What happened
Shares of NGL Energy Partners (NGL -0.34%) are down 11.6% from where they closed last Friday, according to data from S&P Global Market Intelligence, after having rocketed higher the week before on a better-than-expected earnings report.
On a two-week basis, NGL's stock is up about 50%. And year to date, shares have doubled, with the profitable quarterly earnings report serving as the biggest driver.
Image source: Getty Images.
So what
NGL is a midstream operator in the energy industry. It transports, treats, recycles, and disposes of water for oil and gas companies that generate it as part of the energy production process. It also transports, stores, markets, and offers other logistics services for crude oil and liquid hydrocarbons.
After years of lackluster exploration and production in the industry, oil and gas companies have responded to the spike in prices with a boomlet of activity. Even as prices have eased back off their highs, companies foresee an extended period of growth in the years ahead, believing the structural imbalances that have been present for a while have a long way to go before achieving equilibrium.
That's a beneficial environment for NGL Energy, which reported its water-solutions segment saw record adjusted earnings in the quarter because it processed record volumes of water. That in turn allowed the energy services business to pay off more debt while raising its guidance for that segment for the full year.
Now what
We don't hear too much about peak oil as we once did because it's become apparent that not only is there excess demand for fossil fuels, but there are also vast untapped fields of oil and gas still to be exploited.
Moreover, China has been operating under a set of strict regulations that limited its people's ability to freely move about. After more than a year of tight control, Beijing has finally lifted most of those restrictions, and analysts are expecting that as the Chinese economy fires back up, it will ignite additional demand for oil and gas.
The U.S. Energy Information Administration forecasts that as a result of China rolling back its restrictions, as well as other demands placed on supply by underdeveloped countries, global liquid fuels consumption will increase by 1.1 million barrels per day (b/d) this year and by 1.8 million b/d in 2024. China alone will account for 730,000 b/d in 2023 and 370,000 b/d in 2024.
That portends NGL Energy will be keeping itself busy for some time to come.
