NGL Energy Partners LP - $NGL - Earnings Analysis: Growth in Water Solutions segment supported by long-term contracts and acreage dedications.
Business Model
NGL Energy Partners LP operates through three segments: Water Solutions, Crude Oil Logistics, and Liquids Logistics.
Revenue Sources
- Water Solutions: Transportation, treatment, recycling, and disposal of produced and flowback water.
- Crude Oil Logistics: Purchase and transport crude oil to refineries and trade hubs, provides storage and terminaling.
- Liquids Logistics: Supply natural gas liquids, refined petroleum products, and biodiesel to commercial, retail, and industrial customers.
Income Statement Analysis
- Total revenues decreased due to lower performance in Crude Oil Logistics and Liquids Logistics segments.
- Operating income decreased primarily due to lower revenues and higher operating costs in some segments.
- Net income decreased significantly compared to the prior year, reflecting lower operating performance.
Balance Sheet Analysis
- Total assets decreased primarily due to sales of assets and winding down of biodiesel business.
- Total liabilities decreased with debt management.
- Total equity decreased due to distributions to preferred unitholders and common unit repurchases.
Cash Flow Analysis
- Net cash provided by operating activities decreased due to lower earnings from operations and fluctuations in working capital.
- Net cash used in investing activities was primarily related to capital expenditures.
- Net cash used in financing activities was related to debt payments and distributions to preferred unitholders.
Capital Allocation
The partnership is focusing on deleveraging the balance sheet, streamlining operations by selling non core assets, and redeem Class D preferred shares in the future after reducing its leverage further. The company repurchased 500,000 common units for $2.1M since the program was authorized.
Management Commentary
Congrats on your divestiture announcements.
Exiting the biodiesel business and selling substantially all of our wholesale propane business will improve the repeatability of our cash flows and reduce the seasonality and volatility of our adjusted EBITDA.
Water will be below that range, but it's not clear to us where we're going to end up. So we decided not to provide another any more guidance on water.
Overall Sentiment: Management is optimistic about Water Solutions and Crude Oil Logistics performance, but shows concern regarding the weaker liquid segments.
Recommendation
Rating: Hold
Reason for Rating: Hold due to potential growth in Water Solutions and Crude Oil Logistics offset by challenges in Liquids Logistics and overall debt level.
Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.
Generated on: 2/11/2025, 7:36:45 AM