NGL Energy Partners LP [NGL] Filings

10-Q 1 ngl-20230930.htm 10-Q ngl-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-35172

NGL Energy Partners LP

(Exact Name of Registrant as Specified in Its Charter)


Delaware		27-3427920
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6120 South Yale Avenue, Suite 1300
Tulsa,	Oklahoma	74136
(Address of Principal Executive Offices)		(Zip Code)

(918) 481-1119

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common units representing Limited Partner Interests

NGL

New York Stock Exchange

Fixed-to-floating rate cumulative redeemable perpetual preferred units

NGL-PB

New York Stock Exchange

Fixed-to-floating rate cumulative redeemable perpetual preferred units

NGL-PC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At November 7, 2023, there were 131,927,343 common units issued and outstanding.

Table of Contents

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets at September 30, 2023 and March 31, 2023	3
	Unaudited Condensed Consolidated Statements of Operations for the three months and six mon ths ended September 30, 2023 and 2022	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended September 30, 2023 and 2022	5
	Unaudited Condensed Consolidated Statements of Changes in Equity for the three months and six months ended September 30, 2023 and 2022	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2023 and 2022	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	61
PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
SIGNATURES		64

Table of Contents

Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains various forward-looking statements and information that are based on our beliefs and those of our general partner, as well as assumptions made by and information currently available to us. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Certain words in this Quarterly Report such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “will,” and similar expressions and statements regarding our plans and objectives for future operations, identify forward-looking statements. Although we and our general partner believe such forward-looking statements are reasonable, neither we nor our general partner can assure they will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected. Among the key risk factors that may affect our consolidated financial position and results of operations are:

•the prices of crude oil, natural gas liquids, gasoline, diesel, biodiesel and energy prices generally;

•the general level of demand, and the availability of supply, for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;

•the level of crude oil and natural gas drilling and production in areas where we have operations and facilities;

•the ability to obtain adequate supplies of products if an interruption in supply or transportation occurs and the availability of capacity to transport products to market areas;

•the effect of weather conditions on supply and demand for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;

•the effect of natural disasters, earthquakes, hurricanes, tornados, lightning strikes, or other significant weather events;

•the availability of local, intrastate, and interstate transportation infrastructure with respect to our transportation services;

•the availability, price, and marketing of competing fuels;

•the effect of energy conservation efforts on product demand;

•energy efficiencies and technological trends;

•issuance of executive orders, changes in applicable laws, regulations and policies, including tax, environmental, transportation, and employment regulations, or new interpretations by regulatory agencies concerning such laws and regulations and the effect of such laws, regulations and policies (now existing or in the future) on our business operations;

•the effect of executive orders and legislative and regulatory actions on hydraulic fracturing, water disposal and transportation, and the treatment of flowback and produced water;

•hazards or operating risks related to transporting and distributing petroleum products that may not be fully covered by insurance;

•the maturity of the crude oil, natural gas liquids, and refined products industries and competition from other markets;

•loss of key personnel;

•the ability to renew contracts with key customers;

•the ability to maintain or increase the margins we realize for our services;

•the ability to renew leases for our leased equipment and storage facilities;

•inflation, interest rates, and general economic conditions (including recessions and other future disruptions and volatility in the global credit markets, as well as the impact of these events on customers and suppliers);

•the nonpayment, nonperformance or bankruptcy by our counterparties;

•the availability and cost of capital and our ability to access certain capital sources;

•a deterioration of the credit and capital markets;

Table of Contents

•the ability to successfully identify and complete accretive acquisitions and organic growth projects, and integrate acquired assets and businesses;

•the costs and effects of legal and administrative proceedings;

•changes in general economic conditions, including market and macroeconomic disruptions resulting from global pandemics and related governmental responses, and international military conflicts (such as the war in Ukraine and the conflict between Israel and Hamas); and

•political pressure and influence of environmental groups upon policies and decisions related to the production, gathering, refining, processing, fractionation, transportation and sale of crude oil, refined products, natural gas, natural gas liquids, gasoline, diesel or biodiesel.

You should not put undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this Quarterly Report. Except as may be required by state and federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events, or otherwise. When considering forward-looking statements, please review the risks discussed under Part I, Item 1A–“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)


	September 30, 2023		March 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,680	$	5,431
Accounts receivable-trade, net of allowance for expected credit losses of $1,840 and $1,964, respectively	1,157,710		1,033,956
Accounts receivable-affiliates	15,035		12,362
Inventories	250,572		142,607
Prepaid expenses and other current assets	137,585		98,089
Total current assets	1,563,582		1,292,445
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $908,595 and $898,184, respectively	2,166,103		2,223,380
GOODWILL	707,583		712,364
INTANGIBLE ASSETS, net of accumulated amortization of $406,653 and $580,860, respectively	1,016,820		1,058,668
INVESTMENTS IN UNCONSOLIDATED ENTITIES	20,900		21,090
OPERATING LEASE RIGHT-OF-USE ASSETS	95,231		90,220
OTHER NONCURRENT ASSETS	57,696		57,977
Total assets	$	5,627,915	$	5,456,144
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade	$	1,080,673	$	927,591
Accounts payable-affiliates	44		65
Accrued expenses and other payables	164,115		133,616
Advance payments received from customers	29,239		14,699

Operating lease obligations	33,376		34,166
Total current liabilities	1,307,447		1,110,137
LONG-TERM DEBT, net of debt issuance costs of $24,385 and $30,117, respectively	2,782,262		2,857,805
OPERATING LEASE OBLIGATIONS	63,975		58,450
OTHER NONCURRENT LIABILITIES	107,945		111,226
COMMITMENTS AND CONTINGENCIES (NOTE 8)

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

EQUITY:
General partner, representing a 0.1% interest, 132,059 and 132,059 notional units, respectively	(52,572)		(52,551)
Limited partners, representing a 99.9% interest, 131,927,343 and 131,927,343 common units issued and outstanding, respectively	503,798		455,564
Class B preferred limited partners, 12,585,642 and 12,585,642 preferred units issued and outstanding, respectively	305,468		305,468
Class C preferred limited partners, 1,800,000 and 1,800,000 preferred units issued and outstanding, respectively	42,891		42,891
Accumulated other comprehensive loss	(473)		(450)
Noncontrolling interests	16,077		16,507
Total equity	815,189		767,429
Total liabilities and equity	$	5,627,915	$	5,456,144

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

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,
	2023		2022		2023		2022
REVENUES:
Water Solutions	$	197,244	$	164,910	$	378,546	$	330,989
Crude Oil Logistics	489,713		574,783		954,103		1,440,154
Liquids Logistics	1,154,139		1,269,754		2,124,551		2,735,687

Total Revenues	1,841,096		2,009,447		3,457,200		4,506,830
COST OF SALES:
Water Solutions	7,424		920		9,993		11,145
Crude Oil Logistics	454,927		514,199		880,226		1,336,569
Liquids Logistics	1,119,478		1,249,001		2,066,725		2,671,417
Corporate and Other	(3,381)		—		833		—
Total Cost of Sales	1,578,448		1,764,120		2,957,777		4,019,131
OPERATING COSTS AND EXPENSES:
Operating	77,389		84,158		154,070		156,018
General and administrative	17,496		16,628		37,787		33,385
Depreciation and amortization	65,526		68,118		134,505		134,778
Loss on disposal or impairment of assets, net	16,207		7,653		15,011		7,485

Operating Income	86,030		68,770		158,050		156,033
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated entities	851		1,207		942		1,881
Interest expense	(58,627)		(68,297)		(118,149)		(135,608)
Gain on early extinguishment of liabilities, net	63		2,479		6,871		4,141
Other income (expense), net	310		(15)		616		631
Income Before Income Taxes	28,627		4,144		48,330		27,078
INCOME TAX EXPENSE	(342)		(537)		(482)		(365)
Net Income	28,285		3,607		47,848		26,713
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(257)		(97)		(519)		(342)
NET INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	28,028	$	3,510	$	47,329	$	26,371
NET LOSS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3)	$	(6,709)	$	(26,899)	$	(21,191)	$	(31,578)

BASIC AND DILUTED LOSS PER COMMON UNIT	$	(0.05)	$	(0.21)	$	(0.16)	$	(0.24)

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING	131,927,343		130,695,970		131,927,343		130,695,970
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING	131,927,343		130,695,970		131,927,343		130,695,970

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in Thousands)


	Three Months Ended September 30,				Six Months Ended September 30,
	2023		2022		2023		2022
Net income	$	28,285	$	3,607	$	47,848	$	26,713
Other comprehensive loss	(39)		(82)		(23)		(132)
Comprehensive income	$	28,246	$	3,525	$	47,825	$	26,581

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Six Months Ended September 30, 2023

(in Thousands, except unit amounts)


			Limited Partners
			Preferred			Common
	General Partner		Units	Amount		Units	Amount		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity
BALANCE AT MARCH 31, 2023	$	(52,551)	14,385,642	$	348,359	131,927,343	$	455,564	$	(450)	$	16,507	$	767,429
Distributions to noncontrolling interest owners	—		—	—		—	—		—		(377)		(377)
Equity issued pursuant to incentive compensation plan (Note 9)	—		—	—		—	474		—		—		474
Net (loss) income	(14)		—	—		—	19,315		—		262		19,563
Other comprehensive income	—		—	—		—	—		16		—		16
BALANCE AT JUNE 30, 2023	(52,565)		14,385,642	348,359		131,927,343	475,353		(434)		16,392		787,105
Distributions to noncontrolling interest owners	—		—	—		—	—		—		(572)		(572)
Equity issued pursuant to incentive compensation plan (Note 9)	—		—	—		—	410		—		—		410
Net (loss) income	(7)		—	—		—	28,035		—		257		28,285
Other comprehensive loss	—		—	—		—	—		(39)		—		(39)
BALANCE AT SEPTEMBER 30, 2023	$	(52,572)	14,385,642	$	348,359	131,927,343	$	503,798	$	(473)	$	16,077	$	815,189

Table of Contents

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Six Months Ended September 30, 2022

(in Thousands, except unit amounts)


			Limited Partners
			Preferred			Common
	General Partner		Units	Amount		Units	Amount		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity
BALANCE AT MARCH 31, 2022	$	(52,478)	14,385,642	$	348,359	130,695,970	$	401,486	$	(308)	$	17,394	$	714,453
Distributions to noncontrolling interest owners	—		—	—		—	—		—		(975)		(975)
Equity issued pursuant to incentive compensation plan	—		—	—		—	497		—		—		497
Net (loss) income	(5)		—	—		—	22,866		—		245		23,106
Other comprehensive loss	—		—	—		—	—		(50)		—		(50)
BALANCE AT JUNE 30, 2022	(52,483)		14,385,642	348,359		130,695,970	424,849		(358)		16,664		737,031
Distributions to noncontrolling interest owners	—		—	—		—	—		—		(274)		(274)
Equity issued pursuant to incentive compensation plan	—		—	—		—	479		—		—		479
Net (loss) income	(27)		—	—		—	3,537		—		97		3,607
Other comprehensive loss	—		—	—		—	—		(82)		—		(82)
BALANCE AT SEPTEMBER 30, 2022	$	(52,510)	14,385,642	$	348,359	130,695,970	$	428,865	$	(440)	$	16,487	$	740,761

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in Thousands)


	Six Months Ended September 30,
	2023		2022
OPERATING ACTIVITIES:
Net income	$	47,848	$	26,713
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization, including amortization of debt issuance costs	142,998		143,410
Gain on early extinguishment of liabilities, net	(6,871)		(4,141)
Equity-based compensation expense	884		976
Loss on disposal or impairment of assets, net	15,011		7,485
Change in provision for expected credit losses	116		(224)
Net adjustments to fair value of commodity derivatives	1,004		13,075
Equity in earnings of unconsolidated entities	(942)		(1,881)
Distributions of earnings from unconsolidated entities	904		2,567
Lower of cost or net realizable value adjustments	7,071		15,618
Other	2,855		63
Changes in operating assets and liabilities, exclusive of acquisitions:
Accounts receivable-trade and affiliates	(126,050)		(6,576)
Inventories	(115,036)		(144,118)
Other current and noncurrent assets	24,950		(807)
Accounts payable-trade and affiliates	153,001		(90,380)
Other current and noncurrent liabilities	(16,643)		6,548
Net cash provided by (used in) operating activities	131,100		(31,672)
INVESTING ACTIVITIES:
Capital expenditures	(80,443)		(93,963)
Net settlements of commodity derivatives	(16,461)		19,785
Proceeds from sales of assets	23,908		14,054
Proceeds from divestitures of businesses and investments, net	16,000		—
Investments in unconsolidated entities	(258)		(346)
Distributions of capital from unconsolidated entities	486		—
Net cash used in investing activities	(56,768)		(60,470)
FINANCING ACTIVITIES:
Proceeds from borrowings under revolving credit facility	965,000		1,037,000
Payments on revolving credit facility	(947,000)		(866,000)
Repayment and repurchase of senior unsecured notes	(91,982)		(73,472)
Payments on other long-term debt	—		(1,273)
Debt issuance costs	(1,242)		(1,203)
Distributions to noncontrolling interest owners	(949)		(1,249)

Payments to settle contingent consideration liabilities	(902)		(941)
Principal payments of finance lease	(8)		(2)
Net cash (used in) provided by financing activities	(77,083)		92,860
Net (decrease) increase in cash and cash equivalents	(2,751)		718
Cash and cash equivalents, beginning of period	5,431		3,822
Cash and cash equivalents, end of period	$	2,680	$	4,540
Supplemental cash flow information:
Cash interest paid	$	118,516	$	129,000
Income taxes paid (net of income tax refunds)	$	2,056	$	2,170
Supplemental non-cash investing and financing activities:
Accrued capital expenditures	$	10,583	$	13,124

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1—Organization and Operations

NGL Energy Partners LP (“we,” “us,” “our,” or the “Partnership”) is a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner (“GP”). At September 30, 2023, our operations included three segments:

•Our Water Solutions segment transports, treats, recycles and disposes of produced and flowback water generated from crude oil and natural gas production. We also sell produced water for reuse and recycle and brackish non-potable water to our producer customers to be used in their crude oil exploration and production activities. As part of processing water, we aggregate and sell recovered crude oil, also known as skim oil. We also dispose of solids such as tank bottoms, drilling fluids and drilling muds and perform other ancillary services such as truck and frac tank washouts. Our activities in this segment are underpinned by long-term, fixed fee contracts and acreage dedications, some of which contain minimum volume commitments with leading oil and gas companies including large, investment grade producer customers.

•Our Crude Oil Logistics segment purchases crude oil from producers and marketers and transports it to refineries or for resale at pipeline injection stations, storage terminals, barge loading facilities, rail facilities, refineries, and other trade hubs, and provides storage, terminaling, and transportation services through its owned assets. Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines.

•Our Liquids Logistics segment conducts supply operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada. These operations are conducted through our 23 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars. We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia and we also own a propane pipeline in Michigan. We attempt to reduce our exposure to price fluctuations by using back-to-back physical contracts and pre-sale agreements that allow us to lock in a margin on a percentage of our winter volumes. We also enter into financially settled derivative contracts as economic hedges of our physical inventory, physical sales and physical purchase contracts.

Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include our accounts and those of our controlled subsidiaries. Intercompany transactions and account balances have been eliminated in consolidation. Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting. We also own an undivided interest in a crude oil pipeline, and include our proportionate share of assets, liabilities, and expenses related to this pipeline in our unaudited condensed consolidated financial statements.

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim consolidated financial information in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the unaudited condensed consolidated financial statements exclude certain information and notes required by GAAP for complete annual consolidated financial statements. However, we believe that the disclosures made are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements include all adjustments that we consider necessary for a fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. Such adjustments consist only of normal recurring items, unless otherwise disclosed in this Quarterly Report. The unaudited condensed consolidated balance sheet at March 31, 2023 was derived from our audited consolidated financial statements for the fiscal year ended March 31, 2023 included in our Annual Report on Form 10-K (“Annual Report”) filed with the SEC on May 31, 2023.

These interim unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report. Due to the seasonal nature of certain of our operations and other factors, the results of operations for interim periods are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2024.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amount of assets and liabilities reported at the date of the consolidated financial statements and the amount of revenues and expenses reported during the periods presented.

Critical accounting estimates we make in the preparation of our unaudited condensed consolidated financial statements include, among others, determining the impairment of goodwill and long-lived assets, useful lives and recoverability of property, plant and equipment and amortizable intangible assets, the fair value of derivative instruments, estimating certain revenues, the fair value of asset retirement obligations, the fair value of assets and liabilities acquired in acquisitions, the recoverability of inventories, the collectability of accounts and notes receivable and accruals for environmental matters. Although we believe these estimates are reasonable, actual results could differ from those estimates.

Significant Accounting Policies

Our significant accounting policies are consistent with those disclosed in Note 2 of our audited consolidated financial statements included in our Annual Report.

Income Taxes

We qualify as a partnership for income tax purposes. As such, we generally do not pay federal income tax. Rather, each owner reports his or her share of our income or loss on his or her individual tax return. The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined, as we do not have access to information regarding each partner’s basis in the Partnership.

We have a deferred tax liability of $40.5 million and $40.7 million at September 30, 2023 and March 31, 2023, respectively, as a result of acquiring corporations in connection with certain of our acquisitions, which is included within other noncurrent liabilities in our unaudited condensed consolidated balance sheets. The deferred tax liability is the tax effected cumulative temporary difference between the GAAP basis and tax basis of the acquired assets within the corporation. For GAAP purposes, certain of the acquired assets will be depreciated and amortized over time which will lower the GAAP basis. The deferred tax benefit recorded during the six months ended September 30, 2023 was $0.1 million with an effective tax rate of 22.1%. The deferred tax benefit recorded during the six months ended September 30, 2022 was $0.8 million with an effective tax rate of 27.4%.

We evaluate uncertain tax positions for recognition and measurement in the unaudited condensed consolidated financial statements. To recognize a tax position, we determine whether it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the unaudited condensed consolidated financial statements. We had no uncertain tax positions that required recognition in our unaudited condensed consolidated financial statements at September 30, 2023 or March 31, 2023.

Inventories

Our inventories are valued at the lower of cost or net realizable value, with cost determined using either the weighted-average cost or the first in, first out (FIFO) methods, including the cost of transportation and storage, and with net realizable value defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In performing this analysis, we consider fixed-price forward commitments.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Inventories consist of the following at the dates indicated:


	September 30, 2023		March 31, 2023
	(in thousands)
Propane	$	86,077	$	46,910
Butane	84,072		18,384
Crude oil	55,695		49,586
Biodiesel	15,288		19,778
Diesel	2,519		2,536
Other	6,921		5,413
Total	$	250,572	$	142,607

Investments in Unconsolidated Entities

Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting. Investments in partnerships and limited liability companies, unless our investment is considered to be minor, and investments in unincorporated joint ventures are also accounted for using the equity method of accounting.

Our investments in unconsolidated entities consist of the following at the dates indicated:


Entity	Segment	Ownership Interest	September 30, 2023		March 31, 2023
			(in thousands)
Water services and land company	Water Solutions	50%	$	15,388	$	15,036
Water services and land company	Water Solutions	10%	3,008		3,511
Water services and land company	Water Solutions	50%	2,175		2,071
Aircraft company (1)	Corporate and Other	50%	204		308
Natural gas liquids terminal company	Liquids Logistics	50%	125		164
Total			$	20,900	$	21,090

(1) This is an investment with a related party.

Other Noncurrent Assets

Other noncurrent assets consist of the following at the dates indicated:


	September 30, 2023		March 31, 2023
	(in thousands)
Linefill (1)	$	37,861	$	37,861
Loan receivable (2)	7,439		8,592
Minimum shipping fees - pipeline commitments (3)	2,492		4,628
Other	9,904		6,896
Total	$	57,696	$	57,977

(1) Represents minimum volumes of product we are required to leave on certain third-party owned pipelines under long-term shipment commitments. At September 30, 2023 and March 31, 2023, linefill consisted of 502,686 barrels of crude oil. Linefill held in pipelines we own is included within property, plant and equipment (see Note 4).

(2) Represents the noncurrent portion of loan receivables, net of allowances for expected credit losses, primarily related to the sale of certain saltwater disposal assets. See Note 16 for a discussion of activity during the current fiscal year.

(3) Represents the noncurrent portion of minimum shipping fees paid in excess of volumes shipped, or deficiency credits, for a contract with a crude oil pipeline operator. This amount can be recovered when volumes shipped exceed the minimum monthly volume commitment (see Note 8). At September 30, 2023, the deficiency credit was $6.8 million, of which $4.3 million is recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Accrued Expenses and Other Payables

Accrued expenses and other payables consist of the following at the dates indicated:


	September 30, 2023		March 31, 2023
	(in thousands)
Derivative liabilities	$	49,371	$	14,752
Accrued interest	40,741		49,362
Accrued compensation and benefits	20,138		27,013
Excise and other tax liabilities	16,844		11,777
Product exchange liabilities	9,037		4,047
Other	27,984		26,665
Total	$	164,115	$	133,616

Reclassifications

We have reclassified certain prior period financial statement information to be consistent with the classification methods used in the current fiscal year. These reclassifications did not impact previously reported amounts of assets, liabilities, equity, net income or cash flows.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) interest rate or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848” which deferred the sunset date from December 31, 2022 to December 31, 2024 and left all other provisions of ASU 2020-04 unchanged. On April 13, 2022, the ABL Facility (as defined herein) was amended to replace the LIBOR benchmark with the SOFR (as defined herein) benchmark (as discussed further in Note 7). We are continuing to evaluate the effect that this guidance will have on our financial position, results of operations and cash flows.

Note 3—Loss Per Common Unit

The following table presents our calculation of basic and diluted weighted average common units outstanding for the periods indicated:


	Three Months Ended September 30,		Six Months Ended September 30,
	2023	2022	2023	2022
Weighted average common units outstanding during the period:
Common units - Basic	131,927,343	130,695,970	131,927,343	130,695,970


Common units - Diluted	131,927,343	130,695,970	131,927,343	130,695,970

For the three months and six months ended September 30, 2023 and 2022, respectively, all potential common units or convertible securities were considered antidilutive.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Our loss per common unit is as follows for the periods indicated:


	Three Months Ended September 30,				Six Months Ended September 30,
	2023		2022		2023		2022
	(in thousands, except per unit amounts)
Net income	$	28,285	$	3,607	$	47,848	$	26,713
Less: Net income attributable to noncontrolling interests	(257)		(97)		(519)		(342)
Net income attributable to NGL Energy Partners LP	28,028		3,510		47,329		26,371
Less: Distributions to preferred unitholders (1)	(34,744)		(30,436)		(68,541)		(57,981)
Less: Net loss allocated to GP (2)	7		27		21		32
Net loss allocated to common unitholders	$	(6,709)	$	(26,899)	$	(21,191)	$	(31,578)


Basic and diluted loss per common unit	$	(0.05)	$	(0.21)	$	(0.16)	$	(0.24)

(1) Includes cumulative distributions for the three months and six months ended September 30, 2023 and 2022 which were earned but not declared or paid (see Note 9 for a further discussion of the suspension of common unit and preferred unit distributions).

(2) Net loss allocated to the GP includes distributions to which it is entitled as the holder of incentive distribution rights.

Note 4—Property, Plant and Equipment

Our property, plant and equipment consists of the following at the dates indicated:


Description	Estimated Useful Lives			September 30, 2023		March 31, 2023
	(in years)			(in thousands)
Natural gas liquids terminal and storage assets	2	-	30	$	157,261	$	160,939
Pipeline and related facilities	30	-	40	265,211		265,253
Vehicles and railcars (1)	3	-	25	92,357		92,640
Water treatment facilities and equipment	3	-	30	2,003,684		2,040,792
Crude oil tanks and related equipment	2	-	30	222,527		221,881
Information technology equipment	3	-	7	36,931		35,884
Buildings and leasehold improvements	3	-	40	121,891		130,119
Land				81,912		89,474
Tank bottoms and linefill (2)				35,072		40,001
Other	3	-	20	10,641		10,908
Construction in progress				47,211		33,673
Gross property, plant and equipment				3,074,698		3,121,564
Accumulated depreciation				(908,595)		(898,184)
Net property, plant and equipment				$	2,166,103	$	2,223,380

(1) Includes a finance lease right-of-use asset of $0.1 million. The accumulated amortization related to this finance lease is included within accumulated depreciation.

(2) Tank bottoms, which are product volumes required for the operation of storage tanks, are recorded at historical cost. We recover tank bottoms when the storage tanks are removed from service. Linefill, which represents our portion of the product volume required for the operation of the proportionate share of a pipeline we own, is recorded at historical cost.

The following table summarizes depreciation expense and capitalized interest expense for the periods indicated:


	Three Months Ended September 30,				Six Months Ended September 30,
	2023		2022		2023		2022
	(in thousands)
Depreciation expense	$	48,667	$	48,806	$	98,311	$	95,857
Capitalized interest expense	$	347	$	241	$	649	$	490

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

We record (gains) losses from the sales of property, plant and equipment and any write-downs in value due to impairment within loss on disposal or impairment of assets, net in our unaudited condensed consolidated statement of operations. The following table summarizes (gains) losses on the disposal or impairment of property, plant and equipment by segment for the period indicated:


	Three Months Ended September 30, 2023		Six Months Ended September 30, 2023
	(in thousands)
Water Solutions (1)	$	2,080	$	13,407
Crude Oil Logistics	(465)		335
Liquids Logistics (2)	1		(810)

Total	$	1,616	$	12,932

(1) Amounts do not include the loss recognized on the sale of certain saltwater disposal assets in the Pinedale Anticline Basin discussed in Note 16.

(2) Amounts do not include the gain recognized on the sale of two natural gas liquids terminals discussed in Note 16.

Note 5—Goodwill

The following table summarizes changes in goodwill by segment during the six months ended September 30, 2023:


	Water Solutions		Crude Oil Logistics		Liquids Logistics		Total
	(in thousands)
Balance at March 31, 2023	$	283,310	$	309,971	$	119,083	$	712,364
Disposal (1)	—		—		(4,781)		(4,781)


Balance at September 30, 2023	$	283,310	$	309,971	$	114,302	$	707,583

(1) Relates to the sale of two natural gas liquids terminals within our Liquids Logistics segment during the six months ended September 30, 2023 (see Note 16).

Note 6—Intangible Assets

Our intangible assets consist of the following at the dates indicated:


		September 30, 2023						March 31, 2023
Description	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
	(in years)	(in thousands)
Amortizable:
Customer relationships	18.8	$	980,468	$	(306,439)	$	674,029	$	1,196,468	$	(492,002)	$	704,466
Customer commitments	20.8	192,000		(32,640)		159,360		192,000		(28,800)		163,200
Pipeline capacity rights	20.2	7,799		(2,557)		5,242		7,799		(2,427)		5,372
Rights-of-way and easements	30.4	94,994		(16,648)		78,346		94,875		(15,138)		79,737
Water rights	16.1	99,869		(29,477)		70,392		99,869		(26,453)		73,416
Executory contracts and other agreements	24.5	21,640		(6,076)		15,564		21,570		(5,037)		16,533
Non-compete agreements	—	—		—		—		1,100		(1,082)		18
Debt issuance costs (1)	2.4	26,703		(12,816)		13,887		25,592		(9,921)		15,671
Total amortizable		1,423,473		(406,653)		1,016,820		1,639,273		(580,860)		1,058,413
Non-amortizable:

Trade names (2)		—				—		255				255
Total		$	1,423,473	$	(406,653)	$	1,016,820	$	1,639,528	$	(580,860)	$	1,058,668

(1) Includes debt issuance costs related to the ABL Facility. Debt issuance costs related to the fixed-rate notes are reported as a reduction of the carrying amount of long-term debt.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(2) As this item was considered impaired due to the sale of the assets in the Pinedale Anticline Basin, as discussed further in Note 16, the amount was written off during the three months ended September 30, 2023.

Amortization expense is as follows for the periods indicated:


	Three Months Ended September 30,				Six Months Ended September 30,
Recorded In	2023		2022		2023		2022
	(in thousands)
Depreciation and amortization	$	16,859	$	19,312	$	36,194	$	38,921
Cost of sales	65		69		130		137
Interest expense	1,481		1,198		2,895		2,361
Operating expenses	61		61		123		123
Total	$	18,466	$	20,640	$	39,342	$	41,542

The following table summarizes expected amortization of our intangible assets at September 30, 2023 (in thousands):


Fiscal Year Ending March 31,
2024 (six months)	$	34,953
2025	67,962
2026	65,807
2027	60,152
2028	57,300
2029	55,348
Thereafter	675,298
Total	$	1,016,820

Note 7—Long-Term Debt

Our long-term debt consists of the following at the dates indicated:


	September 30, 2023						March 31, 2023
	Face Amount		Unamortized Debt Issuance Costs (1)		Book Value		Face Amount		Unamortized Debt Issuance Costs (1)		Book Value
	(in thousands)
Senior secured notes:
7.500% Notes due 2026 (“2026 Senior Secured Notes”)	$	2,050,000	$	(21,419)	$	2,028,581	$	2,050,000	$	(26,009)	$	2,023,991
Asset-based revolving credit facility (“ABL Facility”)	156,000				156,000		138,000				138,000
Senior unsecured notes:
6.125% Notes due 2025 (“2025 Notes”)	280,745		(881)		279,864		380,020		(1,612)		378,408
7.500% Notes due 2026 (“2026 Notes”)	319,902		(2,085)		317,817		319,902		(2,496)		317,406


Long-term debt	$	2,806,647	$	(24,385)	$	2,782,262	$	2,887,922	$	(30,117)	$	2,857,805

(1) Debt issuance costs related to the ABL Facility are reported within intangible assets, rather than as a reduction of the carrying amount of long-term debt.

2026 Senior Secured Notes

The 2026 Senior Secured Notes bear interest at 7.5%, which is payable on February 1 and August 1 of each year. The 2026 Senior Secured Notes mature on February 1, 2026. The 2026 Senior Secured Notes were issued pursuant to an indenture dated February 4, 2021 (the “Indenture”).

The 2026 Senior Secured Notes are secured by first priority liens on substantially all of our assets other than our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets and second priority liens on our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The Indenture contains covenants that, among other things, limit our ability to: pay distributions or make other restricted payments or repurchase stock; incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock; make certain investments; create or incur liens; sell assets; enter into restrictions affecting the ability of restricted subsidiaries to make distributions, make loans or advances or transfer assets to the guarantors (including the Partnership); enter into certain transactions with our affiliates; designate restricted subsidiaries as unrestricted subsidiaries; and merge, consolidate, transfer or sell all or substantially all of our assets. The Indenture specifically restricts our ability to pay distributions until our total leverage ratio (as defined in the Indenture) for the most recently ended four full fiscal quarters at the time of the distribution is not greater than 4.75 to 1.00. These covenants are subject to a number of important exceptions and qualifications.

We have the option to redeem all or a portion of the 2026 Senior Secured Notes at any time at fixed redemption prices contained within the Indenture. If we experience certain kinds of change of control triggering events, we will be required to offer to repurchase the 2026 Senior Secured Notes at 101% of the aggregate principal amount of the 2026 Senior Secured Notes repurchased plus accrued and unpaid interest on the 2026 Senior Secured Notes repurchased to, but not including, the date of purchase.

Compliance

At September 30, 2023, we were in compliance with the covenants under the Indenture.

ABL Facility

The ABL Facility is subject to a borrowing base, which includes a sub-limit for letters of credit. Total commitments under the ABL Facility are $600.0 million and the sub-limit for letters of credit is $250.0 million. The ABL Facility is secured by a lien on substantially all of our assets, including among other things, a first priority lien on our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets and a second priority lien on all of our other assets. At September 30, 2023, $156.0 million had been borrowed under the ABL Facility and we had letters of credit outstanding of approximately $139.0 million. The ABL Facility is scheduled to mature at the earliest of (a) February 4, 2026 or (b) 91 days prior to the earliest maturity date in respect to any of our indebtedness in an aggregate principal amount of $50.0 million or greater, if such indebtedness is outstanding at such time, subject to certain exceptions.

At September 30, 2023, the borrowings under the ABL Facility had a weighted average interest rate of 8.27% calculated as the prime rate of 8.50% plus a margin of 1.50% on the alternate base borrowings and the weighted average secured overnight financing rate (“SOFR”) of 5.43% plus a margin of 2.50% on the SOFR borrowings. On September 30, 2023, the interest rate in effect on letters of credit was 2.50%.

The ABL Facility contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, distributions and other restricted payments, investments (including acquisitions) and transactions with affiliates. The ABL Facility contains, as the only financial covenant, a fixed charge coverage ratio that is tested based on the financial statements for the most recently ended fiscal quarter upon the occurrence and during the continuation of a Cash Dominion Event (as defined in the ABL Facility). At September 30, 2023, no Cash Dominion Event had occurred.

Compliance

At September 30, 2023, we were in compliance with the covenants under the ABL Facility.

Senior Unsecured Notes

The senior unsecured notes include the 2025 Notes, which mature on March 1, 2025 and the 2026 Notes, which mature on April 15, 2026 (collectively, the “Senior Unsecured Notes”).

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Repurchases

The following table summarizes repurchases of Senior Unsecured Notes for the period indicated:


		Six Months Ended September 30, 2023
	(in thousands)
2025 Notes
Notes repurchased (1)		$	99,275
Cash paid (excluding payments of accrued interest)		$	91,982
Gain on early extinguishment of debt (2)		$	6,906

(1) We did not repurchase any notes during the three months ended September 30, 2023.

(2) Gain on early extinguishment of debt for the 2025 Notes during the six months ended September 30, 2023 is inclusive of the write-off of debt issuance costs of $0.4 million. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statement of operations.

Redemption Rights

We currently have the right to redeem all or a portion of the outstanding 2025 Notes at 100% of the principal amount plus accrued and unpaid interest. As of April 15, 2024, we will have the right to redeem all or a portion of the outstanding 2026 Notes at 100% of the principal amount plus accrued and unpaid interest.

Compliance

At September 30, 2023, we were in compliance with the covenants under all of the Senior Unsecured Notes indentures.

Debt Maturity Schedule

The scheduled maturities of our long-term debt are as follows at September 30, 2023:


Fiscal Year Ending March 31,	2026 Senior Secured Notes		ABL Facility		Senior Unsecured Notes		Total
	(in thousands)
2024 (six months)	$	—	$	—	$	—	$	—
2025	—		—		280,745		280,745
2026	2,050,000		156,000		—		2,206,000
2027	—		—		319,902		319,902



Total	$	2,050,000	$	156,000	$	600,647	$	2,806,647

Amortization of Debt Issuance Costs

Amortization expense for debt issuance costs related to long-term debt was $2.7 million and $3.0 million during the three months ended September 30, 2023 and 2022, respectively, and $5.3 million and $6.0 million during the six months ended September 30, 2023 and 2022, respectively.

The following table summarizes expected amortization of debt issuance costs at September 30, 2023 (in thousands):


Fiscal Year Ending March 31,
2024 (six months)	$	5,312
2025	10,570
2026	8,471
2027	32
Total	$	24,385

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 8—Commitments and Contingencies

Legal Contingencies

In August 2015, LCT Capital, LLC (“LCT”) filed a lawsuit against the GP and the Partnership seeking payment for investment banking services relating to the purchase of TransMontaigne Inc. and related assets in July 2014. After pre-trial rulings, LCT was limited to pursuing claims of (i) quantum meruit (the value of the services rendered by LCT) and (ii) fraudulent misrepresentation against the defendants. Following a jury trial conducted in Delaware state court from July 23, 2018 through August 1, 2018, the jury returned a verdict consisting of an award of $4.0 million for quantum meruit and $29.0 million for fraudulent misrepresentation, subject to statutory interest. On December 5, 2019, in response to the defendants’ post-trial motion, the Court issued an Order overturning the jury’s damages award and ordering the case to be set for a damages-only trial (the “December 5th Order”). Both parties filed applications with the trial court asking the trial court to certify the December 5th Order for interlocutory, immediate review by the Appellate Court. On January 7, 2020, the Supreme Court of Delaware (“Supreme Court”) entered an Order accepting an interlocutory appeal of various issues relating to both the quantum meruit and fraudulent misrepresentation verdicts. The Supreme Court heard oral arguments of the parties on November 4, 2020, took the matters presented under advisement and on January 28, 2021, issued a ruling that (a) LCT is not entitled to “benefit-of-the-bargain” damages on its fraud claim; (b) LCT is not entitled to receive fraudulent misrepresentation damages separate from its quantum meruit damages; (c) the trial court abused its discretion when it ordered a new trial on damages relating to LCT’s claim of fraudulent misrepresentation; and (d) the trial court properly ordered a new trial on LCT’s claim of quantum meruit damages. The re-trial of the quantum meruit claim was conducted in Delaware state court from February 6, 2023 through February 15, 2023 and resulted in the jury returning a verdict consisting of an award of $36.0 million subject to statutory interest and costs, as applicable, which through September 30, 2023, equals approximately $22.3 million. The GP and the Partnership contend that the jury verdict is not supportable by controlling law or the evidentiary record, and on July 28, 2023, filed their notice of appeal to the Delaware Supreme Court which raises various issues relating to the quantum meruit verdict, including but not limited to, certain written orders and oral evidentiary and other rulings made prior to and during the February 2023 remand trial. On October 12, 2023, LCT filed its answering brief on appeal and cross-appellant’s opening brief on cross-appeal. The GP and the Partnership have until November 13, 2023 to file their reply and answering brief on cross-appeal. Any allocation of the ultimate verdict award, if any, between the GP and the Partnership will be made by the board of directors of our GP once all information is available to it and after any post-trial and/or any appellate process has concluded and the verdict is final as a matter of law. As of September 30, 2023, we have accrued approximately $4.0 million related to this matter, of which approximately $1.5 million represents interest accrued through September 30, 2023.

The Partnership is a party defendant to a purported class action complaint filed in the federal court in the Northern District of Oklahoma styled Gary R. Underwood, Successor Trustee for the James L. Price Revocable Living Trust, on behalf of the Trust and all others similarly situated v. NGL Energy Partners LP, Case No. 4:21-cv-00135-CVE-SH. This case seeks class certification on behalf of owners who allege the Partnership’s Crude Oil Logistics group violated Oklahoma’s Production Revenue Standards Act when it failed to include statutory interest on proceeds payments it made to certain mineral owners and to state unclaimed property divisions for oil purchased from certain Oklahoma wells. A substantial portion of the statutory interest claimed to be owed in the lawsuit related to suspended proceeds we inherited from our predecessors and remitted to various state unclaimed property divisions in 2016. With no admission of liability or wrongdoing, but only to avoid the expense and uncertainty of future litigation, the Partnership entered into a settlement agreement in this case to resolve all claims made against it by the plaintiff and the proposed class and paid approximately $8.4 million to the plaintiff and the proposed class. During the final fairness hearing on June 15, 2023, the settlement agreement was approved by the court and an order granting final approval of the class action settlement was entered into record.

We are party to various other claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of our management, the ultimate resolution of these claims, legal actions, and complaints, after consideration of amounts accrued, insurance coverage, and other arrangements, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, the outcome of such matters is inherently uncertain, and estimates of our liabilities may change materially as circumstances develop.

Environmental Matters

At September 30, 2023, we have an environmental liability, measured on an undiscounted basis, of $1.4 million, which is recorded within accrued expenses and other payables in our unaudited condensed consolidated balance sheet. Our operations are subject to extensive federal, state, and local environmental laws and regulations. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in our businesses, and there can be no assurance that we will not incur significant costs. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

for damages to property or persons resulting from the operations, could result in substantial costs. Accordingly, we have adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials designed to prevent material environmental or other damage, and to limit the financial liability that could result from such events. However, some risk of environmental or other damage is inherent in our businesses.

Asset Retirement Obligations

We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement, or removal activities when the assets are retired. Our liability for asset retirement obligations is discounted to present value. To calculate the liability, we make estimates and assumptions about the retirement cost and the timing of retirement. Changes in our assumptions and estimates may occur as a result of the passage of time and the occurrence of future events.

The following table summarizes changes in our asset retirement obligation, which is reported within other noncurrent liabilities in our unaudited condensed consolidated balance sheets (in thousands):


Balance at March 31, 2023	$	35,163
Liabilities incurred	917

Liabilities associated with disposed assets (1)	(3,126)
Liabilities settled	(222)
Accretion expense	1,489
Balance at September 30, 2023	$	34,221

(1) Relates to the sale of seven saltwater disposal wells and other long-lived assets within our Water Solutions segment (see Note 16).

In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets. However, the fair value of the asset retirement obligation cannot currently be reasonably estimated because the settlement dates are indeterminable. We will record an asset retirement obligation for these assets in the periods in which settlement dates are reasonably determinable.

Pipeline Capacity Agreement

We have a noncancellable agreement with a crude oil pipeline operator, which guarantees us minimum monthly shipping capacity on the pipeline. As a result, we are required to pay the minimum shipping fees if actual shipments are less than our allotted capacity. Under this agreement, we have the ability to recover minimum shipping fees previously paid if our shipping volumes exceed the minimum monthly shipping commitment during each month remaining under the agreement, and this agreement allows us to continue shipping up to six months after the maturity date of the contract in order to recapture previously paid minimum shipping delinquency fees. We currently have an asset recorded in prepaid expenses and other current assets and in other noncurrent assets in our unaudited condensed consolidated balance sheet for minimum shipping fees paid in both the current and previous periods that are expected to be recovered in future periods by exceeding the minimum monthly volumes (see Note 2).

The following table summarizes future minimum throughput payments under this agreement at September 30, 2023 (in thousands):


Fiscal Year Ending March 31,
2024 (six months)	$	15,217
2025	30,351



Total	$	45,568

Sales and Purchase Contracts

We have entered into product sales and purchase contracts for which we expect the parties to physically settle and deliver the inventory in future periods.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

At September 30, 2023, we had the following commodity purchase commitments:


	Crude Oil (1)			Natural Gas Liquids
	Value		Volume (in barrels)	Value		Volume (in gallons)
	(in thousands)
Fixed-Price Commodity Purchase Commitments:
2024 (six months)	$	233,260	2,911	$	41,449	46,184
2025	—		—	4,225		5,502
2026	—		—	4,464

NGL Energy Partners LP [NGL] Filings
NGL Energy Partners LP [NGL-PB] Filings
NGL Energy Partners LP [NGL-PC] Filings
10-Q	[2023-11-09]
10-Q	[2023-08-09]
10-K	[2023-05-31]
10-Q	[2023-02-09]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-K	[2022-06-06]
10-Q	[2022-02-09]
10-Q	[2021-11-09]
10-Q	[2021-08-09]
10-K	[2021-06-03]
10-Q	[2021-02-09]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-K	[2020-06-01]
10-Q	[2020-02-06]
10-Q	[2019-11-08]
10-Q	[2019-08-09]
10-K	[2019-05-30]
10-Q	[2019-02-11]
10-Q	[2018-11-08]
10-Q	[2018-08-07]
10-K	[2018-05-30]
10-Q	[2018-02-09]
10-Q	[2017-11-07]
10-Q	[2017-08-04]
10-K	[2017-05-26]
10-Q	[2017-02-07]
10-Q	[2016-11-07]
10-Q	[2016-08-09]
10-K	[2016-05-31]
10-Q	[2016-02-09]
10-Q	[2015-11-09]
10-Q	[2015-08-10]
10-K	[2015-06-01]
10-Q	[2015-02-09]
10-Q	[2014-11-10]
10-Q	[2014-08-11]
10-K	[2014-05-30]
10-Q	[2014-02-10]
10-Q	[2013-11-12]
10-Q	[2013-08-09]
10-K	[2013-06-14]
10-Q	[2013-02-14]
10-Q	[2012-11-14]
10-Q	[2012-08-14]
10-K	[2012-06-15]
10-Q	[2012-02-14]

NGL Energy Partners LP [NGL] Filings

NGL Energy Partners LP [NGL-PB] Filings

NGL Energy Partners LP [NGL-PC] Filings