NGL Energy Partners LP (NGL) Q4 2024 Earnings Report

Overview of the QQ4 2024 financials and notable trend signals:
- Revenue: $1.6296 billion; YoY decline of 20.5%; QoQ decline of 12.9%.
- Gross profit: $160.3 million; gross margin 9.84%.
- Operating income: -$82.3 million; operating margin -5.05%.
- EBITDA: -$73.9 million; EBITDA margin -4.54%.
- Net income: -$236.8 million; net income margin -14.53%; EPS -$1.79 (diluted).
- Water Solutions: Q4 adjusted EBITDA $123.4 million; full-year adjusted EBITDA $508.3 million, +10% YoY; physical disposed water volumes 2.39 million barrels/day in Q4 (2.46 in prior Q4).
- Volumes and utilization: Total produced-water disposed for fiscal 2024 averaged +4% vs. 2023; total volumes paid to dispose rose 7% to 2.59 million barrels/day (fiscal 2024).
- Grand Mesa Pipeline: Q4 physical volumes ~67,000 bpd vs. ~76,000 bpd prior-year quarter; management sees potential up to 110–115k bpd exit volumes in 6–12 months.
- Crude Logistics: Q4 EBITDA $15.3 million vs. $29.7 million prior-year quarter; margin pressure from lower production on long-tenor acreage and a contract expiration (Dec 31, 2023).
- Liquids Logistics: Q4 EBITDA $21.8 million vs. $28.5 million prior-year quarter; weakness driven by lower propane margins, terminal closures/sales, and warmer winter conditions; biodiesel pricing pressure from late-2023 mandates.
- Cash flow and capital allocation: Net cash provided by operating activities $152.2 million; free cash flow $119.8 million; capex $32.4 million; dividends paid $178.3 million; net cash used in financing activities $79.6 million; cash balance at period-end $38.9 million.
- Balance sheet and leverage: Total assets $5.02 billion; total Liabilities $4.02 billion; total debt $2.95 billion; net debt $2.91 billion; stockholders’ equity negative about $0.499 million; debt-to-capitalization ratio ~1.00; interest coverage negative; cash ratio ~0.0398; current ratio ~1.206. Note: equity impairment reflects heavy debt load and preferred equity structure.
- Guidance: Fiscal 2025 consolidated adjusted EBITDA guidance of $665 million, implying ~9% YoY growth; Water Solutions expected to drive most of the growth (8–10% range). CapEx guidance of $210 million for 2025 (approx. 60% tied to LEX II). Common-unit repurchase program authorized up to $50 million. Soft-call on Term Loan B at 101 through July; potential opportunities for debt repayment thereafter.
- Operational efficiency: Water Solutions operating costs per barrel run at $0.23 in Q4 and ~$0.24 per barrel for FY2024, highlighting disciplined cost control in a variable-margin environment.

Key management insights and implications drawn from the earnings call:
- Strategy and capital structure: Management emphasized a transformational year in 2024, highlighting the refinancing and the intention to attack the capital structure to address maturities. Quote: Our plan to attack the capital structure and address our maturities during the fiscal year has been executed, and being current on all preferred arrearages as of April exceeded expectations.
- EBITDA trajectory and 2025 outlook: CEO Mike Krimbill outlined a target of $665 million in consolidated adjusted EBITDA for fiscal 2025, with Water Solutions driving 8–10% growth and an incremental 1–2% lift when accounting for non-recurrence of certain 2024 items. Quote: Our fiscal 2025 consolidated adjusted EBITDA guidance is $665 million, implying year-over-year growth of 9%; Water Solutions is the primary driver of that growth.
- LEX II and capacity expansion: LEX II adds 200,000 bpd capacity with expansion potential to 500,000 bpd, targeting an October service date; Lea County Express Pipeline total capacity is 500,000 bpd. Quote: LEX II adds 200,000 barrels per day that will go into service in October this year; Lea County Express Pipeline total capacity is 500,000 per day.
- Grand Mesa growth potential: The company sees significant upside in Grand Mesa volumes, with line-of-sight to 70k bpd today and upside beyond 100k, potentially to 110–115k bpd in 6–12 months. Quote: We probably assume 70,000 barrel a day range today, with potential to reach 110–115k bpd over the next six to twelve months.
- Liquids segment strategic review: Management signaled potential strategic alternatives for the Liquids Logistics business, leaning toward divestitures of certain hard assets to fetch multiples while rationalizing asset portfolio. Quote: It’s more on the divestiture side; a continued rationalization of each business unit and assets at our disposal.
- Shareholder-friendly capital allocation: The board approved a common-unit repurchase program of up to $50 million, reflecting a view that the unit price offers an attractive use of capital given the cash-flow generation. Quote: The board approved a common unit repurchase program of up to $50 million; this gives us significant flexibility.

Overall, NGL offers a bifurcated investment profile: a structurally leveraged but potentially improving balance sheet with a high-conviction Water Solutions growth engine, and a set of growth catalysts (LEX II, Grand Mesa ramp) that could elevate cash flow and reduce leverage over time. The company’s 2025 EBITDA target of $665 million signals a mid-single-digit to high-single-digit multiple of EBITDA expansion, aided by a disciplined CapEx plan (~$210 million) and ongoing capital management tools (common-unit buyback up to $50 million). However, investors should remain mindful of persistent leverage, negative equity, and commodity-price sensitivity that could cap near-term upside or cause volatility in quarterly results. Key catalysts to watch include the LEX II in-service timing (October 2024), the Grand Mesa ramp, any realizations from Liquids asset dispositions, and the company’s ability to sustain Water Solutions margin discipline under evolving market dynamics. In comparison with peers, NGL’s valuation will largely hinge on the execution of these growth levers and the company’s progress in deleveraging, given its heavy debt load and equity impairment relative to many midstream peers.