NGL Energy Partners LP Common Units (NGL) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance, particularly in the Water Solutions segment, with increased EBITDA and disposal volumes. The company also announced a significant share repurchase plan, reducing dilution. Despite some declines in other segments, the overall guidance is optimistic, with increased EBITDA projections and new growth projects. The Q&A section revealed strong long-term commitments and opportunities in water treatment, although management was vague on AI's financial impact. Given these factors, a positive stock price movement is likely in the short term.
Key Financial Performance
Adjusted EBITDA from continuing operations $172.5 million, up from $158 million a year ago, a 9.2% increase. The increase was due to record water disposal volumes in Water Solutions and continued execution on financial strategy.
Water Solutions segment adjusted EBITDA $154.5 million versus $132.7 million in the prior year third quarter, an increase of 16.5%. This was driven by a 17.1% increase in physical disposal volumes and a 7% increase in total volumes paid to dispose.
Crude Oil Logistics adjusted EBITDA $15.4 million in the third quarter of fiscal 2026 versus $17.3 million in the prior year's third quarter, a decrease. The decline was due to lower oil prices and a reduction in volumes from committed producers with higher contracted tariffs.
Liquids Logistics adjusted EBITDA $15.2 million in the third quarter of fiscal 2026 versus $18.6 million in the prior year's third quarter, a decrease. The decline was attributed to the strategic repositioning of the segment, including the sale of the wholesale propane business and other assets.
Physical disposal volume in Water Solutions 3.07 million barrels per day versus 2.6 million barrels per day in the prior year third quarter, an increase of 17.1%. This was due to the execution of growth projects and increased capacity.
Total volumes paid to dispose in Water Solutions 3.13 million barrels per day in the third quarter versus 2.91 million barrels per day in the prior year third quarter, an increase of approximately 7%. This was driven by new contracted volumes and operational improvements.
Operating expenses for Water Solutions $0.18 per barrel due to nonrecurring expense reductions.
Physical volumes on the Grand Mesa Pipeline 85,000 barrels per day, up from 61,000 barrels per day in the prior year quarter, a significant increase. However, margins were lower due to lower oil prices and reduced volumes from committed producers with higher tariffs.
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Operating Highlights
AI machine-based learning project: The company is in its second year of development for an AI machine-based learning project aimed at operational efficiencies. This project uses data from SCADA systems, electric power meters, and flow models to identify opportunities to increase revenues and decrease expenses.
Nuclear-powered water treatment: The company entered into an MOU with Natura Resources to explore using nuclear power for thermal desalination in Reeves County, Texas. This is part of a strategy for large-scale produced water treatment.
Water disposal volumes: Achieved record water disposal volumes, including a single-day record of 3.5 million barrels. This reflects growth in the Water Solutions segment.
Delaware Basin contracts: Secured several volume commitment contracts in the Delaware Basin, leading to asset development and increased water volumes.
Operational efficiencies: Operating expenses for water disposal were reduced to $0.18 per barrel due to nonrecurring expense reductions.
Pipeline expansion: Completed a 27-mile expansion of the Western Express pipeline, enhancing water transport flexibility and capacity.
Shift to water solutions: The company is transitioning to focus predominantly on water solutions, shedding non-water assets to improve cash flow consistency and predictability.
Capital allocation priorities: Prioritized internal growth projects, redemption of Class D preferred units, and opportunistic repurchase of common units to reduce dilution.
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Risk or Challenges
Extreme Weather Impact: Mid-January extreme cold weather in the Midwest and Southeast caused disposal volumes to drop below 3 million barrels per day temporarily, though it is not expected to materially impact full-year guidance.
Lower Margins in Crude Oil Logistics: Margins for barrels on the Grand Mesa Pipeline were lower due to reduced oil prices and a decline in volumes from committed producers with higher contracted tariffs.
Operational and Seismicity Constraints: Seismicity and poor pressure constraints in certain areas required flexibility in water transport to underutilized areas, highlighting operational challenges.
Regulatory and Technological Uncertainty: The company is pursuing a combination of nuclear power and thermal desalination technology for water treatment, but the success of these initiatives is uncertain and dependent on regulatory approvals and technological feasibility.
Capital Allocation Risks: Growth capital increased by over $100 million in the second and third quarters due to new opportunities, which could strain financial resources if not managed effectively.
Dependence on Water Solutions: The company is transitioning to a predominantly water solutions business, which could expose it to risks if water-related revenues or operations face disruptions.
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Guidance & Outlook
Full Year EBITDA Guidance for Fiscal 2026: The company is guiding its full year EBITDA to a range of $650 million to $660 million.
Fiscal 2027 EBITDA Projection: The company is projecting to exceed $700 million of EBITDA for the first time in its history.
Water Disposal Volume Growth: New contracted volumes are expected to contribute to a strong start to fiscal 2027. The company is working to secure additional disposal contracts in fiscal year 2027.
Capital Allocation Priorities: The company plans to finance internal growth projects for producer customers, redeem a significant portion of the remaining Class D preferred units, and opportunistically purchase and retire common units at attractive prices.
AI and Operational Efficiencies: The company is in its second year of developing an AI machine-based learning project, which is expected to contribute to operational efficiencies and increase revenue while decreasing expenses starting this calendar year.
Produced Water Treatment Strategy: The company is pursuing a combination of nuclear power and thermal desalination technology in Reeves County, Texas, with a permit expected early this year. This aligns with medium- to long-term goals of large-scale disposition of produced water.
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Shareholder Return Plan
Common Unit Repurchase: During the quarter, the company repurchased 1.6 million common units, bringing the total repurchased units to approximately 8.7 million since the program's inception. This represents almost 7% of the outstanding units at an average price of $5.70 per unit. The Board-approved common unit repurchase plan is nearly exhausted.
Reduction of Dilution: The company has eliminated approximately 25% of dilution in common equity through actions such as purchasing 23.3 million long-term common unit warrants and repurchasing common units.
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Key Q&A
Q:Can you speak to the firmness of the growth projects highlighted in 2Q and the appetite of producers to commit to future water disposal needs given crude price volatility?
A:The projects and capital spend outlined in the last call are financially firm, with volume commitments for the long term. Despite fluctuations in oil prices, there has been no significant change in customer behavior. Consolidation in the Delaware Basin has created a stable activity level, and foundational volumes of produced water in the basin provide opportunities for large-scale projects.
Q:How would you characterize the water treatment opportunity in volume and values, and how material is the current CapEx obligation?
A:The water treatment opportunity is significant, with plans for large-scale desalination projects supported by produced water volumes and available energy sources. The initial plant may start with a 50,000 barrel/day capacity, powered by natural gas, with no heavy CapEx demand initially. The project will scale over time as contracts with customers and downstream users are signed. The MOU with Natura involves no CapEx demand on the nuclear side, and the CapEx forecast remains unchanged.
Q:What is the amount of value recovered to date and the potential value from AI and machine learning initiatives?
A:AI and machine learning have improved operational efficiencies, reducing capital spend and increasing asset utilization. While the exact dollar amount or percentage impact is not yet quantifiable, the initiatives are contributing to cost savings and revenue improvements. More discernible returns will be shared in the future.
Q:Have there been any conversations with Devon following their deal announcement, and were there any takeaways on potential changes to activities or volume?
A:No conversations with Devon have occurred yet due to the focus on preparing for the call and running the business.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific dollar amount or percentage impact of AI and machine learning initiatives, stating they were not comfortable quantifying the value at this time. Additionally, no insights were provided regarding potential changes to activities or volume following Devon's deal announcement, as no conversations had taken place.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI machine
AI model
AI update
Basin MOU
Basin amount
CEO Krimbill
CFO NGL
CVC volume
Centennial butane
Delaware Basin
Energy Holdings
Express expansion
Holdings LLC
LLC volume
Logistics repositioning
MOU Natura
MVC CVC
Mesa oil
Midwest Southeast
NGL Partners
NGL terminal
area
barrel water
capacity
capital investment
contract
day water
development
expense
footprint
permit
power
project
reduction
scale
system
unit price
volume record
water barrel
NGL Transcript
NGL Energy Partners LP Common Units (NGL) Q4 2026 Earnings Call Transcript
Positive5-29
The earnings call highlights strong financial performance with significant EBITDA growth, improved operational efficiencies, and a robust share buyback program. The company's strategic plans, including AI-driven efficiencies and expansion projects, are promising. Despite some risks related to regulatory compliance and customer dependency, the positive outlook on water disposal volumes and beneficial reuse projects, alongside optimistic guidance, suggests a positive stock price movement in the short term.
NGL Energy Partners LP Common Units (NGL) Q3 2026 Earnings Call Transcript
Positive2-3
The earnings call indicates strong financial performance, particularly in the Water Solutions segment, with increased EBITDA and disposal volumes. The company also announced a significant share repurchase plan, reducing dilution. Despite some declines in other segments, the overall guidance is optimistic, with increased EBITDA projections and new growth projects. The Q&A section revealed strong long-term commitments and opportunities in water treatment, although management was vague on AI's financial impact. Given these factors, a positive stock price movement is likely in the short term.
NGL Energy Partners LP Common Units (NGL) Q2 2026 Earnings Call Transcript
Positive11-4
The earnings call summary and Q&A reveal strong performance in the Water Solutions segment and strategic repurchases of units, indicating positive financial health. The reaffirmation of full-year EBITDA guidance and potential for guidance revision add optimism. Risks are acknowledged but seem manageable. The Q&A supports a positive sentiment with clear responses and no evasive answers. The unit repurchase plan and Class D preferred units repurchase enhance shareholder returns, contributing to a positive outlook.
NGL Energy Partners LP Common Units (NGL) Q1 2026 Earnings Call Transcript
Unknown8-8
The earnings call presents a mixed picture. Positive aspects include increased EBITDA driven by Water Solutions and successful repurchase plans. However, challenges like declining Grand Mesa pipeline volumes, reduced Liquids Logistics EBITDA, and reliance on butane blending pose concerns. The Q&A shows management's strategic flexibility, but lack of clear guidance and dependency on market conditions add uncertainty. Overall, the positives and negatives balance out, suggesting a neutral stock price movement.
NGL Slides
NGL Energy Partners Q3 2026 slides: Water Solutions drives 17% EBITDA growth2026-02-03
NGL Energy Partners Q2 FY2026 slides: Water Solutions powers growth amid mixed results2025-11-04
NGL Energy Partners Q1 FY2026 slides: Water Solutions growth masks revenue miss2025-08-07
NGL Energy Q3 2025 slides: Water Solutions drives growth amid strategic transformation2025-05-29
NGL Report
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
