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NGL Energy Partners LP (NYSE:NGL)
Q4 2020 Earnings Call
Jun 1, 2020, 6:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q4 Fiscal Year 2020 NGL Energy Partners LP Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your host, CFO, Trey Karlovich. Sir, you may begin.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Great. Thank you and welcome everybody. As a reminder, this conference call includes forward-looking statements and information. Words such as anticipate, project, expect, plan, goal, forecast, intend, could, believe, may and similar expressions and statements are intended to identify forward-looking statements. While NGL Energy Partners believes that its expectations are based on reasonable assumptions, there can be no assurance that such expectations will prove to be correct.

A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations included in the forward-looking statements. These factors include prices of crude oil, natural gas liquids, gasoline, diesel and biodiesel; volume of crude oil, natural gas and natural gas liquids production; level of demand and the availability of supply for crude oil, natural gas liquids, gasoline, diesel and biodiesel; the level of crude oil and natural gas drilling and production in areas where we have operations; the effect of market and weather conditions on supply and demand for crude oil, natural gas liquids, gasoline, diesel and biodiesel; and changes in general economic conditions, including market and macroeconomic disruptions resulting from the novel strain of coronavirus pandemic and related governmental responses. Other factors that could impact these forward-looking statements are described in Risk Factors in the Partnership's recently filed annual report on Form 10-K and other public filings and press releases. NGL Energy Partners undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

This conference call also includes certain non-GAAP measures, namely EBITDA, adjusted EBITDA and distributable cash flow, which management believes are useful in evaluating our financial results. Please see the Partnership's earnings releases, investor presentations, and annual and quarterly reports on Form 10-K and Form 10-Q on our website at www.nglenergypartners.com under the Investor Relations tab for more information on our use of non-GAAP measures, as well as reconciliations of differences between any non-GAAP measures discussed on this conference call to the most directly comparable GAAP financial measures.

I'll now turn the call over to our CEO, Mr. Mike Krimbill. Mike?

H. Michael Krimbill -- Chief Executive Officer

Thank you, Trey. Good evening, and welcome to the NGL earnings call for fiscal 2020 and what we see ahead in '21. In addition to Trey and myself, we have our Executive VPs of Crude Oil Logistics, Mr. Don Robinson; NGL Logistics, Mr. Jeff Pinter; and Water Solutions, Mr. Doug White, who will be available to answer your questions.

We are here to report strong fourth quarter and record fiscal year 2020 adjusted EBITDA results from continuing operations of $590 million. On a GAAP basis, we reported a net loss due to non-cash impairments that Trey will address. Our transition away from retail propane, refined products and certain shale oil basins to those that are the most economic is complete. And we are now performing very well on a combined basis in the three segments we are focused on for the future.

To recap 2020 results before turning to the new fiscal year, one, Crude Oil Logistics performed at the high end of our previously announced range; two, NGL Logistics significantly exceeded our expectations in both the butane blending and wholesale propane business components, greatly exceeding the high-end of the range. Water Solutions came in at the low end of expectations due to delayed activity by producers, i.e. lower volumes, and higher costs in several categories including [Indecipherable] diesel and repair and maintenance. These costs have been addressed and will be discussed in a few minutes.

We averaged 1.7 million barrels per day in the fourth quarter with a high of 1.9 million barrels a day in March. The Delaware represented nearly 80% of the averages. Based on crude prices at the time, the volume trend was increasing and we are on pace to exceed 2 million barrels per day.

Our water infrastructure is substantially complete, as reflected in our reduced fiscal '21 capex. In summary, the 24-inch LEX pipeline from Lea County to Texas has been in service since Q3. The 24-inch WEX pipeline from New Mexico south to Orla was in service in Q4, and the extension further south to Mentone will be in service this month. The 24-inch [Technical Issues] Express from the border of Lea and Eddy Counties south to Orla and Powers [Phonetic] is in service. And the 30-inch Poker Lake pipeline was commissioned two weeks ago and is flowing volume currently. We expect larger volumes beginning in the second quarter. And as you know, this line we put in service for Poker Lake and the contract we have there that will have substantial future volumes. We now have 3.4 million barrels of disposal capacity in the Delaware Basin and 535 miles of pipeline in service.

Now, onto fiscal 2021, you have heard many midstream an upstream management teams discuss the impact of COVID on oil price and supply demand, so we're not going to repeat those observations. We all know what happened. As of today, we have witnessed one of the greatest collapses in oil prices and a subsequent recovery in a matter of weeks. This is an extremely challenging market to predict. There are a range of outcomes depending on market development. So we're not going to provide segment guidance this fiscal year.

Our diversified asset base and fewer businesses served us well in fiscal '20 and believe that we'll continue to do so in '21. We are confirming our adjusted EBITDA guidance for fiscal '21 of $600 million. We continue to prioritize the safety and health of our employees, while providing the capacity and services required by customers to move crude oil produced water and natural gas liquids.

With respect to our individual segments, Crude Oil Logistics: Grand Mesa volumes are expected to be down 5% to 10% due to decreased drilling rig activity. Fortunately, in times of excess supply, our storage assets act as a hedge and provide significant contango opportunities, which we have captured and continue to do so. Certain producers that shut in production in May are coming back online in June due to the recent crude oil price increase.

NGL Logistics: we have transformed this into an asset-based business with 27 terminals and 5,000 railcars moving butane and propane. The segment includes two different businesses, one providing propane to retailers, and the other, butane to gasoline blenders. Retail propane demand has not decreased due to COVID-19 and is projected to benefit from an upcoming colder winter compared to the prior winters, which as you remember, was one of the five warmest in history. Butane results will be impacted by gasoline demand, which we're all watching, this winter. In both cases, there are less liquids being produced by refineries from associated gas with crude oil production and shut-ins in the Northeast. We are optimistic about performance in the second half of the fiscal year.

Water Solutions: we previously decided to focus on the Delaware Basin, as we believe it has the best economics for producers. This is evidenced by the current rig count whereby more than 50% of the active rigs in the US are concentrated in the Permian. We exited certain shale plays to build the largest pipeline disposal capacity system in the Delaware. We do expect volumes to decline in the first six months of this fiscal year. April volumes averaged 1.6 million barrels per day and May averaged about 1.25 million barrels per day. About -- of this, 85% of the water is piped companywide and 96% is piped in the Delaware. We believe the water volumes hit bottom in May. Several large customers that shut in production in May are producing again in June.

So, what have we done? Doug and his team have analyzed operations and found substantial cost reduction opportunities. I'm always suspicious of synergistic cost cuts in M&A transactions. I also question miraculous savings from companies that previously thought they were efficient. So what are these costs in NGL that will be reduced? First, Doug and his team have consolidated our SWDs, concentrating produced water in fewer locations. This consolidation allowed us to eliminate all leased generators and diesel where we had no station power. Second, from Feb 28 to the present time, we have reduced headcount nearly 15% through automation and operating fewer facilities. We have also reduced numerous other expenses such as chemical costs and power usage, including demand charges. Doug will -- may get into more of this, but these improvements amount to over $2 million of cash savings per month.

Although we have now cut costs increasing our efficiency, we are more focused for the long term and pursuing growth in the business through additional customers, MVCs and acreage dedications. As these opportunities are consummated, we will announce them. We continue to be very bullish about our Delaware Water Solutions position. We can provide any product or service our customers require.

So what else are we doing to get through this downturn? We are taking numerous measures to further improve our liquidity, balance sheet, while maximizing adjusted EBITDA. Growth capex is reduced to $50 million annually as our assets can serve the needs of our current customers. We spent a lot of money in the past few years, so this lower level does make sense. We don't have a lot more to do. Maintenance cap is expected to be around $50 million also, an almost 20% reduction, primarily from the Water Solutions segment as we have upgraded our SWDs in prior years and are operating fewer now than we did. The cost of workovers has declined significantly. So, our forecast for 2021 may be high.

Additional expense savings, frankly, all the variable costs are going down. Interestingly, we're experiencing reduced medical, dental and prescription drug costs as we've reduced headcount and employees are avoiding hospitals, emergency care facilities and doctor visits, instead utilizing online options and mail order prescription drugs. Our employees are getting medical care they need at less cost and more convenience. Others, costs like T&E are obviously down as none of us are traveling or eating out. So, we expect a significant reduction in those costs. All of these reductions will improve our adjusted EBITDA performance.

Our free cash flow is meaningfully positive based on $600 million EBITDA with distributable cash flow after interest expense, maintenance capital and preferred dividends being about $295 million prior to the growth capital number we spoke of and common unit distributions.

Leverage: we have reduced our leverage from 5.0 times last quarter to 4.86 times at 3/31. We have also been purchasing our unsecured indebtedness at a discount such the debt has currently been reduced by another $24 million, not reflected in our 3/31 numbers. We have numerous small assets we expect to monetize over the next six months and will further reduce debt. And finally, our common unit coverage ratio has increased, exceeding 2.5 times, as you would expect.

In conclusion, we have reduced costs, limited capex, improved the balance sheet, while focusing on positioning NGL for success over the next 10 to 15 years. We believe that the Delaware infrastructure and the other diverse assets we have will provide years of future growth with minimal capital expenditures.

With that, Trey, it concludes my remarks.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Great. Thanks Mike. So, highlights of the quarter from a financial perspective, some of which Mike mentioned, include: our Crude Logistics segment coming in at the high end of our guidance range with another quarter of consistent performance; another great quarter from our Liquids and Refined segment, which exceeded our high-end of guidance by $22 million; water volumes continued to grow, particularly in the Delaware Basin. All of these items contributed to adjusted EBITDA from continuing operations of approximately $162 million for the quarter and $590 million for the full fiscal year, both at the high end of our guidance range. As a result, our total leverage at 3/31, as Mike mentioned, was 4.86 times as calculated under our credit facility, better than our 5 times guide given last quarter. Based on our guidance expectations, leverage should be in the high 4 times to low 4 times area this upcoming year.

We were able to reduce working capital by an additional $97 million this quarter, driven by the completion of the gas blending sale, lower inventory volumes and lower commodity prices. Working capital borrowings have come down $546 million over the past year with our disposal of the TPSL mid-continent gas blending businesses. Following year-end and the closing of the gas blending sale, we amended our credit facility to allow for a reallocation of the working capital facility to $350 million and the expansion facility to $1.565 billion. The overall size of our facility remains $1.9 billion and our liquidity at 3/31/20 was approximately $400 million. We appreciate the continued support of our bank group.

As Mike mentioned, we also actively repurchased some of our bonds in the open market since March 31, utilizing approximately $25 million to repurchase $49 million of face value for a net $24 million reduction in debt. We will continue to evaluate the strategy as we have in the past as a way to delever our balance sheet and reduce interest costs.

Now, I'll cover some of the details driving our operating results for the fourth quarter and year-to-date fiscal 2020. As a reminder, while I cover each segment, adjusted EBITDA is a non-GAAP measure that we reconciled in our earnings release, investor presentations and quarterly reports to operating income, which is a GAAP measure.

Starting with Crude Oil, the Crude segment reported approximately $57 million of adjusted EBITDA this quarter and $220 million year-to-date. This is at the top end of our updated fiscal 2020 adjusted EBITDA guidance range. Grand Mesa volumes averaged 131,000 barrels per day this quarter and for the year, remaining in line with our expectations. Our other Crude Logistics assets also performed well this past year. And the benefit of our storage assets has been realized during the recent downturn in commodity price and the ability to capitalize on contango. Drivers for fiscal '21 for this business will continue to be volumes transported on Grand Mesa and through our other assets, capitalizing on contango or basin differentials where applicable, and managing our inventory price risk.

Moving to Water, Water adjusted EBITDA was $72 million for the quarter and has totaled $232 million year-to-date. This was the first quarter with the full benefit of both Mesquite and Hillstone. Total disposal barrels were almost 1.7 million barrels per day during the quarter. Delaware Basin volumes totaled 1.3 million barrels per day, almost 80% of total volumes. We moved approximately 90% of Delaware Basin volumes on pipe during the quarter. Eagle Ford volumes continued to fall during the quarter and had been most impacted by the decline in prices, rigs and production shut-ins. We received an average disposal fee of $0.63 per barrel for the quarter, which is consistent with our disposal fee for the full year. We recognized over $300 million in disposal revenue for the year compared to approximately $190 million last year, a 60% increase over the prior year.

Our skim oil volumes totaled 3,500 barrels per day during the quarter and realized skim oil revenues after hedges totaled approximately $54 per barrel, with an average skim oil cut of 21 basis points. Skim oil revenues net of realized hedge gains totaled $69 million this year, or $56 per barrel, compared to $70 million last year or $54 per barrel, as our skim oil recovery rate declined with more volumes transported via pipeline. Our skim oil volumes are well hedged for calendar 2020 with approximately 3,000 barrels per day hedged at an average price just over $56 per barrel from April through December.

Operating expenses were $0.39 per barrel for the quarter, a 7% reduction from last quarter, and averaged $0.40 per barrel for the year. Mike covered some of the significant measures we have taken to bring this cost down going forward, including a significant reduction in headcount as we completed our automation projects, recontracting chemicals and other supplies at lower costs, and reducing utilities costs.

Like many of our peers, the impact of the COVID-19 pandemic on demand and resulting collapse of crude oil prices resulted in a triggering event for the evaluation of goodwill on March 31. We performed a step one analysis on each of our reporting units on that date and determined that the future expected cash flows for our Water segment, particularly in the Eagle Ford and Pinedale Anticline, had decreased. We wrote down our goodwill in this segment by $250 million during the quarter.

The Water segment is primarily impacted by volumes. With over 75% to 80% of our volumes coming from the Delaware Basin, we believe we are positioned in the best basin to operate. We have long-term fee-based contracts with acreage -- large acreage dedications and minimum volume commitments. Our customer base includes some of the strongest E&Ps in the country, and the Delaware remains a core operating area for them. We are doing what we can to optimize our margins and reduce operating and capital expenditures in this business to maximize cash flow and returns. We are working closely with our customers as they manage their drilling and production plans.

Moving to Liquids and Refined Products, adjusted EBITDA for our Liquids and Refined Products segment totaled $47 million this quarter and has totaled $182 million for the year, as I mentioned, well above our guidance range and $80 million higher than the prior year. We have combined our remaining refined products business with our liquids business for reporting purposes and will continue to report in this manner going forward. Volumes for propane and butane were strong through the quarter. While heating degree days were lower than expected, we benefited with a full quarter of the terminal assets we acquired last March, including the Chesapeake, Virginia export facility. As Mike discussed, we expect demand for certain of these products, namely butane, gasoline and diesel to be lower in fiscal '21 as the market starts to recover from the pandemic. We currently expect propane demand to increase next year with a normalized winter season.

Turning to capital expenditures and cash flows, we are completing a significant growth phase in our Water Solutions segment, including the acquisitions and integrations of Mesquite and Hillstone and the completion of our integrated disposal system in the basin. We will complete certain vital projects in early fiscal '21 and expect growth capital spending to reduce materially as our system should be capable of meeting our producer customers' disposal needs. Our target for this upcoming year is $50 million of growth capex. We are also focused on reducing our maintenance capex, which came down in the fourth quarter to $11 million and totaled $61 million this past year. We will continue to focus on safety and regulatory items and expect to keep our assets in good operating condition. A significant amount of our recent growth projects are new facilities and assets that should not require significant maintenance capital in the near term.

Our Board made the decision to reduce our common unit distribution to $0.20 per unit for the quarter, $0.80 per unit on an annualized basis. This is about a 50% reduction in the distribution and will save approximately $100 million in cash on an annualized basis. We made this decision despite exceeding our distribution coverage targets for the quarter and the year. We expect fiscal year 2021 coverage to exceed 2.5 times based on our adjusted EBITDA guidance $600 million.

Leverage and liquidity remain key. Based on this guidance and after funding our expected financing costs, including interest and distributions on both preferred and common units, maintenance and growth capex and other obligations, we expect fiscal 2021 to be free cash flow positive.

In summary, we just finished a very significant and successful year that saw us complete the repositioning of our business and strengthen our company. We completed two major acquisitions which solidified our infrastructure, customer base and contract structure in the Water business. We reduced working capital needs and earnings volatility with the sale of a significant piece of our former Refined Products segment. We successfully integrated our new liquids terminals and demonstrated our ability to improve the performance of those assets with our new scale. And we recognized record earnings for the year. We know there are headwinds for our industry and many challenge in the face of the current environment, but we believe we are well positioned with a strong diversified asset base to weather the storm and maximize value.

That concludes our prepared remarks. Please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Pearce Hammond of Simmons Energy. Your line is open.

Pearce Hammond -- Simmons Energy -- Analyst

Yeah, thank you for taking my questions, and really helpful disclosure regarding the produced water volumes you provided for April -- for March, for April and then for May, and May likely the bottom point. And then, do you expect it to kind of get back up to that trend line of about 1.9 million barrels a day? And then, is Poker Lake still coming online you think mid-part of this year?

H. Michael Krimbill -- Chief Executive Officer

Hey, Doug?

Doug White -- Executive Vice President-Water Solutions

Hi Pearce. As far as volumes go, it'll be obviously driven by the commodity price. We're seeing a lot of the wells that were shut in in May -- late April and May come back online today and going forward through this month. So the trend is up. We'll leave it open to what may happen in the future with commodity price to see what happens there. But our expectation is -- what we're receiving back from our customers is, they are ready to begin completions and turn production back up in the coming months.

Poker Lake is still on schedule with what we had released publicly and prior discussions.

Pearce Hammond -- Simmons Energy -- Analyst

Okay. Thank you, Doug. And then a follow-up for you is, are you in good shape on SWD wells? Or do you need to permit more? And if so, what does permitting activity look like right now?

Doug White -- Executive Vice President-Water Solutions

For NGLs portfolio, I believe, we have about 100 approved permits in place. Many of those -- most of them are in the Delaware. So we have a great inventory to grow. Permian -- permitting activity has slowed earlier this spring. But even -- maybe everybody was looking for something to do in May, and we've seen activity actually pick up across all companies preparing for the upturn.

Pearce Hammond -- Simmons Energy -- Analyst

Okay. And then, Mike, my final question is, just based upon your experience in the midstream sector and given the big change that's happened with COVID and then the Saudi-Russian market share war and likely production growth may not be as robust as what people thought a few months ago, how do you think the midstream sector looks in a few years' time? Do you think there is more M&A ahead, consolidation, that sort of thing? Just love to get your thoughts on the road map ahead.

H. Michael Krimbill -- Chief Executive Officer

Sure. I think [Phonetic] the first part of the question was, in a couple of years, so we're watching the strips -- crude price strips here for '21 and '22. And I think, December '21 is up to $39. Current month I believes is $35.60-ish [Phonetic]. But in December of '22, it's over $40. I think it's $41-ish. So the basins we're in, we believe that $40 is maybe the new price that gets rigs back to work because of the fall in the oil field service costs. So we do think we've probably got a one-year delay in where we thought we were going to be. And Doug, you can chime in on that. But we do think we're going to be back. The Poker Lake water under the contract was going to come in October. We're hopeful it comes earlier. We're ready for it. That's why we completed the 30-inch in advance of October.

The M&A, and I'll even [Phonetic] include in there kind of go-private. I think the biggest impediment to that is all this debt trading at a discount. So if you buy something or merge with someone, it's a change of control event. All of a sudden, either the holders can get out of their investment and you've got to find other sources of capital or you've taken on $1 billion of -- an example, $1 billion of debt that was trading at $500 million. So I think those kinds of transactions are going to be difficult in -- certainly in the near term.

Pearce Hammond -- Simmons Energy -- Analyst

Well, thank you. That's very helpful color. I appreciate it.

Operator

[Operator Instructions] Our next question comes from James S. Johnson, Investor. Your line is open.

James S. Johnson -- Investor

Thank you very much. I had a couple of quick questions. I'll try to put them all together here. First of all, are there plans to get dividends back up? And if so, what will it take to do so and how long do you estimate for that to happen?

H. Michael Krimbill -- Chief Executive Officer

I'm writing your questions down here quickly. Okay. First of all, obviously, we're disappointed to be here at $0.80 on annual basis. As you know, management owns a lot of common units as well. I think getting through this, we're just -- getting to the other side where we can start increasing the distribution, which obviously the Boards has to approve, but I think we need to see the Water volumes increasing as we expect. We need to hit our numbers. Leverage needs to be reduced, to Trey's point. We've got our common unit coverage ratio where it needs to be already to raise the distribution. I think with just leverage and getting to the other side of this downturn -- frankly, the downturn has happened much faster than anybody thought -- or maybe, I should say the recovery. No one ever dreamed we'd be negative prices and now here we are, almost $40 within a month. So it's amazing how quickly it has reversed. And we've had a little benefit having our fiscal [Phonetic] year-end. The other guys that had quarterly calls were having their calls in the early May when things looked pretty bleak. And it's a totally different landscape today.

James S. Johnson -- Investor

Okay. So, do we expect something like this to happen this year?

H. Michael Krimbill -- Chief Executive Officer

I would -- I've got to leave it up to the Board. We would love to see it as soon as possible. But again, we got to see the decrease in leverage. And we've got to get through several quarters of increasing water volumes.

James S. Johnson -- Investor

Okay. With interest rates going down, it seems like, and even possibly to a negative number in the future, depending on the economy, how it ramps up, that should help to get about lower leverage and higher dividends, correct?

H. Michael Krimbill -- Chief Executive Officer

Yeah, it definitely will help lower the leverage, the less the interest we pay. We're dreaming of the day when people pay us to borrow money. I don't think it's going to happen.

James S. Johnson -- Investor

Okay. Well, thank you very much for your answers.

H. Michael Krimbill -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Shneur Gershuni of UBS. Your question please.

Shneur Gershuni -- UBS -- Analyst

Hi, everyone. I guess, good afternoon or good evening, I guess at this point. I did miss some of your prepared remarks, but I was just wondering if we can go through a couple of things. I assume that you've definitely benefited from the crude storage environment during the quarter and so forth, but the contango has since compressed quite a bit. Did you lock in all of your open storage? If I remember correctly, it's 1 million to 2 million barrels worth of storage for a year. Or were you rolling it from a month-to-month basis? Trying to understand kind of how we should think about the storage on a go-forward basis.

H. Michael Krimbill -- Chief Executive Officer

Don?

Don Jensen -- Executive Vice President-Refined Products

Yes, we rolled in -- we basically locked in basically May-June, June-July, and a little bit of August to September. But we did not lock in a year. We basically stayed in the short term as far as locking into contango, but we were able to capture some really good numbers for especially the first couple of months of that. And then we -- as we said, we locked in a little bit in the outer months through September, and that was what we ended up doing.

Shneur Gershuni -- UBS -- Analyst

Okay. And is the general strategy to roll a couple of months at a time? Or is the idea to try and look for an opportunity to lock a full year and so forth?

Don Jensen -- Executive Vice President-Refined Products

Yeah, the numbers really never spread out wide enough as far as what we thought would -- a number we would do for a year. So, we were looking at one month and two months as far as what we -- and obviously it went away quickly. There's still contango there. It's running about $0.35 to $0.40 in July August number and about the same for August-September. So, we're looking at those numbers today to lock in some of that. So, it just won't be the numbers that we were able to achieve in those early months, but yes if it -- and historically, when you got out past $2, that was really, really good numbers and, obviously, the numbers were in the $6 and $7 numbers at one time and even higher, but we did get a lot of that achieved in the early months, but we have not done anything other than through basically September.

H. Michael Krimbill -- Chief Executive Officer

Shneur, I will add to that. Shneur, would just add to that -- with the way -- and I'll speak for Trey a little bit here. We look at it -- contango is $0.15 or $0.20. It doesn't make sense to borrow the money and deep up the debt because that barely covers your interest cost. So, we do watch and make sure that it makes sense to have that working capital on the book.

Shneur Gershuni -- UBS -- Analyst

Okay that makes sense. Actually that's kind of a good transition to my next set of questions. With respect to working capital, just given the fact that, I guess, crude is back up, but obviously down from where we started, same with everything else. How much should we be thinking about as your true working capital improvement in crude then on a year-on-year basis for 2020 versus 2019, just sort of given where the commodity prices are now?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Sure, Shenur. So we ended 3/31 at $350 million of working capital outstanding. That included some lower inventory values. We exited the winter season. So, propane was at a low volume perspective. We did still have quite a bit of receivables that were based on higher prices. So, as we roll forward with the contango play, working capital increased slightly into the first quarter. We will also start to build for butane and propane season a little bit, but we are seeing lower prices and lower AR just based on what those commodity prices are and the timing of collections of receivables. I think the $350 million is a reasonable estimate, based on where commodity prices are today and how we're operating the business. We do have some levers to pull where we could reduce that if we needed to, and take some inventory off the balance sheet, so to speak. I don't see it going much higher than that. Again, that's something that -- leverage is something that we're trying to manage very closely. So, I think that $350 million number, in total, is reasonable.

Shneur Gershuni -- UBS -- Analyst

That makes sense.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Any again that's also in line with where we adjusted the working capital facility to and we did that in April.

Shneur Gershuni -- UBS -- Analyst

Okay, got it. All right. So, the way to think about the change in the facility is that you sort of made your assumptions for the year as to kind of what you needed essentially?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Yeah.

Shneur Gershuni -- UBS -- Analyst

Okay. I was wondering if you can recap because I didn't catch it all. How much debt did you actually buy back in the previous quarter and how much have you bought back since the quarter ended?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Minimal as of March 31, most of our repurchases were in April and early May. We bought back $49 million face for about $25 million in cash costs.

H. Michael Krimbill -- Chief Executive Officer

Was last quarter $1.8 million?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Yeah, about $1.8 million and it was repurchased in March for about $400,000.

Shneur Gershuni -- UBS -- Analyst

Okay. And can I assume that this is a strategy given that your debt's trading in the 70s [Phonetic] right now, that business strategy that you're continuing to pursue as free cash is generated.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Sure. We've done this in the past, Shneur. It's not something that's new to us. We balance both leverage and liquidity. Important thing to point out with our notes, they are not very liquid. There is not a significant number of available notes out there. We actually size -- we were buying notes if the price of the notes was moving up. So, it's something that we'll continue to evaluate from a strategic perspective and may continue to do, especially as they trade at a discount, like we've done in the past.

Shneur Gershuni -- UBS -- Analyst

Okay.

H. Michael Krimbill -- Chief Executive Officer

Shneur, I'd just comment. You've heard me say that the screen is fake news and the screen doesn't tell you how much depth there is in the market. So we would -- we view it as really helping out our investors. We're the perfect the issuer of debt because we issue it at a fair price and we buy it back whenever they have a need for cash.

Shneur Gershuni -- UBS -- Analyst

Right. Okay. That makes sense. I mean have you thought about a strategy of, let's say, putting a tender out for a certain amount, let's say, at 75 [Phonetic] or a couple of points higher and seeing if you can create some liquidity that way?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

We've thought about a lot of different balance sheet strategies, Shneur, but we're not executed on that at this time.

Shneur Gershuni -- UBS -- Analyst

Okay, fair enough. And then, with respect to guidance by segment, is that something that you're willing to provide this year or you are going to keep it at kind of the more of the higher level?

H. Michael Krimbill -- Chief Executive Officer

We can...

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Go ahead.

H. Michael Krimbill -- Chief Executive Officer

Shneur, we look at what happened last year, we look at what our other midstream peers have done and this year, there seems to be a number of us that are not providing segment guidance because it's so volatile. We're not -- you don't know where you are. What happened last year as you know, we were at and over the high end of the range on two and low on one, we're at the low end, but we ended up in the high end of our total range. So it's two things. Trey can add too as well as there is just uncertainty, but we feel good about the combination of the three. We're very happy with the diversity of our assets. But then the other problem is, when you give segments, if we exceed two out of three, we think that's great. Well, the market picks on the one that didn't and starts criticizing us because we were low on one segment even though we beat on two.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Yeah. And just to add to that, Shneur, I mean even three weeks, four weeks ago, if we had given segment guidance, Crude would probably be higher than where we think it will be now based on contango and Water would have been lower than where we think it is now based off the volumes we're seeing coming back. So, with the market dynamics moving so quickly right now, we felt like it was prudent not to give specific guidance. Now, what we have given and we will continue to give are what impacts the different businesses. We provided a lot of information in the past and we simplified the business to a point that it should be much easier to model. I think with Water volume as the driver, Crude Grand Mesa is still going to be a large -- or the largest piece of it, contango is not that difficult to model as we've given our thoughts around how much storage will utilize. And Liquids, Liquids over time has a fairly consistent trend on volume and margin and that information is all available to help you model as well.

Shneur Gershuni -- UBS -- Analyst

Cool. Just figured I would ask, right.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Yeah. Doesn't hurt.

Shneur Gershuni -- UBS -- Analyst

Yep. Doesn't right. You won't get anything with it, if you don't ask. Appreciate all the color, guys. I think that pretty much exhausts the questions I had. So, thank you very much and have a good evening.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Thanks, Shneur.

H. Michael Krimbill -- Chief Executive Officer

Thanks, Shneur.

Operator

Thank you. Our next question comes from James Spicer of TD Securities. Your line is open.

James Spicer -- TD Securities -- Analyst

Hey guys, good afternoon. Just had a couple of follow-ups. First of all on the Liquids side, obviously, that's been a very strong segment for you over the past couple of quarters. Your Q4 EBITDA was about $22 million higher than guidance. Was that all just incremental volumes or with some of that margin and I'm just trying to think about going forward as some of the natural gasoline-related butane volumes are probably going to be a little bit lower. Are we going to be trending back toward sort of the -- your more historical levels there or with propane expected to be higher, should we be thinking about a run rate closer to where we were in the third and fourth quarter?

Jeff Pinter -- Executive Vice President-NGL Liquids

Good evening, James. It's Jeff Pinter. To answer your first question, yes, it was a combination of strong volume and margins for the quarter and forecasting going forward, we're entering our slower season here. So our fiscal 1Q, 2Q are generally lower demand. That's kind of our build season. And we see a ramp up into 3Q, 4Q. Forecasting into this year is a little more difficult, as Mike mentioned earlier in the call with gasoline demand going into the fall, but we are studying that carefully and kind of preparing and constant contact with our customers to supply their needs.

James Spicer -- TD Securities -- Analyst

Okay, great, that's helpful. And then secondly, just wondering one of your major shippers on Grand Mesa extraction has been struggling a little bit. Just wondering if you're anticipating -- you're hearing anything in terms of potential contract renegotiations or anything of that nature.

H. Michael Krimbill -- Chief Executive Officer

Well, obviously, we all know the same public information. Really, all we can tell you is, they are a good customer and we're both performing for each other and they are meeting all their obligations and so are we. So that's a nice [Indecipherable] really tells you nothing, but I'd tell you something if I could.

James Spicer -- TD Securities -- Analyst

Okay. Understand. That's all I have. Thank you.

Operator

Thank you. [Operator Instructions] And our next question comes from the line of Selman Akyol of Stifel. Your line is open.

Selman Akyol -- Stifel -- Analyst

Thank you. Good afternoon. Just a couple of follow-ups from your prepared comments you talked about volumes bottoming in May and then it was going to be driven by shut-in production coming back online in completions as well. Can you talk about where you see completions coming back at sort of what price level and then the other -- I think you also mentioned was drilling sort of at the $40 level given the reduced oilfield services costs. I'm just wondering if your customers are asking or receiving any concessions from you. Thank you.

Doug White -- Executive Vice President-Water Solutions

Thanks. This is Doug.

H. Michael Krimbill -- Chief Executive Officer

Doug?

Doug White -- Executive Vice President-Water Solutions

Yes, sir. In the Delaware, we are already beginning to see some completions activity. It's interesting you think during these price levels that everyone just drills DUCs if they're drilling at all and doesn't complete anything. We do have customers that are actually drilling and completing. They've not released their completions crews whether that be by contract that they don't want to turn away and pay for or just that's their philosophy because they believe this is a short-term issue. So, we are seeing completions continue obviously at a much decreased [Phonetic] rate, but in the Delaware anywhere between $35 and $40, we are going to see continued completions and that's the feedback we're receiving from our customers. They are not just looking at June. They're looking for -- as you know, it's a longer planning horizon for this -- for what we do, drilling and completions. We're getting a lot of positive feedback on activity picking up this summer.

And then, as far as price concessions go, as you know, we are very heavily contracted for a long-term, but of course we do have interruptible agreements and we do have spot rates and we have worked with customers directly, especially to keep wells from being shut in if Water LOE is of a magnitude of which will help them keep a well on. So, we've been very flexible to help our customers. Some requested, some we've reached out to help, but like I said, those are really concessions on non-contracted services.

Selman Akyol -- Stifel -- Analyst

All right, thank you.

Operator

Thank you. Our next question comes from John Crawford of Tranquility Partners. Your question please.

John Crawford -- Tranquility Partners -- Analyst

Hi, gentlemen. I've got two pieces. First of all, you indicated that your goal is to decrease leverage. Have you actually expressed or articulated a target leverage that you're seeking to get to?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Yeah, John. Our target leverage has been 4 times at the total leverage metric. That's been our target here for a while and that remains consistent. So, we're 4.86 times as of 3/31, 4 times is our target.

John Crawford -- Tranquility Partners -- Analyst

Okay. And how do you think about the Class D preferreds in terms of leverage? They are categorized above equity. So, they kind of seem to be a bit of a hybrid security. Do you think about that leverage or not?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

That is not included in our leverage metric. It is not included from a covenant perspective, either. That is a mezzanine instrument as from a GAAP accounting perspective, but we really view that as an equity instrument.

John Crawford -- Tranquility Partners -- Analyst

Yeah, equity or potential equity.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Yeah.

John Crawford -- Tranquility Partners -- Analyst

Last question and I apologize for the battery, but it was an unusual adjustment. I haven't had a chance to get through all the F pages and I apologize if this is explained, but you incurred some lower of cost to market adjustments to the downside, probably because of dislocations in commodity prices. Is that just a temporary blip and would you expect that -- if there are underlying commodities, they would flip back the other way in what appears to be a better environment for sale of those products?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

Sure, it's really timing related, and we have hedges in place that offset that in the future period. So, from a GAAP LCM perspective, we did reduce the cost of inventory, but we do expect to see a -- from, again, a GAAP perspective, you'll recognize that the profit in the following period.

John Crawford -- Tranquility Partners -- Analyst

So, OK, let me peel that back a little bit. So, what you're saying is even though you have those future sales hedged that you are required to mark-to-market?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

That's correct. That was in our -- mostly in our crude business.

John Crawford -- Tranquility Partners -- Analyst

That seems odd. If you've got it sold forward, then why would you have to mark down what you own?

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

It's the hedge. So, the hedge has the realized gain to offset it.

John Crawford -- Tranquility Partners -- Analyst

So, the realized gain up above is really...

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

[Speech Overlap] It's an unrealized gain that should offset it.

John Crawford -- Tranquility Partners -- Analyst

Okay, but that's already recorded, the unrealized gains on the books. I get it. All right. Thank you for your time. Appreciate it.

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

All right. Good questions.

Operator

Thank you. At this time, I'd like to turn the call back over to Mike Krimbill for closing remarks. Sir?

H. Michael Krimbill -- Chief Executive Officer

Yep. Everyone thank you for your attention. If anyone's left, we'll talk to you shortly at the end of the first quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Robert W. Karlovich III -- Executive Vice President and Chief Financial Officer

H. Michael Krimbill -- Chief Executive Officer

Doug White -- Executive Vice President-Water Solutions

Don Jensen -- Executive Vice President-Refined Products

Jeff Pinter -- Executive Vice President-NGL Liquids

Pearce Hammond -- Simmons Energy -- Analyst

James S. Johnson -- Investor

Shneur Gershuni -- UBS -- Analyst

James Spicer -- TD Securities -- Analyst

Selman Akyol -- Stifel -- Analyst

John Crawford -- Tranquility Partners -- Analyst

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