734.6 million estimate.
NGL Energy Partners LP Price, Consensus and EPS Surprise
Cooper increased fiscal 2027 growth capital spending guidance to approximately $250 million-$270 million from about $200 million. Cooper said that this year's projects would contribute only about one quarter's worth of EBITDA in fiscal 2027.
The LEX II extension expands the network to 81 miles and 560,000 barrels per day of transportation capacity. Its long-term contract includes higher minimum volumes and dedication of four additional townships in Eddy County. Cooper expected service to begin within weeks.
Asked by a Texas Capital Securities analyst about potential returns, Cooper emphasized the lag between capital spending and earnings contributions. He expects continued EBITDA growth in fiscal 2028.
NGL Sees Contract Support for Rising Water Volumes
Physical water disposal reached 3.45 million barrels daily, up 23%. Cooper noted that operating costs fell to $0.20 per barrel from $0.22, while higher skim oil revenue also supported results.
NGL added approximately 450,000 barrels daily of permitted injection capacity in the fiscal first half. Cooper said new capacity filled quickly, reflecting water takeaway demand. More than 90% of produced water came from investment-grade counterparties.
NGL Water Solutions’ executive vice president Douglas White said that new wells had contractual or forecast-volume support. He added that customer consolidation had not reduced activity and was creating negotiations over expanded service areas.
NGL Energy Advances Water Reuse Plans
White outlined desalination plans at Borrow Ranch and Red Bluff near Orla, with a final draft permit approaching after years of work.
He discussed a memorandum of understanding with a data-center developer and work involving power plants, tied to beneficial reuse of produced water.
Cooper welcomed maturing regulation and expected an incoming Texas Railroad Commissioner to support the industry. NGL plans continued engagement.
NGL Targets Debt Reduction and Lower Financing Costs
Cooper targeted leverage of approximately four times by fiscal year-end, supported by cash flow expected during October through March.
NGL cut its Term Loan B margin by 50 basis points in September and expanded asset-based lending commitments to $475 million in October.
September-end liquidity was near $130 million, with $249 million borrowed on the facility. Cooper expects repayment through cash generation. Krimbill reiterated plans to repurchase Class D preferred units and eventually restore common distributions.
NGL Energy Faces Mixed Logistics Trends
Crude Oil Logistics adjusted EBITDA fell to $11.9 million from $16.6 million. Grand Mesa Pipeline volumes dropped to 64,000 barrels daily from 72,000.
The segment recorded a $58.1 million impairment. The partnership posted a $42.6 million loss from continuing operations despite higher adjusted EBITDA.
Liquids Logistics adjusted EBITDA rose to $14.2 million from $10.5 million, driven by contracted activity at butane terminals, Cooper said.
NGL Keeps Its Focus on Water and the Balance Sheet
Krimbill described NGL's priorities as becoming a more water-focused partnership, reducing leverage and addressing its remaining Class D preferred units.
Cooper linked contracted water projects to fiscal 2028 EBITDA growth, while maintaining a focus on debt reduction and the eventual restoration of common-unit distributions.
Zacks Rank and Style Scores Offer Mixed Signals
NGL carries a Zacks Rank #3 (Hold) at present, a neutral rating. Its Growth Score of A, Value Score of B and VGM Score of A indicate favorable growth and valuation characteristics.
Its Momentum Score of C is more moderate. Zacks Style Scores complement the Rank, with stronger combinations pairing A or B scores with Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks. NGL's Rank can change following post-earnings estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.
View the Zacks #1 Rank List
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NGL Q2 Earnings Call Spotlights Water Growth and Deleveraging
Key Takeaways
NGL Energy Partners LP (NGL - Free Report) raised its fiscal 2027 outlook on the strength of its produced-water operations. Executives also positioned new infrastructure spending as a driver of fiscal 2028 earnings.
The call underscored the balance between expansion, debt reduction and eventually restoring common distributions.
NGL Raises Fiscal 2027 Outlook on Water Strength
Chief financial officer Brad Cooper raised adjusted EBITDA guidance to $735-$745 million from $725-$735 million, its second increase this fiscal year.
Water Solutions posted record adjusted EBITDA of $178.3 million, up 17% year over year, and accounted for 93% of consolidated adjusted EBITDA from continuing operations.
Chief executive officer Mike Krimbill clarified during questions that Water Solutions exceeded its budget by more than $20 million in the first half. Guidance reflects existing earnings, not projected contributions from new contracts.
For the second quarter of fiscal 2027, the company reported EPS of $0.24, topping the Zacks Consensus Estimate of $0.22. Revenues of $984.6 million also exceeded the $734.6 million estimate.
NGL Energy Partners LP Price, Consensus and EPS Surprise
NGL Energy Partners LP price-consensus-eps-surprise-chart | NGL Energy Partners LP Quote
NGL Energy Builds Capacity for Fiscal 2028
Cooper increased fiscal 2027 growth capital spending guidance to approximately $250 million-$270 million from about $200 million. Cooper said that this year's projects would contribute only about one quarter's worth of EBITDA in fiscal 2027.
The LEX II extension expands the network to 81 miles and 560,000 barrels per day of transportation capacity. Its long-term contract includes higher minimum volumes and dedication of four additional townships in Eddy County. Cooper expected service to begin within weeks.
Asked by a Texas Capital Securities analyst about potential returns, Cooper emphasized the lag between capital spending and earnings contributions. He expects continued EBITDA growth in fiscal 2028.
NGL Sees Contract Support for Rising Water Volumes
Physical water disposal reached 3.45 million barrels daily, up 23%. Cooper noted that operating costs fell to $0.20 per barrel from $0.22, while higher skim oil revenue also supported results.
NGL added approximately 450,000 barrels daily of permitted injection capacity in the fiscal first half. Cooper said new capacity filled quickly, reflecting water takeaway demand. More than 90% of produced water came from investment-grade counterparties.
NGL Water Solutions’ executive vice president Douglas White said that new wells had contractual or forecast-volume support. He added that customer consolidation had not reduced activity and was creating negotiations over expanded service areas.
NGL Energy Advances Water Reuse Plans
White outlined desalination plans at Borrow Ranch and Red Bluff near Orla, with a final draft permit approaching after years of work.
He discussed a memorandum of understanding with a data-center developer and work involving power plants, tied to beneficial reuse of produced water.
Cooper welcomed maturing regulation and expected an incoming Texas Railroad Commissioner to support the industry. NGL plans continued engagement.
NGL Targets Debt Reduction and Lower Financing Costs
Cooper targeted leverage of approximately four times by fiscal year-end, supported by cash flow expected during October through March.
NGL cut its Term Loan B margin by 50 basis points in September and expanded asset-based lending commitments to $475 million in October.
September-end liquidity was near $130 million, with $249 million borrowed on the facility. Cooper expects repayment through cash generation. Krimbill reiterated plans to repurchase Class D preferred units and eventually restore common distributions.
NGL Energy Faces Mixed Logistics Trends
Crude Oil Logistics adjusted EBITDA fell to $11.9 million from $16.6 million. Grand Mesa Pipeline volumes dropped to 64,000 barrels daily from 72,000.
The segment recorded a $58.1 million impairment. The partnership posted a $42.6 million loss from continuing operations despite higher adjusted EBITDA.
Liquids Logistics adjusted EBITDA rose to $14.2 million from $10.5 million, driven by contracted activity at butane terminals, Cooper said.
NGL Keeps Its Focus on Water and the Balance Sheet
Krimbill described NGL's priorities as becoming a more water-focused partnership, reducing leverage and addressing its remaining Class D preferred units.
Cooper linked contracted water projects to fiscal 2028 EBITDA growth, while maintaining a focus on debt reduction and the eventual restoration of common-unit distributions.
Zacks Rank and Style Scores Offer Mixed Signals
NGL carries a Zacks Rank #3 (Hold) at present, a neutral rating. Its Growth Score of A, Value Score of B and VGM Score of A indicate favorable growth and valuation characteristics.
Its Momentum Score of C is more moderate. Zacks Style Scores complement the Rank, with stronger combinations pairing A or B scores with Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks. NGL's Rank can change following post-earnings estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.