NGL Energy Partners LP Announces Third Quarter Results and Filing of Form 10-Q

NGL Energy Partners LP (NYSE:NGL) today reported Adjusted EBITDA of $144.8 million for the three months ended December 31, 2014 (exclusive of $0.7 million of advisory and legal costs related to acquisitions and $7.6 million of compensation costs related to the Gavilon and TransMontaigne acquisitions), compared to Adjusted EBITDA of $85.0 million during the three months ended December 31, 2013 (exclusive of $5.1 million of costs related to acquisitions), an increase of 70%. NGL reported a net loss of $5.3 million for the three months ended December 31, 2014, compared to net income of $24.1 million for the three months ended December 31, 2013. Net loss per limited partner common unit for the three months ended December 31, 2014 was $(0.26), compared to net income per limited partner common unit of $0.27 for the three months ended December 31, 2013. The net loss for the three months ended December 31, 2014 includes a loss of $29.9 million on the sale of a natural gas liquids terminal.

For the nine months ended December 31, 2014, NGL reported Adjusted EBITDA of $258.3 million (exclusive of $5.0 million of advisory and legal costs related to acquisitions and $15.3 million of compensation costs related to the Gavilon and TransMontaigne acquisitions), compared to Adjusted EBITDA of $154.5 million during the nine months ended December 31, 2013 (exclusive of $6.5 million of costs related to acquisitions), an increase of 67%. NGL reported a net loss of $61.1 million for the nine months ended December 31, 2014, compared to net income of $5.6 million for the nine months ended December 31, 2013. Net loss per limited partner common unit for the nine months ended December 31, 2014 was $(1.17), compared to a net loss per limited partner common unit of $(0.03) for the nine months ended December 31, 2013. The net loss for the nine months ended December 31, 2014 includes a loss of $29.9 million on the sale of a natural gas liquids terminal.

NGL’s recent accomplishments include the following:

• Began construction of the Grand Mesa Pipeline, a 20-inch crude oil pipeline that originates in Weld County, Colorado and terminates at NGL’s Cushing, Oklahoma terminal. NGL completed a successful open season in which it received the requisite support, in the form of ship-or-pay volume commitments from multiple shippers, to begin construction of the pipeline system.
• In February 2015, NGL signed an agreement to acquire an entity that owns a natural gas liquids salt dome storage facility in Utah. The purchase price will be approximately $280.0 million, of which $80.0 million will be payable in cash and approximately $200.0 million will be payable in common units.

NGL reaffirms its Adjusted EBITDA guidance of $410 - $425 million for the fiscal year ending March 31, 2015 and 6% - 8% distribution growth for calendar 2015.

A conference call to discuss NGL's results of operations is scheduled for 8:30am Eastern Time (7:30am Central Time) on February 10, 2015. Analysts, investors, and other interested parties may access the conference call by dialing (877) 703-6102 and providing access code 75753056. An archived audio replay of the conference call will be available for 7 days beginning at 12:30pm Eastern Time (11:30am Central Time) on February 10, 2015 and can be accessed by dialing (888) 286-8010 and providing access code 20148772.

NGL also announced that it has filed its quarterly report on Form 10-Q for its fiscal quarter ended December 31, 2014 with the Securities and Exchange Commission. NGL has posted a copy of the Form 10-Q on its website at www.nglenergypartners.com.

NGL defines EBITDA as net income (loss) attributable to parent equity, plus interest expense, income taxes, and depreciation and amortization expense. NGL defines Adjusted EBITDA as EBITDA excluding unrealized gains or losses on derivatives, lower of cost or market adjustments, gains or losses on the disposal or impairment of assets, and equity-based compensation expense. EBITDA and Adjusted EBITDA should not be considered alternatives to net income, income before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) as those items are used to measure operating performance, liquidity or the ability to service debt obligations. NGL believes that EBITDA provides additional information to investors for evaluating NGL’s ability to make quarterly distributions to NGL’s unitholders and is presented solely as a supplemental measure. NGL believes that Adjusted EBITDA provides additional information to investors for evaluating NGL’s financial performance without regard to NGL’s financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as NGL defines them, may not be comparable to EBITDA and Adjusted EBITDA or similarly titled measures used by other entities.

For purposes of NGL’s Adjusted EBITDA calculation, NGL makes a distinction between unrealized gains/losses on derivatives and realized gains/losses on derivatives. During the period when a derivative contract is open, NGL records changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, NGL reverses the previously-recorded unrealized gain or loss and records a realized gain or loss. For the three months and nine months ended December 31, 2014, NGL excluded lower of cost or market adjustments to inventory from the calculation of Adjusted EBITDA. A portion of these adjustments was hedged through financial derivatives, and the related unrealized gains were also excluded from the calculation of Adjusted EBITDA.

NGL acquired TransMontaigne in July 2014. NGL is still in the process of developing procedures to calculate realized and unrealized gains and losses for these operations in the same way NGL calculates them for its other operations. Accordingly, the net unrealized gains and losses in the table below exclude any unrealized gains and losses related to TransMontaigne. As of December 31, 2014, the refined products business acquired in the TransMontaigne business combination held futures contracts to protect against declines in the value of refined products inventories. As a result of declining prices in December, NGL recorded a lower of cost or market adjustment to these inventories and recorded gains on the open futures contracts. The loss associated with the lower of cost or market adjustment and the gains associated with the futures contracts pertaining to the TransMontaigne business are included in Adjusted EBITDA in the table below.

A portion of the revenues of NGL’s water solutions business is generated from the sale of crude oil that it recovers in the process of treating the wastewater. NGL has historically entered into derivative contracts to protect against the risk of declines in the value of the crude oil it expects to recover in future months. During the three months ended December 31, 2014, NGL settled certain derivative contracts that related to crude oil it expects to recover in the months from April 2015 to September 2015 and realized a gain of $17.9 million. Of this gain, $9.4 million was attributable to derivatives with scheduled settlement dates during the quarter ending June 30, 2015 and $8.5 million was attributable to derivative contracts with scheduled settlement dates during the quarter ending September 30, 2015. As of December 31, 2014, NGL’s water solutions business had open derivative contracts with settlement dates through March 2015.

This press release includes “forward-looking statements.” All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. While NGL believes its expectations as reflected in the forward-looking statements are reasonable, NGL can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings with the Securities and Exchange Commission. Other factors that could impact any forward-looking statements are those risks described in NGL’s annual report on Form 10-K, quarterly reports on Form 10-Q, and other public filings. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” NGL undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.

About NGL Energy Partners LP

NGL Energy Partners LP is a Delaware limited partnership. NGL owns and operates a vertically integrated energy business with five primary businesses: water solutions, crude oil logistics, NGL logistics, refined products/renewables and retail propane. For further information visit the Partnership's website at www.nglenergypartners.com.

Non-GAAP Financial Measures

The following table reconciles net income (loss) attributable to parent equity to EBITDA and Adjusted EBITDA, each of which are non-GAAP financial measures:

(1) During January 2015, NGL reached an agreement with certain employees whereby certain bonus commitments otherwise payable in cash subsequent to NGL’s fiscal year end would instead be paid using NGL’s common units. The amounts in the table above include the compensation expense during the nine months ended December 31, 2014 associated with these bonuses.

The following tables reconcile depreciation and amortization amounts per the EBITDA table above to depreciation and amortization amounts reported in NGL’s condensed consolidated statements of operations and cash flows:

The following table summarizes maintenance and expansion capital expenditures (exclusive of acquisitions) for each of the periods indicated (in thousands):