Business Wire | Nov 9, 2020 04:35PM EST

NGL Energy Partners LP Announces Second Quarter Fiscal 2021 Financial Results

Nov. 09, 2020

TULSA, Okla.--(BUSINESS WIRE)--Nov. 09, 2020--NGL Energy Partners LP (NYSE:NGL) ("NGL," "our," "we," or the "Partnership") today reported its second quarter fiscal 2021 results. Highlights for the quarter include:

* Income from continuing operations for the second quarter of Fiscal 2021 of $6.0 million, compared to a loss from continuing operations of $15.6 million for the second quarter of Fiscal 2020 * Adjusted EBITDA from continuing operations for the second quarter of Fiscal 2021 of $138.0 million, compared to $123.5 million for the second quarter of Fiscal 2020 * Successful completion of our Poker Lake pipeline, which has an initial capacity of over 350,000 barrels per day and connects into our integrated Delaware Basin produced water pipeline infrastructure network * New, long-term acreage dedications for water disposal services and a long-term extension and expansion to an existing acreage dedication with leading independent and super major producers in the Delaware Basin

"Our second quarter results reflect the expected increase in Adjusted EBITDA related to the sale of crude oil stored for contango, as well as the sale of skim oil barrels we held during our first fiscal quarter. Our second quarter earnings also reflect the full benefit of reduced operating expenses in the Water Solutions segment, with operating expense averaging $0.27 per barrel, compared to $0.32 per barrel during the first quarter of this fiscal year and $0.40 per barrel during Fiscal 2020. This decrease in expenses is significant as it represents approximately $50 - $60 million in annual cost savings based on average volumes for the quarter," stated Mike Krimbill, NGL's CEO. "Additionally during the quarter, we were able to enter into several new, long-term water disposal contracts, as well as extend and expand certain other water disposal contracts, in the Delaware Basin with both high quality, independent and super major producers. Our Crude Logistics segment continued to perform despite the noise around the Extraction bankruptcy process and averaged approximately 123,000 barrels per day on Grand Mesa Pipeline. As previously stated, NGL will continue to vigorously defend the value of its contracts with Extraction and remains amenable to resolving the dispute through commercial considerations. Finally, the Liquids and Refined Products segment is heading into its peak earning season with strong inventory positions and we are looking forward to a successful year in this segment. In addition to maximizing results from operations, we are focused on reducing indebtedness and our bank commitments. We are reducing capital expenditures, further cutting costs and have decreased the common unit distribution, all of which increase our free cash flow. We are also evaluating assets sales and joint venture opportunities. These remain challenging times; however, we continue to manage the things we can control and focus on the future to create value for our stakeholders," Krimbill concluded.

Quarterly Results of Operations

The following table summarizes operating income (loss) and Adjusted EBITDA from continuing operations by reportable segment for the periods indicated:

Quarter Ended

September 30, 2020 September 30, 2019

Operating Operating Adjusted Income Adjusted Income EBITDA (Loss) EBITDA (Loss)

(in thousands)

Crude Oil Logistics $ 48,239 $ 65,181 $ 38,520 $ 54,632

Liquids and Refined 14,338 21,257 8,798 23,273 Products

Water Solutions (13,277 ) 61,047 21,274 56,879

Corporate and Other (12,984 ) (9,514 ) (38,477 ) (11,318 )

Total $ 36,316 $ 137,971 $ 30,115 $ 123,466

The tables included in this release reconcile operating income (loss) to Adjusted EBITDA from continuing operations, a non-GAAP financial measure, on a consolidated basis and for each of the Partnership's reportable segments.

Crude Oil Logistics

Operating income for the second quarter of Fiscal 2021 increased compared to the second quarter of Fiscal 2020 primarily due to increased margins. The increased margin realized during the current quarter was due primarily to the sale of inventory that was purchased at lower prices and held during the three months ended June 30, 2020. During the three months ended September 30, 2020, financial volumes on the Grand Mesa Pipeline averaged approximately 123,000 barrels per day.

In June 2020, Extraction Oil & Gas, Inc. ("Extraction"), a significant shipper on the Grand Mesa Pipeline, filed a petition for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Extraction has transportation contracts pursuant to which it has committed to ship crude oil on the pipeline through October 2026. As part of the bankruptcy filing, Extraction filed a motion requesting that the court authorize it to reject these transportation contracts, to which the Partnership filed an objection and took various other legal steps within the bankruptcy to protect the value of the contracts. On November 2, 2020, the bankruptcy court issued a bench ruling granting the motion to reject the transportation contracts effective as of June 14, 2020. As a result, we intend to appeal the bankruptcy court's ruling and raise what we respectfully believe are numerous infirmities with the ruling.

Liquids and Refined Products

Total product margin per gallon, excluding the impact of derivatives, was $0.036 for the quarter ended September 30, 2020, compared to $0.031 for the quarter ended September 30, 2019. This increase was primarily due to propane inventory values aligning with increased commodity prices. This increase was partially offset by lower margins for butane and refined products due to lower demand resulting from the COVID-19 pandemic.

Refined products volumes decreased by approximately 111.7 million gallons, or 33.6%, during the quarter ended September 30, 2020 compared to the quarter ended September 30, 2019. Propane volumes decreased by approximately 9.5 million gallons, or 3.6%, and butane volumes decreased by approximately 26.8 million gallons, or 15.7%, when compared to the quarter ended September 30, 2019. Other product volumes decreased by approximately 37.1 million gallons, or 24.5%, during the quarter ended September 30, 2020 compared to the same period in the prior year. The decrease in refined products, propane, butane and other product volumes was also primarily due to the continued lower demand as a result of the COVID-19 pandemic.

Water Solutions

The Partnership processed approximately 1.28 million barrels of water per day during the quarter ended September 30, 2020, a 1.9% increase when compared to produced water processed per day during the quarter ended September 30, 2019. This increase was primarily driven by our acquisition of Hillstone Environmental Partners, LLC in November 2019 in the Delaware Basin and was offset by lower disposal volumes in all other basins during the period resulting from lower crude oil prices, drilling activity and production volumes.

Revenues from recovered crude oil, including the impact from realized skim oil hedges, totaled $12.5 million for the quarter ended September 30, 2020, a decrease of $3.9 million from the prior year period. This decrease was the result of lower volumes and lower crude oil prices. The percentage of recovered crude oil per barrel of produced water processed has declined over the past several periods due to an increase in produced water transported through pipelines (which contains less oil per barrel of produced water) and the addition of contract structures that allow producers to keep the skim oil recovered from produced water. This decrease was partially offset by the sale of crude oil during the three months ended September 30, 2020, that we stored as of June 30, 2020 due to the lower crude oil prices.

Operating expenses in the Water Solutions segment decreased to $0.27 per barrel compared to $0.38 per barrel in the comparative quarter last year. The Partnership has taken significant steps to reduce operating costs and continues to evaluate cost saving initiatives in the current environment.

In October 2020, the Partnership successfully completed its Poker Lake pipeline and tie-ins, which has an initial capacity of over 350,000 barrels per day and connects into its integrated Delaware Basin produced water pipeline infrastructure network. NGL began receiving produced water volumes from Exxon's Poker Lake Development. Additionally, the Partnership recently announced new agreements, including acreage dedications, water transportation and disposal agreements, and water supply agreements, with leading super major producers and other key producers in the Delaware Basin. The Partnership expects to service these customers' produced water needs with its existing infrastructure with minimal capital expenditure requirements in the foreseeable future.

Corporate and Other

Corporate and Other expenses decreased from the comparable prior year period primarily due to lower compensation expense, in particular cash and non-cash incentive compensation, and a reduction in acquisition related expenses. These decreases were partially offset by legal costs incurred for defending the rejection of our transportation contracts in Extraction bankruptcy proceedings.

Capitalization and Liquidity

Total debt outstanding was $3.29 billion at September 30, 2020 compared to $3.15 billion at March 31, 2020, an increase of $139 million due primarily to the funding of certain capital expenditures incurred prior to and accrued on March 31, 2020 and $83.1 million of the remaining $100.0 million deferred purchase price of Mesquite Disposals Unlimited, LLC ("Mesquite"). Capital expenditures incurred totaled $24.4 million during the second quarter (including $6.8 million in maintenance expenditures) and $54.4 million year-to-date. These expenditures are expected to continue to decrease throughout Fiscal 2021 with full year expectations totaling $100 million or less for both growth and maintenance capital expenditures combined. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $122.1 million as of September 30, 2020 and the Partnership is in compliance with all of its debt covenants.

The Partnership is currently working with the syndicate of lenders that are a party to its revolving credit facility to extend the maturity of the facility by at least one year. The Partnership's proposal was submitted to all of the syndicate lenders in October 2020, and remains subject to approval by each lender.

Second Quarter Conference Call Information

A conference call to discuss NGL's results of operations is scheduled for 4:00 pm Central Time on Monday, November 9, 2020. Analysts, investors, and other interested parties may access the conference call by dialing (800) 291-4083 and providing access code 8880357. An archived audio replay of the conference call will be available for 7 days beginning at 1:00 pm Central Time on November 10, 2020, which can be accessed by dialing (855) 859-2056 and providing access code 8880357.

Non-GAAP Financial Measures

NGL defines EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. NGL defines Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other. NGL also includes in Adjusted EBITDA certain inventory valuation adjustments related to TransMontaigne Product Services, LLC ("TPSL"), our refined products business in the mid-continent region of the United States ("Mid-Con") and our gas blending business in the southeastern and eastern regions of the United States ("Gas Blending"), which are included in discontinued operations, and certain refined products businesses within NGL's Liquids and Refined Products segment, as discussed below. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), income (loss) from continuing operations before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. NGL believes that EBITDA provides additional information to investors for evaluating NGL's ability to make quarterly distributions to NGL's unitholders and is presented solely as a supplemental measure. NGL believes that Adjusted EBITDA provides additional information to investors for evaluating NGL's financial performance without regard to NGL's financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as NGL defines them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities.

Other than for the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL's Liquids and Refined Products segment, for purposes of the Adjusted EBITDA calculation, NGL makes a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, NGL records changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, NGL reverses the previously recorded unrealized gain or loss and record a realized gain or loss. NGL does not draw such a distinction between realized and unrealized gains and losses on derivatives of the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL's Liquids and Refined Products segment. The primary hedging strategy of these businesses is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges cover extended periods of time. The "inventory valuation adjustment" row in the reconciliation table reflects the difference between the market value of the inventory of these businesses at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. NGL includes this in Adjusted EBITDA because the unrealized gains and losses associated with derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA.

Distributable Cash Flow is defined as Adjusted EBITDA minus maintenance capital expenditures, income tax expense, cash interest expense, preferred unit distributions and other. Maintenance capital expenditures represent capital expenditures necessary to maintain the Partnership's operating capacity. Distributable Cash Flow is a performance metric used by senior management to compare cash flows generated by the Partnership (excluding growth capital expenditures and prior to the establishment of any retained cash reserves by the Board of Directors) to the cash distributions expected to be paid to unitholders. Using this metric, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions. This financial measure also is important to investors as an indicator of whether the Partnership is generating cash flow at a level that can sustain, or support an increase in, quarterly distribution rates. Actual distribution amounts are set by the Board of Directors.

Forward-Looking Statements

This press release includes "forward-looking statements." All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. While NGL believes such forward-looking statements are reasonable, NGL cannot assure they will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings with the Securities and Exchange Commission. Other factors that could impact any forward-looking statements are those risks described in NGL's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other public filings. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading "Risk Factors." NGL undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.

NGL provides Adjusted EBITDA guidance that does not include certain charges and costs, which in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as income taxes, interest and other non-operating items, depreciation and amortization, net unrealized gains and losses on derivatives, lower of cost or net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities and items that are unusual in nature or infrequently occurring. The exclusion of these charges and costs in future periods will have a significant impact on the Partnership's Adjusted EBITDA, and the Partnership is not able to provide a reconciliation of its Adjusted EBITDA guidance to net income (loss) without unreasonable efforts due to the uncertainty and variability of the nature and amount of these future charges and costs and the Partnership believes that such reconciliation, if possible, would imply a degree of precision that would be potentially confusing or misleading to investors.

About NGL Energy Partners LP

NGL Energy Partners LP, a Delaware limited partnership, is a diversified midstream energy company that transports, stores, markets and provides other logistics services for crude oil, natural gas liquids and other products and transports, treats and disposes of produced water generated as part of the oil and natural gas production process.

For further information, visit the Partnership's website at www.nglenergypartners.com.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)

September 30, March 31, 2020 2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 16,912 $ 22,704

Accounts receivable-trade, net of allowance forexpected credit losses of $3,399 and $4,540, 439,889 566,834 respectively

Accounts receivable-affiliates 14,904 12,934

Inventories 182,859 69,634

Prepaid expenses and other current assets 74,150 101,981

Total current assets 728,714 774,087

PROPERTY, PLANT AND EQUIPMENT, net of accumulateddepreciation of $619,820 and $529,068, 2,799,725 2,851,555 respectively

GOODWILL 982,239 993,587

INTANGIBLE ASSETS, net of accumulatedamortization of $706,259 and $631,449, 1,538,417 1,612,480 respectively

INVESTMENTS IN UNCONSOLIDATED ENTITIES 21,215 23,182

OPERATING LEASE RIGHT-OF-USE ASSETS 168,349 180,708

OTHER NONCURRENT ASSETS 47,752 63,137

Total assets $ 6,286,411 $ 6,498,736

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable-trade $ 379,420 $ 515,049

Accounts payable-affiliates 23,985 17,717

Accrued expenses and other payables 138,572 232,062

Advance payments received from customers 24,143 19,536

Current maturities of long-term debt 13,123 4,683

Operating lease obligations 50,709 56,776

Total current liabilities 629,952 845,823

LONG-TERM DEBT, net of debt issuance costs of$22,267 and $19,795, respectively, and current 3,275,166 3,144,848 maturities

OPERATING LEASE OBLIGATIONS 114,833 121,013

OTHER NONCURRENT LIABILITIES 105,835 114,079



CLASS D 9.00% PREFERRED UNITS, 600,000 and600,000 preferred units issued and outstanding, 551,097 537,283 respectively



EQUITY:

General partner, representing a 0.1% interest, (51,518 ) (51,390 )128,901 and 128,901 notional units, respectively

Limited partners, representing a 99.9% interest,128,771,715 and 128,771,715 common units issued 1,242,676 1,366,152 and outstanding, respectively

Class B preferred limited partners, 12,585,642and 12,585,642 preferred units issued and 305,468 305,468 outstanding, respectively

Class C preferred limited partners, 1,800,000 and1,800,000 preferred units issued and outstanding, 42,891 42,891 respectively

Accumulated other comprehensive loss (307 ) (385 )

Noncontrolling interests 70,318 72,954

Total equity 1,609,528 1,735,690

Total liabilities and equity $ 6,286,411 $ 6,498,736

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)

Three Months Ended September 30,

Six Months Ended September 30,

2020

2019

2020

2019

REVENUES:

Crude Oil Logistics

$

466,841

$

641,152

$

742,880

$

1,357,312

Water Solutions

88,678

101,249

176,743

173,032

Liquids and Refined Products

612,324

1,061,671

1,092,322

2,145,364

Other

315

264

628

519

Total Revenues

1,168,158

1,804,336

2,012,573

3,676,227

COST OF SALES:

Crude Oil Logistics

386,771

569,699

604,328

1,218,939

Water Solutions

579

(6,496

)

5,279

(9,303

)

Liquids and Refined Products

577,086

1,025,565

1,031,422

2,068,597

Other

454

435

908

900

Total Cost of Sales

964,890

1,589,203

1,641,937

3,279,133

OPERATING COSTS AND EXPENSES:

Operating

56,054

74,886

121,041

136,198

General and administrative

17,475

43,908

34,633

64,250

Depreciation and amortization

87,469

63,113

171,455

116,867

Loss on disposal or impairment of assets, net

5,954

3,111

17,976

2,144

Operating Income

36,316

30,115

25,531

77,635

OTHER INCOME (EXPENSE):

Equity in earnings (loss) of unconsolidated entities

501

(265

)

790

(257

)

Interest expense

(46,935

)

(45,017

)

(90,896

)

(84,894

)

Gain on early extinguishment of liabilities, net

13,747

-

33,102

-

Other income, net

1,585

183

2,620

1,193

Income (Loss) From Continuing Operations Before Income Taxes

5,214

(14,984

)

(28,853

)

(6,323

)

INCOME TAX BENEFIT (EXPENSE)

774

(640

)

1,075

(319

)

Income (Loss) From Continuing Operations

5,988

(15,624

)

(27,778

)

(6,642

)

Loss From Discontinued Operations, net of Tax

(153

)

(185,742

)

(1,639

)

(186,685

)

Net Income (Loss)

5,835

(201,366

)

(29,417

)

(193,327

)

LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(168

)

129

(219

)

397

NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP

$

5,667

$

(201,237

)

$

(29,636

)

$

(192,930

)

NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

$

(17,933

)

$

(32,561

)

$

(73,748

)

$

(152,687

)

NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

$

(152

)

$

(185,556

)

$

(1,637

)

$

(186,498

)

NET LOSS ALLOCATED TO COMMON UNITHOLDERS

$

(18,085

)

$

(218,117

)

$

(75,385

)

$

(339,185

)

BASIC LOSS PER COMMON UNIT

Loss From Continuing Operations

$

(0.14

)

$

(0.26

)

$

(0.57

)

$

(1.21

)

Loss From Discontinued Operations, net of Tax

$

-

$

(1.46

)

$

(0.01

)

$

(1.47

)

Net Loss

$

(0.14

)

$

(1.72

)

$

(0.58

)

$

(2.68

)

DILUTED LOSS PER COMMON UNIT

Loss From Continuing Operations

$

(0.14

)

$

(0.26

)

$

(0.57

)

$

(1.21

)

Loss From Discontinued Operations, net of Tax

$

-

$

(1.46

)

$

(0.01

)

$

(1.47

)

Net Loss

$

(0.14

)

$

(1.72

)

$

(0.58

)

$

(2.68

)

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

128,771,715

126,979,034

128,771,715

126,435,870

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

128,771,715

126,979,034

128,771,715

126,435,870

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)



Three Months Ended September Six Months Ended September 30, 30,

2020 2019 2020 2019

REVENUES:

Crude Oil $ 466,841 $ 641,152 $ 742,880 $ 1,357,312 Logistics

Water Solutions 88,678 101,249 176,743 173,032

Liquids andRefined 612,324 1,061,671 1,092,322 2,145,364 Products

Other 315 264 628 519

Total Revenues 1,168,158 1,804,336 2,012,573 3,676,227

COST OF SALES:

Crude Oil 386,771 569,699 604,328 1,218,939 Logistics

Water Solutions 579 (6,496 ) 5,279 (9,303 )

Liquids andRefined 577,086 1,025,565 1,031,422 2,068,597 Products

Other 454 435 908 900

Total Cost of 964,890 1,589,203 1,641,937 3,279,133 Sales

OPERATING COSTS AND EXPENSES:

Operating 56,054 74,886 121,041 136,198

General and 17,475 43,908 34,633 64,250 administrative

Depreciationand 87,469 63,113 171,455 116,867 amortization

Loss ondisposal or 5,954 3,111 17,976 2,144 impairment ofassets, net

Operating 36,316 30,115 25,531 77,635 Income

OTHER INCOME (EXPENSE):

Equity inearnings (loss)of 501 (265 ) 790 (257 )unconsolidatedentities

Interest (46,935 ) (45,017 ) (90,896 ) (84,894 )expense

Gain on earlyextinguishment 13,747 - 33,102 - of liabilities,net

Other income, 1,585 183 2,620 1,193 net

Income (Loss)From ContinuingOperations 5,214 (14,984 ) (28,853 ) (6,323 )Before IncomeTaxes

INCOME TAXBENEFIT 774 (640 ) 1,075 (319 )(EXPENSE)

Income (Loss)From Continuing 5,988 (15,624 ) (27,778 ) (6,642 )Operations

Loss FromDiscontinued (153 ) (185,742 ) (1,639 ) (186,685 )Operations, netof Tax

Net Income 5,835 (201,366 ) (29,417 ) (193,327 )(Loss)

LESS: NET(INCOME) LOSSATTRIBUTABLE TO (168 ) 129 (219 ) 397 NONCONTROLLINGINTERESTS

NET INCOME(LOSS)ATTRIBUTABLE TO $ 5,667 $ (201,237 ) $ (29,636 ) $ (192,930 )NGL ENERGYPARTNERS LP

NET LOSS FROMCONTINUINGOPERATIONS $ (17,933 ) $ (32,561 ) $ (73,748 ) $ (152,687 )ALLOCATED TOCOMMONUNITHOLDERS

NET LOSS FROMDISCONTINUEDOPERATIONS $ (152 ) $ (185,556 ) $ (1,637 ) $ (186,498 )ALLOCATED TOCOMMONUNITHOLDERS

NET LOSSALLOCATED TO $ (18,085 ) $ (218,117 ) $ (75,385 ) $ (339,185 )COMMONUNITHOLDERS

BASIC LOSS PER COMMON UNIT

Loss FromContinuing $ (0.14 ) $ (0.26 ) $ (0.57 ) $ (1.21 )Operations

Loss FromDiscontinued $ - $ (1.46 ) $ (0.01 ) $ (1.47 )Operations, netof Tax

Net Loss $ (0.14 ) $ (1.72 ) $ (0.58 ) $ (2.68 )

DILUTED LOSS PER COMMON UNIT

Loss FromContinuing $ (0.14 ) $ (0.26 ) $ (0.57 ) $ (1.21 )Operations

Loss FromDiscontinued $ - $ (1.46 ) $ (0.01 ) $ (1.47 )Operations, netof Tax

Net Loss $ (0.14 ) $ (1.72 ) $ (0.58 ) $ (2.68 )

BASIC WEIGHTEDAVERAGE COMMON 128,771,715 126,979,034 128,771,715 126,435,870 UNITSOUTSTANDING

DILUTEDWEIGHTEDAVERAGE COMMON 128,771,715 126,979,034 128,771,715 126,435,870 UNITSOUTSTANDING

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION

(Unaudited)

The following table reconciles NGL's net income (loss) to NGL's EBITDA, Adjusted EBITDA and Distributable Cash Flow:

Three Months Ended September 30,

Six Months Ended September 30,

2020

2019

2020

2019

(in thousands)

Net income (loss)

$

5,835

$

(201,366

)

$

(29,417

)

$

(193,327

)

Less: Net (income) loss attributable to noncontrolling interests

(168

)

129

(219

)

397

Net income (loss) attributable to NGL Energy Partners LP

5,667

(201,237

)

(29,636

)

(192,930

)

Interest expense

46,840

45,113

90,906

85,023

Income tax (benefit) expense

(827

)

650

(1,128

)

339

Depreciation and amortization

86,822

63,266

170,024

118,110

EBITDA

138,502

(92,208

)

230,166

10,542

Net unrealized losses (gains) on derivatives

4,457

(5,462

)

31,128

(8,936

)

Inventory valuation adjustment (1)

(1,641

)

(5,439

)

2,179

(25,185

)

Lower of cost or net realizable value adjustments

(1,531

)

(901

)

(33,534

)

(1,819

)

Loss on disposal or impairment of assets, net

6,063

177,561

19,147

176,594

Gain on early extinguishment of liabilities, net

(13,747

)

-

(33,102

)

-

Equity-based compensation expense (2)

2,256

21,295

4,558

24,996

Acquisition expense (3)

169

5,085

326

7,176

Other (4)

3,253

3,332

7,601

6,655

Adjusted EBITDA

$

137,781

$

103,263

$

228,469

$

190,023

Adjusted EBITDA - Discontinued Operations (5)

$

(190

)

$

(20,203

)

$

(484

)

$

(37,161

)

Adjusted EBITDA - Continuing Operations

$

137,971

$

123,466

$

228,953

$

227,184

Less: Cash interest expense (6)

43,568

42,712

83,967

80,487

Less: Income tax (benefit) expense

(774

)

640

(1,075

)

319

Less: Maintenance capital expenditures

6,830

16,461

15,998

33,390

Less: Preferred unit distributions paid

15,108

5,796

30,138

18,872

Less: Other (7)

-

127

-

127

Distributable Cash Flow - Continuing Operations

$

73,239

$

57,730

$

99,925

$

93,989

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION

(Unaudited)

The following table reconciles NGL's net income (loss) to NGL's EBITDA,Adjusted EBITDA and Distributable Cash Flow:

Three Months Ended Six Months Ended September September 30, 30,

2020 2019 2020 2019

(in thousands)

Net income (loss) $ 5,835 $ (201,366 ) $ (29,417 ) $ (193,327 )

Less: Net (income)loss attributable to (168 ) 129 (219 ) 397 noncontrollinginterests

Net income (loss)attributable to NGL 5,667 (201,237 ) (29,636 ) (192,930 )Energy Partners LP

Interest expense 46,840 45,113 90,906 85,023

Income tax (benefit) (827 ) 650 (1,128 ) 339 expense

Depreciation and 86,822 63,266 170,024 118,110 amortization

EBITDA 138,502 (92,208 ) 230,166 10,542

Net unrealized losses(gains) on 4,457 (5,462 ) 31,128 (8,936 )derivatives

Inventory valuation (1,641 ) (5,439 ) 2,179 (25,185 )adjustment (1)

Lower of cost or netrealizable value (1,531 ) (901 ) (33,534 ) (1,819 )adjustments

Loss on disposal orimpairment of assets, 6,063 177,561 19,147 176,594 net

Gain on earlyextinguishment of (13,747 ) - (33,102 ) - liabilities, net

Equity-basedcompensation expense 2,256 21,295 4,558 24,996 (2)

Acquisition expense 169 5,085 326 7,176 (3)

Other (4) 3,253 3,332 7,601 6,655

Adjusted EBITDA $ 137,781 $ 103,263 $ 228,469 $ 190,023

Adjusted EBITDA -Discontinued $ (190 ) $ (20,203 ) $ (484 ) $ (37,161 )Operations (5)

Adjusted EBITDA - $ 137,971 $ 123,466 $ 228,953 $ 227,184 Continuing Operations

Less: Cash interest 43,568 42,712 83,967 80,487 expense (6)

Less: Income tax (774 ) 640 (1,075 ) 319 (benefit) expense

Less: Maintenance 6,830 16,461 15,998 33,390 capital expenditures

Less: Preferred unit 15,108 5,796 30,138 18,872 distributions paid

Less: Other (7) - 127 - 127

Distributable CashFlow - Continuing $ 73,239 $ 57,730 $ 99,925 $ 93,989 Operations

(1)Amount reflects the difference between the market value of the inventory at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge position. See "Non-GAAP Financial Measures" section above for a further discussion.

(2)

Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in the footnotes to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.

(3)

Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including Mesquite during the three months and six months ended September 30, 2019.

(4)

Amounts for the three months and six months ended September 30, 2020 and 2019 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations.

(5)

Amounts include the operations of TPSL, Gas Blending and Mid-Con.

(6)

Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.

(7)

Amounts represents cash paid to settle asset retirement obligations.

ADJUSTED EBITDA RECONCILIATION BY SEGMENT

Amount reflects the difference between the market value of the inventory at the balance sheet date and its cost, adjusted for the impact of(1) seasonal market movements related to our base inventory and the related hedge position. See "Non-GAAP Financial Measures" section above for a further discussion.

Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership's Quarterly Report on Form 10-Q for the quarter ended(2) September 30, 2020. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in the footnotes to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.

Amounts represent expenses we incurred related to legal and advisory costs(3) associated with acquisitions, including Mesquite during the three months and six months ended September 30, 2019.

Amounts for the three months and six months ended September 30, 2020 and(4) 2019 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations.

(5) Amounts include the operations of TPSL, Gas Blending and Mid-Con.

(6) Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.

(7) Amounts represents cash paid to settle asset retirement obligations.

ADJUSTED EBITDA RECONCILIATION BY SEGMENT

Three Months Ended September 30, 2020

Discontinued Liquids Operations Crude Oil Water and Corporate Continuing (TPSL, Consolidated Logistics Solutions Refined and Other Operations Mid-Con, Products Gas Blending)

(in thousands)

Operating $ 48,239 $ (13,277 ) $ 14,338 $ (12,984 ) $ 36,316 $ - $ 36,316 income (loss)

Depreciationand 17,232 62,220 7,026 991 87,469 - 87,469 amortization

Amortizationrecorded to - - 76 - 76 - 76 cost of sales

Net unrealized(gains) losses (3,317 ) 4,413 3,361 - 4,457 - 4,457 on derivatives

Inventoryvaluation - - (1,639 ) - (1,639 ) - (1,639 )adjustment

Lower of costor netrealizable (19 ) - (1,513 ) - (1,532 ) - (1,532 )valueadjustments

(Gain) loss ondisposal or (310 ) 6,223 43 (2 ) 5,954 - 5,954 impairment ofassets, net

Equity-basedcompensation - - - 2,256 2,256 - 2,256 expense

Acquisition - 1 - 168 169 - 169 expense

Other income, 1,175 2 286 122 1,585 - 1,585 net

AdjustedEBITDAattributable - 845 (13 ) (65 ) 767 - 767 tounconsolidatedentities

AdjustedEBITDAattributable - (441 ) (736 ) - (1,177 ) - (1,177 )tononcontrollinginterest

Other 2,181 1,061 28 - 3,270 - 3,270

Discontinued - - - - - (190 ) (190 )operations

Adjusted $ 65,181 $ 61,047 $ 21,257 $ (9,514 ) $ 137,971 $ (190 ) $ 137,781 EBITDA

Three Months Ended September 30, 2019

Crude OilLogistics

WaterSolutions

Liquids andRefined Products

Corporateand Other

ContinuingOperations

Discontinued Operations(TPSL, Mid-Con, Gas Blending)

Consolidated

(in thousands)

Operating income (loss)

$

38,520

$

21,274

$

8,798

$

(38,477

)

$

30,115

$

-

$

30,115

Depreciation and amortization

17,693

37,921

6,736

763

63,113

-

63,113

Amortization recorded to cost of sales

-

-

89

-

89

-

89

Net unrealized (gains) losses on derivatives

(4,126

)

(5,870

)

4,534

-

(5,462

)

-

(5,462

)

Inventory valuation adjustment

-

-

1,801

-

1,801

-

1,801

Lower of cost or net realizable value adjustments

-

-

152

-

152

-

152

(Gain) loss on disposal or impairment of assets, net

(630

)

3,744

(4

)

1

3,111

-

3,111

Equity-based compensation expense

-

-

-

21,295

21,295

-

21,295

Acquisition expense

-

-

-

5,085

5,085

-

5,085

Other income (expense), net

43

(2

)

(20

)

162

183

-

183

Adjusted EBITDA attributable to unconsolidated entities

-

-

(26

)

(147

)

(173

)

-

(173

)

Adjusted EBITDA attributable to noncontrolling interest

-

(319

)

(283

)

-

(602

)

-

(602

)

Intersegment transactions (1)

-

-

1,427

-

1,427

-

1,427

Other

3,132

131

69

-

3,332

-

3,332

Discontinued operations

-

-

-

-

-

(20,203

)

(20,203

)

Adjusted EBITDA

$

54,632

$

56,879

$

23,273

$

(11,318

)

$

123,466

$

(20,203

)

$

103,263

Three Months Ended September 30, 2019

Liquids Discontinued Crude Oil Water and Corporate Continuing Operations Logistics Solutions Refined and Other Operations (TPSL, Consolidated Products Mid-Con, Gas Blending)

(in thousands)

Operating $ 38,520 $ 21,274 $ 8,798 $ (38,477 ) $ 30,115 $ - $ 30,115 income (loss)

Depreciationand 17,693 37,921 6,736 763 63,113 - 63,113 amortization

Amortizationrecorded to - - 89 - 89 - 89 cost of sales

Net unrealized(gains) losses (4,126 ) (5,870 ) 4,534 - (5,462 ) - (5,462 )on derivatives

Inventoryvaluation - - 1,801 - 1,801 - 1,801 adjustment

Lower of costor netrealizable - - 152 - 152 - 152 valueadjustments

(Gain) loss ondisposal or (630 ) 3,744 (4 ) 1 3,111 - 3,111 impairment ofassets, net

Equity-basedcompensation - - - 21,295 21,295 - 21,295 expense

Acquisition - - - 5,085 5,085 - 5,085 expense

Other income 43 (2 ) (20 ) 162 183 - 183 (expense), net

AdjustedEBITDAattributable - - (26 ) (147 ) (173 ) - (173 )tounconsolidatedentities

AdjustedEBITDAattributable - (319 ) (283 ) - (602 ) - (602 )tononcontrollinginterest

Intersegmenttransactions - - 1,427 - 1,427 - 1,427 (1)

Other 3,132 131 69 - 3,332 - 3,332

Discontinued - - - - - (20,203 ) (20,203 )operations

Adjusted $ 54,632 $ 56,879 $ 23,273 $ (11,318 ) $ 123,466 $ (20,203 ) $ 103,263 EBITDA

Six Months Ended September 30, 2020

Crude OilLogistics

WaterSolutions

Liquids andRefined Products

Corporateand Other

ContinuingOperations

Discontinued Operations(TPSL, Mid-Con, Gas Blending)

Consolidated

(in thousands)

Operating income (loss)

$

71,559

$

(29,324

)

$

18,900

$

(35,604

)

25,531

$

-

$

25,531

Depreciation and amortization

34,027

120,353

15,182

1,893

171,455

-

171,455

Amortization recorded to cost of sales

-

-

153

-

153

-

153

Net unrealized losses on derivatives

11,321

17,725

2,082

-

31,128

-

31,128

Inventory valuation adjustment

-

-

2,201

-

2,201

-

2,201

Lower of cost or net realizable value adjustments

(29,079

)

-

(4,476

)

-

(33,555

)

-

(33,555

)

Loss on disposal or impairment of assets, net

1,140

6,552

47

10,237

17,976

-

17,976

Equity-based compensation expense

-

-

-

4,558

4,558

-

4,558

Acquisition expense

-

13

-

313

326

-

326

Other income, net

1,513

258

663

186

2,620

-

2,620

Adjusted EBITDA attributable to unconsolidated entities

-

1,310

(14

)

(127

)

1,169

-

1,169

Adjusted EBITDA attributable to noncontrolling interest

-

(928

)

(1,272

)

-

(2,200

)

-

(2,200

)

Intersegment transactions (1)

-

-

(27

)

-

(27

)

-

(27

)

Other

5,554

2,014

50

-

7,618

-

7,618

Discontinued operations

-

-

-

-

-

(484

)

(484

)

Adjusted EBITDA

$

96,035

$

117,973

$

33,489

$

(18,544

)

$

228,953

$

(484

)

$

228,469

Six Months Ended September 30, 2020

Discontinued Liquids Operations Crude Oil Water and Corporate Continuing (TPSL, Consolidated Logistics Solutions Refined and Other Operations Mid-Con, Products Gas Blending)

(in thousands)

Operating $ 71,559 $ (29,324 ) $ 18,900 $ (35,604 ) 25,531 $ - $ 25,531 income (loss)

Depreciationand 34,027 120,353 15,182 1,893 171,455 - 171,455 amortization

Amortizationrecorded to - - 153 - 153 - 153 cost of sales

Net unrealizedlosses on 11,321 17,725 2,082 - 31,128 - 31,128 derivatives

Inventoryvaluation - - 2,201 - 2,201 - 2,201 adjustment

Lower of costor netrealizable (29,079 ) - (4,476 ) - (33,555 ) - (33,555 )valueadjustments

Loss ondisposal or 1,140 6,552 47 10,237 17,976 - 17,976 impairment ofassets, net

Equity-basedcompensation - - - 4,558 4,558 - 4,558 expense

Acquisition - 13 - 313 326 - 326 expense

Other income, 1,513 258 663 186 2,620 - 2,620 net

AdjustedEBITDAattributable - 1,310 (14 ) (127 ) 1,169 - 1,169 tounconsolidatedentities

AdjustedEBITDAattributable - (928 ) (1,272 ) - (2,200 ) - (2,200 )tononcontrollinginterest

Intersegmenttransactions - - (27 ) - (27 ) - (27 )(1)

Other 5,554 2,014 50 - 7,618 - 7,618

Discontinued - - - - - (484 ) (484 )operations

Adjusted $ 96,035 $ 117,973 $ 33,489 $ (18,544 ) $ 228,953 $ (484 ) $ 228,469 EBITDA

Six Months Ended September 30, 2019

Crude OilLogistics

WaterSolutions

Liquids andRefined Products

Corporateand Other

ContinuingOperations

Discontinued Operations(TPSL, Mid-Con, Gas Blending)

Consolidated

(in thousands)

Operating income (loss)

$

72,322

$

34,963

$

24,169

$

(53,819

)

$

77,635

$

-

$

77,635

Depreciation and amortization

35,278

65,992

14,091

1,506

116,867

-

116,867

Amortization recorded to cost of sales

-

-

176

-

176

-

176

Net unrealized (gains) losses on derivatives

(5,984

)

(6,037

)

3,085

-

(8,936

)

-

(8,936

)

Inventory valuation adjustment

-

-

1,835

-

1,835

-

1,835

Lower of cost or net realizable value adjustments

-

-

(1,471

)

-

(1,471

)

-

(1,471

)

(Gain) loss on disposal or impairment of assets, net

(1,246

)

3,155

(7

)

242

2,144

-

2,144

Equity-based compensation expense

-

-

-

24,996

24,996

-

24,996

Acquisition expense

-

20

-

7,156

7,176

-

7,176

Other income (expense), net

39

(2

)

-

1,156

1,193

-

1,193

Adjusted EBITDA attributable to unconsolidated entities

-

-

(22

)

(136

)

(158

)

-

(158

)

Adjusted EBITDA attributable to noncontrolling interest

-

(394

)

(680

)

-

(1,074

)

-

(1,074

)

Intersegment transactions (1)

-

-

146

-

146

-

146

Other

6,297

271

87

-

6,655

-

6,655

Discontinued operations

-

-

-

-

-

(37,161

)

(37,161

)

Adjusted EBITDA

$

106,706

$

97,968

$

41,409

$

(18,899

)

$

227,184

$

(37,161

)

$

190,023

Six Months Ended September 30, 2019

Liquids Discontinued Crude Oil Water and Corporate Continuing Operations Logistics Solutions Refined and Other Operations (TPSL, Consolidated Products Mid-Con, Gas Blending)

(in thousands)

Operating $ 72,322 $ 34,963 $ 24,169 $ (53,819 ) $ 77,635 $ - $ 77,635 income (loss)

Depreciationand 35,278 65,992 14,091 1,506 116,867 - 116,867 amortization

Amortizationrecorded to - - 176 - 176 - 176 cost of sales

Net unrealized(gains) losses (5,984 ) (6,037 ) 3,085 - (8,936 ) - (8,936 )on derivatives

Inventoryvaluation - - 1,835 - 1,835 - 1,835 adjustment

Lower of costor netrealizable - - (1,471 ) - (1,471 ) - (1,471 )valueadjustments

(Gain) loss ondisposal or (1,246 ) 3,155 (7 ) 242 2,144 - 2,144 impairment ofassets, net

Equity-basedcompensation - - - 24,996 24,996 - 24,996 expense

Acquisition - 20 - 7,156 7,176 - 7,176 expense

Other income 39 (2 ) - 1,156 1,193 - 1,193 (expense), net

AdjustedEBITDAattributable - - (22 ) (136 ) (158 ) - (158 )tounconsolidatedentities

AdjustedEBITDAattributable - (394 ) (680 ) - (1,074 ) - (1,074 )tononcontrollinginterest

Intersegmenttransactions - - 146 - 146 - 146 (1)

Other 6,297 271 87 - 6,655 - 6,655

Discontinued - - - - - (37,161 ) (37,161 )operations

Adjusted $ 106,706 $ 97,968 $ 41,409 $ (18,899 ) $ 227,184 $ (37,161 ) $ 190,023 EBITDA

(1)Amount reflects the transactions with TPSL, Mid-Con and Gas Blending that are eliminated in consolidation.

Amount reflects the transactions with TPSL, Mid-Con and Gas Blending that(1) are eliminated in consolidation.

OPERATIONAL DATA

(Unaudited)

Three Months Ended

Six Months Ended

September 30,

September 30,

2020

2019

2020

2019

(in thousands, except per day amounts)

Crude Oil Logistics:

Crude oil sold (barrels)

10,178

10,421

19,470

21,712

Crude oil transported on owned pipelines (barrels)

9,992

10,922

20,468

22,711

Crude oil storage capacity - owned and leased (barrels) (1)

5,239

5,232

Crude oil inventory (barrels) (1)

1,507

1,425

Water Solutions:

Produced water processed (barrels per day)

Northern Delaware Basin

869,472

465,453

892,205

277,802

Delaware Basin

190,881

282,365

191,155

267,646

Eagle Ford Basin

81,260

279,754

88,279

273,533

DJ Basin

114,219

169,485

123,242

169,552

Other Basins

26,264

61,296

29,146

66,206

Total

1,282,096

1,258,353

1,324,027

1,054,739

Solids processed (barrels per day)

863

5,759

1,378

5,601

Skim oil sold (barrels per day)

2,611

3,079

1,654

2,970

Liquids and Refined Products:

Refined products sold (gallons)

220,243

331,898

432,217

653,532

Propane sold (gallons)

252,693

262,183

504,982

507,450

Butane sold (gallons)

143,392

170,169

262,958

312,648

Other products sold (gallons)

114,734

151,871

228,956

306,463

Liquids and Refined Products storage capacity - owned and leased (gallons) (1)

427,004

401,249

Refined products inventory (gallons) (1)

1,209

55,119

Propane inventory (gallons) (1)

116,462

104,048

Butane inventory (gallons) (1)

92,672

80,839

Other products inventory (gallons) (1)

18,671

69,116

OPERATIONAL DATA

(Unaudited)

Three Months Ended Six Months Ended

September 30, September 30,

2020 2019 2020 2019

(in thousands, except per day amounts)

Crude Oil Logistics:

Crude oil sold (barrels) 10,178 10,421 19,470 21,712

Crude oil transported on 9,992 10,922 20,468 22,711 owned pipelines (barrels)

Crude oil storagecapacity - owned and 5,239 5,232 leased (barrels) (1)

Crude oil inventory 1,507 1,425 (barrels) (1)



Water Solutions:

Produced water processed (barrels per day)

Northern Delaware Basin 869,472 465,453 892,205 277,802

Delaware Basin 190,881 282,365 191,155 267,646

Eagle Ford Basin 81,260 279,754 88,279 273,533

DJ Basin 114,219 169,485 123,242 169,552

Other Basins 26,264 61,296 29,146 66,206

Total 1,282,096 1,258,353 1,324,027 1,054,739

Solids processed (barrels 863 5,759 1,378 5,601 per day)

Skim oil sold (barrels 2,611 3,079 1,654 2,970 per day)



Liquids and Refined Products:

Refined products sold 220,243 331,898 432,217 653,532 (gallons)

Propane sold (gallons) 252,693 262,183 504,982 507,450

Butane sold (gallons) 143,392 170,169 262,958 312,648

Other products sold 114,734 151,871 228,956 306,463 (gallons)

Liquids and RefinedProducts storage capacity 427,004 401,249 - owned and leased(gallons) (1)

Refined products 1,209 55,119 inventory (gallons) (1)

Propane inventory 116,462 104,048 (gallons) (1)

Butane inventory 92,672 80,839 (gallons) (1)

Other products inventory 18,671 69,116 (gallons) (1)

(1)Information is presented as of September 30, 2020 and September 30, 2019, respectively.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201109006146/en/

CONTACT: NGL Energy Partners LP Trey Karlovich, 918-481-1119 Chief Financial Officer and Executive Vice President Trey.Karlovich@nglep.com

CONTACT: or

CONTACT: Linda Bridges, 918-481-1119 Senior Vice President - Finance and Treasurer Linda.Bridges@nglep.com