NGL Energy Partners LP [NGL-PC] Filings

10-Q 1 ngl-20240630.htm 10-Q ngl-20240630

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 June 30, 2024


☐			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 August 6, 2024, there were 132,512,766 common units issued and outstanding.

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PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets at June 30, 2024 and March 31, 2024	3
	Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2024 and 2023	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended June 30, 2024 and 2023	5
	Unaudited Condensed Consolidated Statements of Changes in Equity for the three months ended June 30, 2024 and 2023	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2024 and 2023	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	52
PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	53
SIGNATURES		55

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Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains various forward-looking statements and information that are based on NGL Energy Partners LP’s (“we,” “us,” “our,” or the “Partnership”) beliefs and those of our general partner (“GP”), 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 GP believe such forward-looking statements are reasonable, neither we nor our GP 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;

•the 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, the treatment of flowback and produced water, seismic activity, and drilling and right-of-way access on federal and state lands;

•delays or restrictions in obtaining, utilizing or maintaining permits and/or rights-of-way by us or our customers;

•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 impact of competition on our operations, including our 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;

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

•a deterioration of the credit and capital markets;

•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, the conflict between Israel and Hamas and conflicts involving Iran and its proxy forces);

•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; and

•information technology risks including the risk from cyberattacks, cybersecurity breaches, and other disruptions to our information systems.

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, 2024.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)


	June 30, 2024		March 31, 2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	5,269	$	38,909
Accounts receivable-trade, net of allowance for expected credit losses of $2,173 and $1,671, respectively	752,392		814,087
Accounts receivable-affiliates	1,501		1,501
Inventories	158,710		130,907
Prepaid expenses and other current assets	72,385		126,933
Assets held for sale	—		66,597
Total current assets	990,257		1,178,934
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $1,049,187 and $1,011,274, respectively	2,125,421		2,096,702
GOODWILL	634,282		634,282
INTANGIBLE ASSETS, net of accumulated amortization of $347,932 and $332,560, respectively	928,687		939,978
INVESTMENTS IN UNCONSOLIDATED ENTITIES	19,219		20,305
OPERATING LEASE RIGHT-OF-USE ASSETS	91,544		97,155
OTHER NONCURRENT ASSETS	50,169		52,738
Total assets	$	4,839,579	$	5,020,094
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade	$	627,714	$	707,536
Accounts payable-affiliates	6		37
Accrued expenses and other payables	175,513		213,757
Advance payments received from customers	25,439		17,313
Current maturities of long-term debt	7,846		7,000
Operating lease obligations	28,033		31,090
Liabilities held for sale	—		614
Total current liabilities	864,551		977,347
LONG-TERM DEBT, net of debt issuance costs of $47,337 and $49,178, respectively, and current maturities	3,018,427		2,843,822
OPERATING LEASE OBLIGATIONS	67,270		70,573
OTHER NONCURRENT LIABILITIES	124,067		129,185
COMMITMENTS AND CONTINGENCIES (NOTE 7)

CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively	551,097		551,097
REDEEMABLE NONCONTROLLING INTEREST	174		—

EQUITY:
General partner, representing a 0.1% interest, 132,645 and 132,645 notional units, respectively	(52,853)		(52,834)
Limited partners, representing a 99.9% interest, 132,512,766 and 132,512,766 common units issued and outstanding, respectively	(101,095)		134,807
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	(523)		(499)
Noncontrolling interests	20,105		18,237
Total equity	213,993		448,070
Total liabilities and equity	$	4,839,579	$	5,020,094

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

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)


	Three Months Ended June 30,
	2024		2023
REVENUES:
Water Solutions	$	181,410	$	181,302
Crude Oil Logistics	280,103		464,390
Liquids Logistics	925,746		970,412

Total Revenues	1,387,259		1,616,104
COST OF SALES:
Water Solutions	1,000		2,569
Crude Oil Logistics	249,497		425,299
Liquids Logistics	922,711		947,247
Corporate and Other	—		4,214
Total Cost of Sales	1,173,208		1,379,329
OPERATING COSTS AND EXPENSES:
Operating	72,533		76,681
General and administrative	15,014		20,291
Depreciation and amortization	62,219		68,979
Gain on disposal or impairment of assets, net	(10,666)		(1,196)

Operating Income	74,951		72,020
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated entities	300		91
Interest expense	(69,739)		(59,522)
Gain on early extinguishment of liabilities, net	—		6,808
Other income, net	167		306
Income Before Income Taxes	5,679		19,703
INCOME TAX BENEFIT (EXPENSE)	4,796		(140)
Net Income	10,475		19,563
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(792)		(262)

NET INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	9,683	$	19,301
NET LOSS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3)	$	(19,112)	$	(14,482)

BASIC AND DILUTED LOSS PER COMMON UNIT	$	(0.14)	$	(0.11)

BASIC AND DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING	132,512,766		131,927,343

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

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in Thousands)


	Three Months Ended June 30,
	2024		2023
Net income	$	10,475	$	19,563
Other comprehensive (loss) income	(24)		16
Comprehensive income	$	10,451	$	19,579

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

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Three Months Ended June 30, 2024

(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, 2024	$	(52,834)	14,385,642	$	348,359	132,512,766	$	134,807	$	(499)	$	18,237	$	448,070
Contributions from noncontrolling interest owners	—		—	—		—	—		—		1,619		1,619
Distributions to preferred unitholders (Note 8)	—		—	—		—	(245,604)		—		—		(245,604)
Distributions to noncontrolling interest owners	—		—	—		—	—		—		(543)		(543)
Net (loss) income	(19)		—	—		—	9,702		—		792		10,475
Other comprehensive loss	—		—	—		—	—		(24)		—		(24)
BALANCE AT JUNE 30, 2024	$	(52,853)	14,385,642	$	348,359	132,512,766	$	(101,095)	$	(523)	$	20,105	$	213,993

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Three Months Ended June 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	—		—	—		—	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

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

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in Thousands)


	Three Months Ended June 30,
	2024		2023
OPERATING ACTIVITIES:
Net income	$	10,475	$	19,563
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization, including amortization of debt issuance costs	65,192		73,210
Gain on early extinguishment of liabilities, net	—		(6,808)
Equity-based compensation expense	—		474
Gain on disposal or impairment of assets, net	(10,666)		(1,196)
Change in provision for expected credit losses	636		(9)
Net adjustments to fair value of derivatives	12,976		(12,890)
Equity in earnings of unconsolidated entities	(300)		(91)
Distributions of earnings from unconsolidated entities	475		333
Lower of cost or net realizable value adjustments	4,234		5,991
Other	(97)		739
Changes in operating assets and liabilities, exclusive of acquisitions:
Accounts receivable-trade and affiliates	60,991		141,016
Inventories	(36,817)		(49,022)
Other current and noncurrent assets	34,098		24,206
Accounts payable-trade and affiliates	(81,189)		(153,931)
Other current and noncurrent liabilities	(78,067)		13,526
Net cash (used in) provided by operating activities	(18,059)		55,111
INVESTING ACTIVITIES:
Capital expenditures	(59,923)		(35,801)
Net settlements of derivatives	2,029		12,430
Proceeds from sales of assets	15,879		21,131
Proceeds from divestitures of businesses and investments, net	69,320		—
Investments in unconsolidated entities	—		(258)
Distributions of capital from unconsolidated entities	911		1,057
Net cash provided by (used in) investing activities	28,216		(1,441)
FINANCING ACTIVITIES:
Proceeds from borrowings under ABL Facility	389,000		528,000
Payments on ABL Facility	(220,000)		(486,000)
Payments on Term Loan B	(1,750)		—
Proceeds from borrowings on other long-term debt	6,360		—
Repayment and repurchase of senior unsecured notes	—		(91,982)
Debt issuance costs	(328)		(472)
Contributions from noncontrolling interest owners	1,793		—
Distributions to preferred unitholders	(218,091)		—
Distributions to noncontrolling interest owners	(543)		(377)

Payments to settle contingent consideration liabilities	(233)		(480)
Principal payments of finance lease	(5)		(4)
Net cash used in financing activities	(43,797)		(51,315)
Net (decrease) increase in cash and cash equivalents	(33,640)		2,355
Cash and cash equivalents, beginning of period	38,909		5,431
Cash and cash equivalents, end of period	$	5,269	$	7,786
Supplemental cash flow information:
Cash interest paid	$	98,231	$	25,561
Income taxes paid (net of income tax refunds)	$	1,523	$	1,352
Supplemental non-cash investing and financing activities:
Distributions declared but not paid to preferred unitholders	$	27,513	$	—
Accrued capital expenditures	$	26,472	$	15,324

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 master limited partnership. NGL Energy Holdings LLC serves as our general partner (“GP”). At June 30, 2024, 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 storage tanks and 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 on Form 10-Q. The unaudited condensed consolidated balance sheet at March 31, 2024 was derived from our audited consolidated financial statements for the fiscal year ended March 31, 2024 included in our Annual Report on Form 10-K (“Annual Report”) filed with the SEC on June 6, 2024.

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, 2025.

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 $31.8 million and $38.0 million at June 30, 2024 and March 31, 2024, 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 decrease in the deferred tax liability during the three months ended June 30, 2024 was due to the sale of our ranches in April 2024, one ranch of which was treated as a corporation for federal income tax purposes (see Note 15). 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 three months ended June 30, 2024 was $5.7 million with an effective tax rate of 19.4%. The deferred tax benefit recorded during the three months ended June 30, 2023 was $0.1 million with an effective tax rate of 22.3%.

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 June 30, 2024 or March 31, 2024.

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:


	June 30, 2024		March 31, 2024
	(in thousands)
Butane	$	48,677	$	20,400
Propane	45,876		34,225
Crude oil	40,573		44,056
Biodiesel	12,437		18,919
Diesel	4,709		5,361
Other	6,438		7,946
Total	$	158,710	$	130,907

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	June 30, 2024		March 31, 2024
			(in thousands)
Water services and land company	Water Solutions	50%	$	14,277	$	15,228
Water services and land company	Water Solutions	10%	2,856		2,926
Water services and land company	Water Solutions	50%	1,982		2,026
Natural gas liquids terminal company	Liquids Logistics	50%	104		125
Total			$	19,219	$	20,305

Other Noncurrent Assets

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


	June 30, 2024		March 31, 2024
	(in thousands)
Linefill (1)	$	37,715	$	37,861
Loan receivable (2)	2,380		4,776
Minimum shipping fees - pipeline commitments (3)	—		356
Other	10,074		9,745
Total	$	50,169	$	52,738

(1) Represents minimum volumes of product we are required to leave on certain third-party owned pipelines under long-term shipment commitments. At June 30, 2024 and March 31, 2024, linefill consisted of 501,093 and 502,686 barrels of crude oil, respectively. 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. At June 30, 2024 and March 31, 2024, the loan receivable balance (which includes interest receivable) was $5.1 million and $7.5 million, respectively, of which $2.8 million and $2.7 million, respectively, are recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets.

(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. At June 30, 2024 and March 31, 2024, the deficiency credit was $3.6 million and $4.6 million, respectively, of which $3.6 million and $4.3 million, respectively, are recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets.

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:


	June 30, 2024		March 31, 2024
	(in thousands)
Accrued compensation and benefits	$	40,484	$	34,708
Distributions payable	27,513		—
Accrued interest (1)	25,673		58,335
Derivative liabilities	22,268		36,679
Excise and other tax liabilities	15,118		18,003
Product exchange liabilities	4,537		3,366
Other (1)	39,920		62,666
Total	$	175,513	$	213,757

(1) Includes amounts accrued related to the LCT Capital, LLC (“LCT”) legal matter at March 31, 2024. On June 13, 2024, we paid LCT $63.3 million related to the legal judgment against us, of which $27.2 million represented interest and $0.1 million of costs awarded to LCT.

Amounts in the table above do not include accrued expenses and other payables related to the sale of certain freshwater water solutions facilities, as these amounts have been classified as liabilities held for sale within our March 31, 2024 consolidated balance sheet (see Note 15).

Variable Interest Entity

We decide at the inception of each arrangement whether an entity in which an investment is made or in which we have other variable interests is considered a variable interest entity (“VIE”). Generally, an entity is a VIE if (1) the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, (2) the entity’s investors lack any characteristics of a controlling financial interest or (3) the entity was established with non-substantive voting rights.

We consolidate VIEs when we are deemed to be the primary beneficiary. The primary beneficiary of a VIE is generally the party that both: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. If we are not deemed to be the primary beneficiary of a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP.

During the three months ended June 30, 2024, we created a new aviation entity whereby we own a 90% interest and a member of our management owns a 10% interest as discussed in Note 15. We also executed a guarantee for the benefit of the lender that obligates us for the payment and performance of the aviation entity with respect to the repayment of the loan. At June 30, 2024, since we guaranteed the payment of the outstanding loan, we have concluded that the aviation entity is a VIE because the equity is not sufficient to fund the aviation entity’s activities without additional subordinated financial support. We have the power to make decisions that most significantly affect the economic performance of the aviation entity and have benefits through our ownership interest. Therefore, we have concluded that we are the primary beneficiary and will consolidate the aviation entity in our unaudited condensed consolidated financial statements and will include the noncontrolling interest as redeemable noncontrolling interest as discussed below.

The following table summarizes the balances related to the VIE that are consolidated in our June 30, 2024 unaudited condensed consolidated balance sheet (excluding intercompany eliminations at the time of consolidation) as well as our equity in the VIE (in thousands):


Prepaid expenses and other current assets	$	32
Property, plant and equipment, net	8,180
Accrued expenses and other payables	(26)
Current maturities of long-term debt	(846)
Long-term debt, net	(5,498)
Redeemable noncontrolling interest	(174)
Partnership's equity in VIE	$	1,668

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Generally, the assets of the VIE can be used only to settle liabilities of the VIE and the liabilities of the VIE are liabilities for which creditors or beneficial interest holders do not have recourse to the general credit of the Partnership. In general, our maximum exposure to loss due to involvement with the VIE is limited to the amount of capital investment in the VIE, if any, or the potential obligation to perform on the guarantee of the outstanding loan.

Noncontrolling Interests

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. Amounts are adjusted by the noncontrolling interest holder’s proportionate share of the subsidiaries’ earnings or losses each period and any distributions that are paid. Noncontrolling interests are reported as a component of equity, unless the noncontrolling interest is considered redeemable, in which case the noncontrolling interest is recorded between liabilities and equity (mezzanine or temporary equity) in our consolidated balance sheet. The redeemable noncontrolling interest is adjusted at each balance sheet date to its maximum redemption value if the amount is greater than the carrying value. The following table summarizes changes in our redeemable noncontrolling interest in our unaudited condensed consolidated balance sheets (in thousands):


Redeemable noncontrolling interest at March 31, 2024	$	—
Contributions from noncontrolling interest owner (Note 15)	174

Redeemable noncontrolling interest at June 30, 2024	$	174

Reclassifications

We have reclassified certain prior period financial statement information to be consistent with the classification methods used in the current fiscal year. For the three months ended June 30, 2023, certain revenues are now included in Disposal Services Fees in Note 10. These reclassifications did not impact previously reported amounts of assets, liabilities, equity, net income or cash flows.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The ASU is effective for the Partnership’s fiscal year beginning April 1, 2025, with early adoption permitted. The amendments are required to be applied prospectively with retrospective application permitted. We are currently evaluating the ASU to determine its impact on our financial statement disclosures.

In December 2023, the FASB issued ASU No. 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which includes amendments intended to improve the accounting for and disclosure of crypto assets. The ASU requires crypto assets to be measured at fair value each reporting period and for changes from remeasurement to be recognized in net income. The ASU also requires enhanced disclosures for both annual and interim reporting periods to provide investors with relevant information to analyze and assess the exposure and risk of significant individual crypto asset holdings. The ASU is effective for the Partnership’s fiscal year beginning April 1, 2025, including interim periods during that fiscal year, with early adoption permitted and requires a cumulative-effect adjustment upon adoption. This ASU does not currently impact our financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which includes amendments intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU is effective for the Partnership’s fiscal year beginning April 1, 2024, and interim periods within our fiscal year beginning April 1, 2025, with early adoption permitted and requires retrospective application. We are currently evaluating the ASU to determine its impact on our financial statement disclosures.

In March 2020, the FASB issued ASU No. 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 No. 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 No. 2020-04 unchanged. On April 13,

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

2022, the ABL Facility (as defined herein) was amended to replace the LIBOR benchmark with SOFR (as defined herein) benchmark (as discussed further in Note 6). 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 June 30,
	2024	2023
Weighted average common units outstanding during the period:
Common units - Basic	132,512,766	131,927,343


Common units - Diluted	132,512,766	131,927,343

For the three months ended June 30, 2024 and 2023, all potential common units or convertible securities were considered antidilutive.

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


	Three Months Ended June 30,
	2024		2023
	(in thousands, except per unit amounts)
Net income	$	10,475	$	19,563
Less: Net income attributable to noncontrolling interests	(792)		(262)
Net income attributable to NGL Energy Partners LP	9,683		19,301
Less: Distributions to preferred unitholders (1)	(28,814)		(33,797)
Less: Net loss allocated to GP (2)	19		14


Net loss allocated to common unitholders	$	(19,112)	$	(14,482)
Basic and diluted loss per common unit	$	(0.14)	$	(0.11)

(1) Includes distributions earned and declared for the three months ended June 30, 2024. Also includes cumulative distributions for the three months ended June 30, 2023 which were earned but not declared or paid (see Note 8 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			June 30, 2024		March 31, 2024
	(in years)			(in thousands)
Water treatment facilities and equipment	3	-	30	$	2,069,380	$	2,055,565
Pipeline and related facilities	30	-	40	266,158		266,129
Crude oil tanks and related equipment	2	-	30	226,365		226,048
Natural gas liquids terminal and storage assets	2	-	30	168,083		167,633
Buildings and leasehold improvements	3	-	40	122,827		122,878
Vehicles and railcars (1)	3	-	25	91,511		91,715
Land				70,270		70,270
Information technology equipment	3	-	7	33,970		33,907
Tank bottoms and linefill (2)				33,195		28,269
Other	3	-	20	2,552		2,552
Construction in progress				90,297		43,010
Gross property, plant and equipment				3,174,608		3,107,976
Accumulated depreciation				(1,049,187)		(1,011,274)
Net property, plant and equipment				$	2,125,421	$	2,096,702

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(1) Includes a finance lease right-of-use asset of $0.1 million at June 30, 2024 and March 31, 2024. 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.

Amounts in the table above do not include property, plant and equipment and accumulated depreciation related to the sale of certain freshwater water solutions facilities, certain saltwater disposal assets and certain real estate, as these amounts have been classified as assets held for sale within our March 31, 2024 consolidated balance sheet (see Note 15).

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


	Three Months Ended June 30,
	2024		2023
	(in thousands)
Depreciation expense	$	47,919	$	49,644
Capitalized interest expense	$	543	$	302

We record (gains) losses from the sales of property, plant and equipment and any write-downs in value due to impairment within gain 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 June 30, 2024
	(in thousands)
Water Solutions (1)	$	79
Crude Oil Logistics	22


Total	$	101

(1) Amounts do not include the gain recognized on the sale of certain freshwater water solutions facilities and certain saltwater disposal assets discussed in Note 15.

Note 5—Intangible Assets

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


		June 30, 2024						March 31, 2024
Description	Weighted- Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
	(in years)	(in thousands)

Customer relationships	18.4	$	905,113	$	(276,542)	$	628,571	$	905,113	$	(265,621)	$	639,492
Customer commitments	20.0	192,000		(38,400)		153,600		192,000		(36,480)		155,520
Rights-of-way and easements	29.7	97,561		(19,000)		78,561		95,231		(18,187)		77,044
Water rights	25.3	36,068		(5,611)		30,457		36,068		(5,310)		30,758
Executory contracts and other agreements	24.1	19,332		(4,076)		15,256		17,854		(3,670)		14,184
Debt issuance costs (1)	4.7	18,746		(1,551)		17,195		18,473		(605)		17,868
Pipeline capacity rights	19.4	7,799		(2,752)		5,047		7,799		(2,687)		5,112
Total		$	1,276,619	$	(347,932)	$	928,687	$	1,272,538	$	(332,560)	$	939,978

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

Amounts in the table above do not include intangible assets and accumulated amortization related to the sale of certain freshwater water solutions facilities and certain saltwater disposal assets, as these amounts have been classified as assets held for sale within our March 31, 2024 consolidated balance sheet (see Note 15).

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Amortization expense is as follows for the periods indicated:


	Three Months Ended June 30,
Recorded In	2024		2023
	(in thousands)
Depreciation and amortization	$	14,300	$	19,335
Cost of sales	65		65
Interest expense	946		1,414
Operating expenses	62		62
Total	$	15,373	$	20,876

The following table summarizes expected amortization of our intangible assets at June 30, 2024 (in thousands):


Year Ending March 31,
2025 (nine months)	$	44,530
2026	58,536
2027	57,772
2028	54,756
2029	52,170
2030	45,763
Thereafter	615,160
Total	$	928,687

Note 6—Long-Term Debt

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


	June 30, 2024						March 31, 2024
	Face Amount		Unamortized Debt Issuance Costs (1)		Book Value		Face Amount		Unamortized Debt Issuance Costs (1)		Book Value
	(in thousands)
Asset-based revolving credit facility (“ABL Facility”)	$	169,000			$	169,000	$	—			$	—
Senior secured term loan "B" credit facility ("Term Loan B")	698,250		$	(16,933)	681,317		700,000		$	(17,549)	682,451
Senior secured notes:
8.125% Notes due 2029 (“2029 Senior Secured Notes”)	900,000		(12,191)		887,809		900,000		(12,845)		887,155
8.375% Notes due 2032 (“2032 Senior Secured Notes”)	1,300,000		(18,197)		1,281,803		1,300,000		(18,784)		1,281,216
Other long-term debt	6,360		(16)		6,344		—		—		—
Total long-term debt	3,073,610		(47,337)		3,026,273		2,900,000		(49,178)		2,850,822
Less: Current maturities	7,846		—		7,846		7,000		—		7,000
Long-term debt	$	3,065,764	$	(47,337)	$	3,018,427	$	2,893,000	$	(49,178)	$	2,843,822

(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. The unamortized debt issuance costs for Term Loan B include a $4.9 million discount.

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 $200.0 million. At June 30, 2024, $169.0 million had been borrowed under the ABL Facility and we had letters of credit outstanding of $87.6 million. The ABL Facility is scheduled to mature at the earliest of (a) February 2, 2029 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, subject to certain exceptions.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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.

All borrowings under the ABL Facility bear interest at a secured overnight financing rate (“SOFR”) or the alternative base rate to provide for a 0.25% decrease based on our consolidated net leverage ratio. The applicable margin for alternate base rate loans varies from 1.50% to 2.00% and the applicable margin for SOFR varies from 2.50% to 3.00%. In addition, a commitment fee will be charged and payable quarterly in arrears based on the average daily unused portion of the revolving commitments under the ABL Facility. Such commitment fee will be 0.50% per year, subject to a reduction to 0.375% in the event our fixed charge coverage ratio is greater than or equal to 1.75 to 1.00.

At June 30, 2024, the borrowings under the ABL Facility had a weighted average interest rate of 8.42% calculated as weighted average SOFR rate of 5.34% plus a margin of 2.85% for SOFR borrowings and the prime rate of 8.50% plus a margin of 1.75% on the alternate base borrowings. On June 30, 2024, the interest rate in effect on letters of credit was 2.75%.

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 June 30, 2024, no Cash Dominion Event had occurred.

Compliance

At June 30, 2024, we were in compliance with the covenants under the ABL Facility.

Term Loan B

The Term Loan B was issued at 99.25% of par for gross proceeds of $694.8 million. The Term Loan B was issued pursuant to a credit agreement dated February 2, 2024 (“Term Loan Credit Agreement”). The Term Loan B will mature on February 2, 2031 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal amount beginning with the fiscal quarter ended June 30, 2024, with the balance payable on maturity.

The Term Loan B is 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.

The Term Loan B bears interest at a SOFR-based rate or an alternate base rate, in each case plus an applicable margin. The applicable margin for alternate base rate loans varies from 3.25% to 3.50% and the applicable margin for SOFR-based loans varies from 4.25% to 4.50%, in each case, depending on our consolidated first lien net leverage ratio (as defined in the Term Loan Credit Agreement).

At June 30, 2024, the borrowings under the Term Loan B had an interest rate of SOFR of 5.34% plus a margin of 4.50%.

The Term Loan Credit Agreement 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 Term Loan Credit Agreement requires that we maintain, on a quarterly basis, beginning with the quarter ended June 30, 2024, a debt service coverage rate (as defined in the Term Loan Credit Agreement) of no less than 1.1 to 1.0. At June 30, 2024, our debt service coverage rate was approximately 2.17 to 1.0.

The Term Loan Credit Agreement contains other customary terms, events of default and covenants.

Compliance

At June 30, 2024, we were in compliance with the covenants under Term Loan B.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Senior Secured Notes

The 2029 Senior Secured Notes bear interest at 8.125% and the 2032 Senior Secured Notes bear interest at 8.375%. Interest on the 2029 Senior Secured Notes and 2032 Senior Secured Notes is payable on February 15, May 15, August 15 and November 15 of each year, beginning on May 15, 2024. The 2029 Senior Secured Notes mature on February 15, 2029 and the 2032 Senior Secured Notes mature on February 15, 2032. The 2029 Senior Secured Notes and 2032 Senior Secured Notes were issued pursuant to an indenture dated February 2, 2024 (“Indenture”).

The 2029 Senior Secured Notes and 2032 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.

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 consolidate, merge or transfer or sell all or substantially all of our assets. These covenants are subject to a number of important exceptions and qualifications.

The Indenture contains other customary terms, events of default and covenants.

We have the option to redeem all or part of the 2029 Senior Secured Notes, at any time on or after February 15, 2026, at the redemption prices specified in the Indenture. We have the option to redeem all or part of the 2032 Senior Secured Notes, at any time on or after February 15, 2027, at the redemption prices specified in the Indenture.

Compliance

At June 30, 2024, we were in compliance with the covenants under the Indenture.

Other Long-Term Debt

On June 24, 2024, we entered into an equipment loan for $6.4 million with American Bank and Trust Company which bears interest at a rate of 8.5% and is secured by an airplane (see Note 15). We have an aggregate principal balance of $6.4 million at June 30, 2024. This loan matures on June 24, 2030.

Debt Maturity Schedule

The scheduled maturities of our long-term debt are as follows at June 30, 2024:


Year Ending March 31,	ABL Facility		Term Loan B		Senior Secured Notes		Other Long-Term Debt		Total
	(in thousands)
2025 (nine months)	$	—	$	5,250	$	—	$	629	$	5,879
2026	—		7,000		—		902		7,902
2027	—		7,000		—		983		7,983
2028	—		7,000		—		1,071		8,071
2029	169,000		7,000		900,000		1,167		1,077,167
2030	—		7,000		—		1,272		8,272
Thereafter	—		658,000		1,300,000		336		1,958,336
Total	$	169,000	$	698,250	$	2,200,000	$	6,360	$	3,073,610

Amortization of Debt Issuance Costs

Amortization expense for debt issuance costs related to long-term debt was $1.9 million and $2.7 million during the three months ended June 30, 2024 and 2023, respectively.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes expected amortization of debt issuance costs at June 30, 2024 (in thousands):


Year Ending March 31,
2025 (nine months)	$	5,699
2026	7,598
2027	7,598
2028	7,598
2029	7,262
2030	4,961
Thereafter	6,621
Total	$	47,337

Note 7—Commitments and Contingencies

Legal Contingencies

We are party to various 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 June 30, 2024, we have an environmental liability, measured on an undiscounted basis, of $1.2 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 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 obligations, which is reported within other noncurrent liabilities in our unaudited condensed consolidated balance sheets (in thousands):


Asset retirement obligations at March 31, 2024	$	56,574
Liabilities incurred	303

Liabilities associated with disposed assets (1)	(274)
Liabilities settled	(65)
Accretion expense	1,003
Asset retirement obligations at June 30, 2024	$	57,541

(1) Relates to the sale of certain saltwater disposal wells within our Water Solutions segment.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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.

The future minimum throughput payments under this agreement at June 30, 2024 were $22.8 million, all of which will be recognized by March 31, 2025.

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.

At June 30, 2024, 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:
Year ending March 31,
2025 (nine months)	$	79,160	1,108	$	20,759	26,839
2026	—		—	4,464		6,510
2027	—		—	2,963		4,284
2028	—		—	343		504
Total	$	79,160	1,108	$	28,529	38,137

Index-Price Commodity Purchase Commitments:
Year ending March 31,
2025 (nine months)	$	2,697,101	35,555	$	832,640	852,709
2026	711,412		10,545	41,986		56,053
2027	—		—	13,162		25,200
Total	$	3,408,513	46,100	$	887,788	933,962

(1) Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (presented below) due primarily to our long-term purchase commitments for crude oil that we purchase and ship on the Grand Mesa Pipeline. As these purchase commitments are deliver-or-pay contracts, whereby our counterparty is required to pay us for any volumes not delivered, we have not entered into corresponding long-term sales contracts for volumes we may not receive.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

At June 30, 2024, we had the following commodity sale commitments:


	Crude Oil			Natural Gas Liquids
	Value		Volume (in barrels)	Value		Volume (in gallons)
	(in thousands)
Fixed-Price Commodity Sale Commitments:
Year ending March 31,
2025 (nine months)	$	77,351	1,080	$	69,815	72,187
2026	—		—	5,642		6,837
2027	—		—	3,300		4,366
2028	—		—	298		400

Total	$	77,351	1,080	$	79,055	83,790

Index-Price Commodity Sale Commitments:
Year ending March 31,
2025 (nine months)	$	2,214,891	27,827	$	769,895	662,740
2026	29,476		390	20,649		17,893



Total	$	2,244,367	28,217	$	790,544	680,633

We account for the contracts shown in the tables above using the normal purchase and normal sale election. Under this accounting policy election, we do not record the physical contracts at fair value at each balance sheet date; instead, we record the purchase or sale at the contracted value once the delivery occurs. Contracts in the tables above may have offsetting derivative contracts (described in Note 9) or inventory positions (described in Note 2).

Certain other forward purchase and sale contracts do not qualify for the normal purchase and normal sale election. These contracts are recorded at fair value in our unaudited condensed consolidated balance sheet and are not included in the tables above. These contracts are included in the derivative disclosures in Note 9 and represent $21.6 million of our prepaid expenses and other current assets and $20.2 million of our accrued expenses and other payables at June 30, 2024.

Other Commitments

We have noncancellable agreements for product storage, railcar spurs, capital projects and real estate. The following table summarizes future minimum payments under these agreements at June 30, 2024 (in thousands):


Year Ending March 31,
2025 (nine months)	$	26,421
2026	6,674
2027	6,395
2028	2,345
2029	2,128
2030	1,386
Thereafter	2,207
Total	$	47,556

Note 8—Equity

Partnership Equity

The Partnership’s equity consists of a 0.1% GP interest and a 99.9% limited partner interest, which consists of common units. Our GP has the right, but not the obligation, to contribute a proportionate amount of capital to the Partnership to maintain its 0.1% GP interest. Our GP is not required to guarantee or pay any of our debts and obligations. At June 30, 2024, we owned 8.69% of our GP.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Common Unit Repurchase Program

On June 5, 2024, the board of directors of our GP authorized a common unit repurchase program, under which we may repurchase up to $50.0 million of our outstanding common units from time to time in the open market or in other privately negotiated transactions. This program does not have a fixed expiration date. We did not repurchase any units under this program by the end of the quarter ended June 30, 2024.

Suspension of Common Unit and Preferred Unit Distributions

On February 4, 2021, the board of directors of our GP temporarily suspended all distributions, including common unit distributions which began with the quarter ended December 31, 2020 and preferred unit distributions which began with the quarter ended March 31, 2021.

On April 4, 2024 and April 9, 2024, the board of directors of our GP declared cash distributions of the remaining outstanding distribution arrearages through March 31, 2024 to the preferred unitholders. The distributions were paid on April 18, 2024 and April 25, 2024, respectively. See below for further discussion.

As of April 25, 2024, all preferred unit distributions in arrears have been paid.

Class B Preferred Units

As of June 30, 2024, there were 12,585,642 of our Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) outstanding.

On April 4, 2024, the board of directors of our GP declared a cash distribution of $3.0224 which was 55.4% of the outstanding distribution arrearages through the quarter ended March 31, 2024 to the holders of the Class B Preferred Units. The distribution amount of $38.0 million was paid on April 18, 2024 to the holders of record at the close of trading on April 12, 2024.

On April 9, 2024, the board of directors of our GP declared a cash distribution of $2.4750 which fully paid the remaining distribution arrearages and interest through the quarter ended March 31, 2024 to the holders of the Class B Preferred Units. The distribution amount of $31.1 million, which included a distribution of $9.9 million earned during the quarter ended March 31, 2024, was paid on April 25, 2024 to the holders of record at the close of trading on April 19, 2024.

The current distribution rate for the Class B Preferred Units is a floating rate of the three-month LIBOR interest rate (5.30% for the quarter ended June 30, 2024) plus a spread of 7.213%. Effective July 3, 2023, the reference to LIBOR in the formulation for the distribution rate in these securities was replaced with three-month CME Term SOFR, as calculated and published by CME Group Benchmark Administration, Ltd., plus a tenor spread adjustment of 0.26161%, in accordance with the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), and the rules implementing the LIBOR Act.

On June 21, 2024, the board of directors of our GP declared a cash distribution of $0.8153 for the quarter ended June 30, 2024 to the holders of the Class B Preferred Units. The distribution amount of $10.3 million was paid on July 15, 2024 to the holders of record at the close of trading on July 1, 2024 and is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at June 30, 2024.

Class C Preferred Units

As of June 30, 2024, there were 1,800,000 of our Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) outstanding.

On April 4, 2024, the board of directors of our GP declared a cash distribution of $2.6790 which was 55.4% of the outstanding distribution arrearages through the quarter ended March 31, 2024 to the holders of the Class C Preferred Units. The distribution amount of $4.8 million was paid on April 18, 2024 to the holders of record at the close of trading on April 12, 2024.

On April 9, 2024, the board of directors of our GP declared a cash distribution of $2.1860 which fully paid the remaining distribution arrearages and interest through the quarter ended March 31, 2024 to the holders of the Class C Preferred Units. The distribution amount of $3.9 million, which included a distribution of $1.1 million earned during the quarter ended March 31, 2024, was paid on April 25, 2024 to the holders of record at the close of trading on April 19, 2024.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The current distribution rate for the Class C Preferred Units is a floating rate of the three-month LIBOR interest rate (5.30% for the quarter ended June 30, 2024) plus a spread of 7.384%. Effective July 3, 2023, the reference to LIBOR in the formulation for the distribution rate in these securities was replaced with three-month CME Term SOFR, as calculated and published by CME Group Benchmark Administration, Ltd.

On June 21, 2024, the board of directors of our GP declared a cash distribution of $0.7926 for the quarter ended June 30, 2024 to the holders of the Class C Preferred Units. The distribution amount of $1.4 million was paid on July 15, 2024 to the holders of record at the close of trading on July 1, 2024 and is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at June 30, 2024.

Class D Preferred Units

As of June 30, 2024, there were 600,000 preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of 25,500,000 common units outstanding.

The following table summarizes the outstanding warrants at June 30, 2024:


Issuance Date and Description	Number of Warrants	Exercise Price
July 2, 2019
Premium warrants	10,000,000	$	17.45
Par warrants	7,000,000	$	14.54
October 31, 2019
Premium warrants	5,000,000	$	16.28
Par warrants	3,500,000	$	13.56

All outstanding warrants are currently exercisable and any unexercised warrants will expire on the tenth anniversary of the date of issuance. The warrants will not participate in cash distributions.

On April 4, 2024, the board of directors of our GP declared a cash distribution of 55.4% of the outstanding distribution arrearages through the quarter ended March 31, 2024 to the holders of the Class D Preferred Units. The distribution amount of $77.1 million was paid on April 18, 2024 to the holders of record at the close of trading on April 12, 2024.

On April 9, 2024, the board of directors of our GP declared a cash distribution which fully paid the remaining distribution arrearages and interest through the quarter ended March 31, 2024 to the holders of the Class D Preferred Units. The distribution amount of $63.0 million, which included a distribution of $16.4 million earned during the quarter ended March 31, 2024, was paid on April 25, 2024 to the holders of record at the close of trading on April 19, 2024.

The current distribution rate for the Class D Preferred Units is 10.00% (equal to $100.00 per every $1,000 in unit value per year).

On June 21, 2024, the board of directors of our GP declared a cash distribution for the quarter ended June 30, 2024 to the holders of the Class D Preferred Units. The distribution amount of $15.8 million was paid on July 15, 2024 to the holders of record at the close of trading on July 1, 2024 and is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at June 30, 2024.

As of July 1, 2024, the holders of our Class D Preferred Units can elect, from time to time, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in accordance with our amended and restated limited partnership agreement (“Partnership Agreement”)) plus a spread of 7.00% (“Class D Variable Rate,” as defined in the Partnership Agreement). Each Class D Variable Rate election shall be effective for at least four quarters following such election. The holders of the Class D Preferred Units have informed us that they have elected the floating rate for the calculation of the distributions.

Note 9—Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities (excluding derivative instruments) approximate fair value because of the short-term nature of these instruments. Therefore, these assets and liabilities are not presented in the following table.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Derivatives

The following table summarizes, by level within the fair value hierarchy, the estimated fair values of our derivative assets and liabilities reported in our unaudited condensed consolidated balance sheets at the dates indicated:


	June 30, 2024				March 31, 2024
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
	(in thousands)
Level 1 measurements	$	6,195	$	(11,941)	$	4,798	$	(7,517)
Level 2 measurements	24,459		(23,139)		54,040		(37,345)
	30,654		(35,080)		58,838		(44,862)

Netting of counterparty contracts (1)	(6,195)		6,195		(4,798)		4,798
Net cash collateral provided	944		5,189		630		2,719
Derivatives	$	25,403	$	(23,696)	$	54,670	$	(37,345)

NGL Energy Partners LP [NGL-PC] Filings
NGL Energy Partners LP [NGL] Filings
NGL Energy Partners LP [NGL-PB] Filings
10-Q	[2024-08-08]
10-K	[2024-06-06]
10-Q	[2024-02-08]
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-PC] Filings

NGL Energy Partners LP [NGL] Filings

NGL Energy Partners LP [NGL-PB] Filings