NGL Energy Partners Announces Quarterly Cash Distribution and Revised Fiscal Year 2017 and Fiscal Year 2018
Guidance
NGL Energy Partners LP (NYSE: NGL) (the “Partnership” or “NGL”) announced today that the Board of Directors of its general
partner declared a quarterly distribution of $0.39 per unit, or $1.56 per unit on an annualized basis, for the quarter ended March
31, 2017. This cash distribution is payable on May 15, 2017 to common unitholders of record at the close of business on May 8,
2017.
Additionally, the Board of Directors declared a distribution for the quarter ended March 31, 2017 to be paid to the holders of
the Class A Preferred Units according to the terms outlined in NGL's Partnership Agreement. The Class A Preferred distribution will
also be paid on May 15, 2017.
In April 2016, the Board of Directors of NGL’s general partner made the decision to reduce the distribution by 39% in order to
focus on strengthening the balance sheet, which included foregoing approximately $64 million of annual general partner
distributions. Since that time, NGL has successfully increased liquidity and executed several growth initiatives while targeting
distribution coverage in excess of 1.3x. While NGL had anticipated an increase in distributions commencing this quarter, in light
of current market conditions, particularly fluctuating commodity prices and their anticipated impact on NGL's results for its
quarter ended March 31, 2017, the Board of Directors has chosen to defer this increase in distributions for up to an additional
three quarters. Following this deferral, NGL's management anticipates then recommending to its Board of Directors an increase in
the distribution policy consistent with NGL's previously announced distribution guidance.
Fiscal Years 2017 and 2018 Guidance
Based upon preliminary financial information, NGL expects fiscal year 2017 Adjusted EBITDA of approximately $380 million, which
includes an approximately $42 million contribution by the Grand Mesa Pipeline. These preliminary results were adversely influenced
by the significantly warmer than normal winter resulting in lower propane volumes and pricing, continued pressure in crude
marketing and transportation, decreased demand for diesel fuel, lower than expected margins for biodiesel sales and an extended
decline in gasoline line space values on the Colonial Pipeline, all of which negatively impacted fourth quarter results.
For fiscal year 2018, NGL expects to generate Adjusted EBITDA of approximately $500 million to $525 million, which includes
Adjusted EBITDA for Grand Mesa Pipeline for 12 months of operations at approximately $130 million; continued improvement in the
water segment; an anticipated increase in crude production and refined products demand; and the benefit of a full 12 months of
operations for several of our recent projects and acquisitions, including the Houma and Port of Point Comfort projects and the Port
Hudson and Kingfisher terminal assets which were acquired from Murphy Energy in January 2017. NGL's guidance also takes into
consideration management’s lowered expectations for propane volumes, continued challenges in crude marketing and transportation
together with the impact of lower line space values carrying into fiscal year 2018. Distributable Cash Flow is expected to be
$300-325 million and could generate over $100 million of excess cash flow, which would provide at least 1.3x coverage for the year
based on the deferral of the distribution increase. Additional information regarding our fiscal year 2018 guidance is expected to
be provided on NGL’s earnings call for its fiscal year ended March 31, 2017, which is expected to be held on Thursday, May 25,
2017.
Non-GAAP Financial Measures
NGL defines EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense
(benefit), and depreciation and amortization expense. NGL defines Adjusted EBITDA as EBITDA excluding net unrealized gains and
losses on derivatives, lower of cost or market adjustments, gains and losses on disposal or impairment of assets, gain on early
extinguishment of liabilities, revaluation of investments, equity-based compensation expense, acquisition expense and other. We
also include in Adjusted EBITDA certain inventory valuation adjustments related to our Refined Products and Renewables segment, as
described below. 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 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, Adjusted EBITDA, or similarly titled
measures used by other entities.
Other than for NGL’s Refined Products and Renewables segment, for purposes of the Adjusted EBITDA calculation, NGL makes a
distinction between realized and unrealized gains and 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. NGL does not draw such a
distinction between realized and unrealized gains and losses on derivatives of NGL’s Refined Products and Renewables segment. The
primary hedging strategy of NGL’s Refined Products and Renewables segment is to hedge against the risk of declines in the value of
inventory over the course of the contract cycle, and many of the hedges are six months to one year in duration at inception. The
“inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory
of NGL’s Refined Products and Renewables segment at the balance sheet date and its cost. NGL includes this in Adjusted EBITDA
because the gains and losses associated with derivative contracts of this segment, which are intended primarily to hedge inventory
holding risk, also affect Adjusted EBITDA.
Distributable Cash Flow is defined as Adjusted EBITDA minus maintenance capital expenditures and cash interest expense.
Maintenance capital expenditures represent capital expenditures necessary to maintain the Partnership’s operating capacity.
Distributable Cash Flow is a performance metric used by senior management to compare cash flows generated by the Partnership
(excluding growth capital expenditures and prior to the establishment of any retained cash reserves by the Board of Directors) to
the cash distributions expected to be paid to unitholders. Using this metric, management can quickly compute the coverage ratio of
estimated cash flows to planned cash distributions. This financial measure also is important to investors as an indicator of
whether the Partnership is generating cash flow at a level that can sustain, or support an increase in, quarterly distribution
rates. Actual distributions are set by the Board of Directors of NGL’s general partner.
Forward-Looking Statements
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 such forward-looking
statements are reasonable, NGL cannot assure they 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.
This release is a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat
100% of NGL Energy Partners LP’s distributions to foreign investors as being attributable to income that is effectively connected
with a United States trade or business. Therefore, distributions to foreign investors are subject to federal income tax
withholding at the highest applicable effective tax rate.
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NGL Energy Partners LP
Trey Karlovich, 918-481-1119
Executive Vice President and Chief Financial Officer
Trey.Karlovich@nglep.com
or
Linda Bridges, 918-481-1119
Vice President – Finance and Treasurer
Linda.Bridges@nglep.com
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