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    NGL
    Earnings call· Jun 2026(Q1 FY27)

    NGL Energy Partners Q1 FY27 earnings call NGL

    Aug 4, 2026 Source

    Executive summary

    NGL Energy Partners Q1 FY27 — Record Water Volumes Drive Strong Start and Raised Guidance

    The company reported a strong start to FY27, driven by record water volumes and adjusted EBITDA in its Water Solutions segment, leading to an upward revision of full-year adjusted EBITDA guidance. Management is focused on deleveraging and strategically deploying capital into high-return water growth projects, while also preparing for future M&A and potential common unit distribution reinstatement.

    Highlights

    5

    • Record produced water volumes of 3.32 million barrels per day, growing 19.6% YoY.

    • Record Water Solutions adjusted EBITDA of $179.9 million, a 26% increase YoY.

    • Consolidated adjusted EBITDA from continuing operations increased nearly 30% to $186.2 million.

    • Fiscal 2027 adjusted EBITDA guidance raised by $10 million to a new range of $725 million to $735 million.

    • Operating expenses in Water Solutions segment decreased by $0.01 per barrel to $0.21 per barrel.

    Concerns

    2

    • Macro backdrop volatility could impact Water Solutions segment, though no specific quantified impact was stated.

    • Class D preferreds represent a significant liability, with only 50% expected to be redeemed this fiscal year.

    Guidance & targets

    1
    CategoryTargetConfidence
    Fiscal 2027 Adjusted EBITDA
    $725 million to $735 million
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Water Solutions
    Generated 91% of the partnership's EBITDA for the quarter. Increase driven by higher disposal volumes from contracted producer customers and skim oil revenue due to higher skim oil volumes and crude prices. Operating expenses per barrel were lower by $0.01 YoY.
    Physical water disposal volumes: 3.32 million barrels per dayTotal volumes paid to dispose: 3.43 million barrels per dayOperating expenses: $0.21 per barrel
    		—26%—$179.9 million Adjusted EBITDA
    Crude Oil Logistics
    Adjusted EBITDA decreased from $9.6 million in prior year. Grand Mesa Pipeline volumes increased from 55,000 barrels per day in prior year.
    Grand Mesa Pipeline volumes: 74,000 barrels per day
    		———$8.6 million Adjusted EBITDA
    Liquids Logistics
    Adjusted EBITDA increased from $2.9 million in prior year. Largest driver was additional contracted activity through remaining butane terminals. Primary EBITDA contributor going forward is butane blending business, with majority of EBITDA occurring in the back half of the fiscal year.
    		———$10.3 million Adjusted EBITDA

    Operational metrics

    17
    Consolidated Adjusted EBITDA from continuing operations
    $186.2 millionup nearly 30% YoY from $143.9 million
    Q1 FY27

    Primarily driven by the performance of the Water Solutions business segment.

    Physical water disposal volumes
    3.32 millionup 19.6% YoY from 2.77 million barrels per day
    Q1 FY27

    Hit record produced water volumes.

    Total volumes paid to dispose (including deficiency volumes)
    3.43 millionup approximately 12% YoY from 3.06 million barrels per day
    Q1 FY27

    Includes deficiency volumes.

    Water Solutions Adjusted EBITDA
    $179.9 millionup 26% YoY from $142.9 million
    Q1 FY27

    Record adjusted EBITDA for a single quarter for the Water Solutions segment.

    Water Solutions EBITDA contribution to partnership
    91%
    Q1 FY27

    Water Solutions segment's share of total partnership EBITDA.

    Skim oil revenue driver
    —
    Q1 FY27

    Increase in skim oil revenue due to significantly higher skim oil volumes, driven by increased physical water volumes disposed, a slight increase in skim oil percentage, and higher crude prices on unhedged barrels.

    Water Solutions operating expenses per barrel
    $0.21lower by $0.01 YoY
    Q1 FY27

    The increase in volume will continue to dilute the fixed cost component of the cost structure.

    New produced water volume commitments
    200,000
    Q1 FY27

    Signed this quarter alone, demonstrating high interest in takeaway and disposal capacity.

    Permitted injection capacity increase
    200,000
    Q1 FY27

    Added during the first quarter of fiscal 2027.

    Total permitted injection capacity
    5.62 million
    Q1 FY27

    Additional capacity will be added with planned growth projects this fiscal year.

    Investment-grade counterparty volumes
    over 90%
    Q1 FY27

    Represents the credit profile of the customer base for produced water.

    Trailing 12-month Adjusted EBITDA from Water Solutions
    over 85%
    TTM Q1 FY27

    Indicates the segment's contribution to overall EBITDA.

    Leverage trend
    decreasing each quarter
    FY27

    Expected to continue delevering trend for the remainder of the fiscal year while managing growth capital spend and liquidity.

    Growth CapEx
    exceed $200 million
    FY27

    A significant portion of the generated EBITDA will not be recognized until fiscal 2028. Long-term debt expected to be relatively flat until the back half of the year.

    Class D preferreds redemption target
    50%
    FY27

    Expected to redeem about 50% of the remaining Class D preferreds this fiscal year, leaving the balance outstanding. This is not the highest and best use of cash compared to high-return investment opportunities.

    Leverage target
    4x
    end of FY27

    Line of sight to being 4x levered at the end of this fiscal year, which would position them to do something if the market was there to chip away at the Ds some more.

    Asset sales
    $12 million
    Q1 FY27

    Monetization of line fill when a crude contract rolled off, not a hard physical asset sale.

    Industry KPIs

    6
    MetricValueDetails
    Pipeline throughput storage560,000barrels per day
    Sanctioned expansion backlog—
    Basin level production volume3.32 millionbarrels per day
    Cost of supply unit cash cost$0.21per barrel
    FCF shareholder distributions—
    Take or pay contract structure1.77 millionbarrels per day

    Orderbook & backlog

    1
    Produced water volume commitments1.77 million barrels per dayQ1 FY27

    Represents approximately 53% of total volumes.

    Deals & partnerships

    2
    Undisclosed producerLong-term volume commitment contract for produced water transportlong-term

    Supports the LEX II Extension project, expanding the LEX Pipeline System.

    Multiple producersAdditional produced water volume commitments

    These commitments, along with the LEX II contract, represent roughly 53% of total volumes.

    Capital programs

    2
    LEX II Extension projectunderway

    Benefit: 560,000 barrels per day of produced water transport capability

    Expanding the current long-haul LEX Pipeline System to 81 miles, underwritten by a newly executed long-term volume commitment contract.

    Water Solutions growth capital projectsunderwayexceed $200 million
    Start: FY27

    Benefit: 500,000 barrels per day of new capacity (200k bbl/d developed in Q1, 300k bbl/d in balance of year)

    Heavily weighted to the first half of fiscal year 2027. A significant portion of the EBITDA generated will not be recognized until fiscal 2028. Includes accelerating development for existing contracts and working on FY28 deals.

    Risks & headwinds

    2
    Macro backdrop volatility

    potential impacts

    Mitigation: Continuous conversations with producers to monitor activity levels.

    TPDES permit delayspast 3 years

    October will be 3 years since applied

    Mitigation: Received updates that permit will be received this month, expected to be economic.

    What to watch in Q2 FY27

    5

    LEX II Extension in-service

    by end of this calendar year
    CurrentUnder construction
    TargetIn service

    Why it matters

    Verifies the timely completion and operational readiness of a significant water infrastructure project, impacting future capacity and contracted volumes.

    The LEX II Extension is expected to be in service by the end of this calendar year.

    Q&A highlights

    5

    What is the opportunity set for additional growth investments in the Delaware, given potential constraints in H2 FY27 but long-term opportunities?

    The company developed 200,000 bbl/d of new capacity in Q1 and plans another 300,000 bbl/d for the balance of the year, totaling 500,000 bbl/d of contracted capacity. This growth is expected to fill up, and they are already working on FY28 deals. There are no real constraints, just execution and timing for new deals that will likely be in spend and EBITDA in the next fiscal year.

    “As we continue to develop, we continue to develop faster, bringing on 16, 18 wells this year, plus all the surface and the pipeline expansions. We're not constrained really by anything in that matter.”

    asked by Derrick Whitfield · answered by Douglas White

    2 min read6 chapters

    Detailed Narrative

    01

    Deleveraging and Growth Strategy

    NGL Energy Partners is executing a multiyear strategy focused on deleveraging the balance sheet through high-return water growth projects. The company expects the delevering trend to continue throughout the fiscal year, even with growth capital spend heavily weighted to the first half. This strategy positions the partnership to address the Class D preferreds later this fiscal year.

    02

    LEX II Extension Project

    The LEX II Extension project is expanding the LEX Pipeline System to 81 miles, capable of transporting approximately 560,000 barrels per day of produced water from Eddy and Lea Counties, New Mexico, to Andrews County, Texas. This expansion is underwritten by a new long-term volume commitment contract, including increased volume commitments and an additional 4 township committed area in Eddy County. The project is expected to be in service by the end of this calendar year.

    03

    Class D Preferreds Management

    Management plans to redeem about 50% of the remaining Class D preferreds this fiscal year, leaving the balance outstanding. This approach prioritizes attractive investment opportunities with rates of return exceeding the cost of the Class D preferreds. The company is preparing for the possibility of these securities being put to them no sooner than January 1, 2028, noting they would be easily financed if exercised.

    04

    Future Growth and Capital Allocation

    Looking ahead, NGL is positioning itself to potentially build another large diameter water pipeline, pursue M&A opportunities, and reinstate the common unit distribution. The company believes that reducing about half of the Class D preferreds this fiscal year makes distribution reinstatement a possibility in 2027, depending on leverage and capital allocation to high-EBITDA opportunities.

    05

    Beneficial Reuse and Mineral Extraction Opportunities

    The company is actively engaged in discussions and moving forward with contracts for both beneficial reuse of produced water and mineral extraction (lithium and iodine). They anticipate making announcements as these opportunities firm up. Produced water is increasingly seen as a solution for hyperscalers and data centers facing groundwater development pushback in West Texas.

    06

    TPDES Permit Update

    NGL expects to receive its TPDES permit through TCEQ this month, after a three-year application process. Management believes the permit will be economic, which is a critical first step for several exciting scoped projects related to water treatment and discharge. They highlight a competitive advantage in being first movers in this area.

    AI-generated summary of the company’s earnings call. Not investment advice.