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DATE

Thursday, May 28, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — H. Michael Krimbill
  • President — Brad Cooper
  • Executive Vice President, Water Solutions — Douglas W. White

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TAKEAWAYS

  • Adjusted EBITDA -- $176 million for the quarter and approximately $660 million for the year, reaching the high end of guidance with year-over-year growth primarily from Water Solutions.
  • Segment Performance: Water Solutions -- Delivered $153 million adjusted EBITDA in the quarter and $603 million for the year; produced water volumes rose 10% to 3 million barrels per day for the quarter, with full-year disposal volumes up 11% to 2.9 million barrels per day.
  • Operating Expense Efficiency -- Operating expense per barrel was $0.22 in the quarter, improved from the same period in the prior year, signaling gains in efficiency and system optimization.
  • Contractual Volume Growth -- Disposal volumes under volume commitments increased from 45% to 53% during the year; over 90% of volumes are tied to contracts or acreage dedications.
  • Capital Structure Actions -- Completed $950 million refinancing, redeemed 285,000 Class D preferred units (47% of original), and repurchased 8.7 million common units at $5.72 per unit under the $50 million buyback program.
  • Liquids Logistics Segment -- Adjusted EBITDA was $17 million in the quarter; the segment has reduced volatility and seasonality due to streamlining, including the sale of the wholesale propane business.
  • Crude Oil Logistics Segment -- Generated $17 million adjusted EBITDA in the quarter; Grand Mesa pipeline averaged 78,000 barrels per day in the quarter and 72,000 barrels per day for the year.
  • LEX II Expansion -- Capacity increased by 165,000 barrels per day, raising total transport capacity to 560,000 barrels per day, with the project underwritten by a long-term, expanded volume commitment contract and an additional 4 township dedication in Eddy County.
  • 2027 Outlook -- Consolidated adjusted EBITDA guidance is $715 million to $725 million, representing up to 10% year-over-year growth; guidance excludes new contracts and crude price impacts from this point forward.
  • Growth and Maintenance Capital -- Guided to approximately $200 million in growth capital and $45 million in maintenance capital for 2027, with most growth capital allocated to LEX II expansion and near-term projects.
  • Liquidity and Debt Profile -- Ended the year with solid liquidity and no near-term debt maturities.

SUMMARY

NGL Energy Partners LP (NGL 2.98%) highlighted record results driven by its Water Solutions segment and detailed significant steps toward transforming into a focused water infrastructure company during the earnings call. Management confirmed the successful execution of portfolio streamlining, balance sheet restructuring, and strategic asset divestitures. Guidance for 2027 anticipates approximately 10% year over year adjusted EBITDA growth at the high end of guidance, supported by contractual backlogs and the LEX II system expansion.

  • Management stated the LEX II expansion could further increase capacity to 650,000 barrels per day, pending demand growth and customer commitments.
  • President Cooper explained that the $200 million growth capital budget largely reflects LEX II expansion costs, with some incremental projects also funded.
  • Douglas W. White described ongoing strong demand for water infrastructure services in the Delaware Basin, emphasizing, "continuing to have a line out the door of demand for additional capacity."
  • On development opportunities, White stated, "We expect our draft permit from TCEQ any day now, the next certainly within the next few weeks," regarding the next-generation desalination and reuse project timeline.
  • Recent adjustments in Liquids Logistics following asset sales have resulted in lower business volatility, according to management's commentary.
  • Cooper indicated the Class D preferred redemption and common unit buyback reflected disciplined capital allocation aligned with management's stated priorities.

INDUSTRY GLOSSARY

  • LEX II System: A dedicated pipeline and infrastructure system for transporting and disposing produced water in the Delaware Basin, expandable as customer commitments increase.
  • TCEQ: Texas Commission on Environmental Quality, the regulatory agency overseeing permitting for water reuse and desalination projects.
  • Acreage Dedication: A contractual commitment that grants the operator exclusive rights to water or oil produced from a specified geographic area.
  • Volume Commitment: A contract obligating customers to deliver or pay for a minimum amount of product or service, typically securing revenue streams for infrastructure owners.

Full Conference Call Transcript

Brad Cooper: Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts and estimates that are forward looking statements under The U. S. Securities law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward looking statements. Please take note of the cautionary language and risk factors provided in presentation materials and our other public disclosure materials. We are pleased to report a strong finish to fiscal 26. Highlighted by record performance in our Water Solutions segment, and meaningful progress on our capital structure priorities.

For the year, adjusted EBITDA from continuing operations was approximately $660 million which came in at the high end of our guidance range and represents meaningful growth year over year driven by our Water Solutions segment. In the fourth quarter, we generated adjusted EBITDA of approximately $176 million Excluding the goodwill impairment charge, income from continuing operations is approximately $70 million As we step back and look at the partnership's accomplishments this year, we believe fiscal 26 encapsulates execution across every tenet of our multiyear strategy. First, April, we closed on the sale of our wholesale propane and rack marketing businesses.

As we are positioning the partnership to be a pure play water company The Liquid segment will continue to be rightsized as we work to monetize the noncore assets in this division. The disposition of the wholesale propane and rack marketing businesses significantly reduced the volatility in our quarterly reported EBITDA, as well as eliminated swings in our working capital. Second, we continue to attack and simplify the capital structure. We completed a $950 million refinancing transaction extending maturities and providing cash to reduce the Class D preferred units outstanding. Over the course of the fiscal year, we redeemed approximately 285 thousand class D preferred units, significantly reducing our highest cost of capital.

The redemption of the Class D's represents approximately 47% of the original amount. Our strategy over the last few years has remained consistent since the refinancing in early 24. We will continue to chip away at the Class Cs with free cash flow and noncore asset sales. And when leverage is at an appropriate level, we can access the capital markets to further reduce the Class Ds. We have remained opportunistic with respect to the term loan B market, and our ability to reprice this debt instrument. This component of our capital structure has allowed us to further reduce interest expense as our operational and financial performance continues to excel.

Third, the partnership bought 8.7 million common units under our buyback program, at an attractive price of $5.72. At the time when the board approved the $50 million buyback program, believe the common units to be the best return in our portfolio. And I think the recent performance in the unit price validates our investment and belief in our multiyear strategy to allocate this capital to the common units. Lastly, we continue to deploy capital to our Water Solutions segment, that drove growth in our EBITDA year over year by 11%. Our disposal volumes committed under volume commitments grew from 45% to 53% during the fiscal year as well.

Recall, over 90% of our volumes are contractual volume commitments or are acreage dedicated. We will get into the guide and outlook for 2027 later, but I would expect us to utilize the same playbook for fiscal 27 that we utilized in fiscal 26. By executing on accretive growth projects in our Water Solutions segment, and continuing to simplify our capital structure. Fiscal 27 is off to a great start. The momentum we exited with in fiscal 26 is carrying through to 2027. As evidenced by the press release issued earlier this month. On May 7, we announced a further expansion of our LEX 2 system.

Increasing capacity by 165 thousand barrels per day with the capability to transport approximately 560 thousand barrels of water per day on the LEX II system. The LEX II expansion is underwritten by a long term volume commitment contract, that includes increased volume commitments and an additional 4 township committed area in Eddy County. Additionally, the LEX II expansion is expandable up to 650 thousand barrels of water per day. Now let's hit the highlights for the fourth quarter of fiscal 26. Starting with Water Solutions, which continues to be the cornerstone of our business. This segment delivered another record year with adjusted EBITDA of approximately $153 million in the fourth quarter and approximately $603 million for the full year.

From a volume standpoint, we achieved produced water volumes of 3 million barrels per day in the fourth quarter, a 10% increase in physical volumes disposed compared to the previous year's fourth quarter. Total volumes we were paid on for the fourth quarter were approximately 3.1 million barrels per day compared to approximately 3 million barrels per day in the previous fourth quarter. For the full year, disposal volumes averaged approximately 2.9 million barrels per day, up 11% from the prior year. From a margin and cost perspective, operating costs remain well managed, Our operating expenses per barrel, $0.22 in the quarter, improving when compared to the same quarter from the prior year. Reflecting continued efficiency gains and system optimization.

As we think about the drivers behind this performance, there are a few key factors. First, the scope and size of our integrated system in the Delaware Basin which allows us to bolt on additional volume pipelines and volumes. Second, strong customer activity levels, particularly from large investment grade producers. Third, our long term fee based contracts with minimum volume commitments and acreage dedications. Additionally, our infrastructure footprint continues to expand in the Delaware Basin, with incremental disposal capacity in Andrews County, where we have millions of barrels of pore space. Believe our water solutions segment remains 1 of the most durable, invisible, earnings streams in the midstream sector and provides our most attractive returns from internal growth opportunities.

It continues to be the primary growth engine of the partnership. Turning to crude oil logistics. Adjusted EBITDA for the quarter was approximately $17 million Grand Mesa pipeline volumes averaged approximately 78 thousand barrels per day during the quarter, for the full year averaged 72 thousand barrels per day. We continue to work with producers and gatherers in the DJ Basin to contract more barrels to ship on the pipeline. In Liquids Logistics, we generated approximately $17 million of adjusted EBITDA in the quarter. As a reminder, this segment has been significantly streamlined following the divestiture of noncore assets, including the wholesale propane business. As a result, the segment is now a less volatile business.

Performance continues to be stable and in line with expectations. With reduced seasonality and lower capital requirements than in previous years. I mentioned at the beginning of my prepared remarks, fiscal 26 was an important year in terms of strengthening our balance sheet and positioning the partnership for long term success. Combined with our growth in adjusted EBITDA, the actions mentioned earlier collectively represent meaningful progress toward our key financial priorities of reducing leverage, lowering our cost of capital, and improving overall financial flexibility. Ended the year with solid liquidity, no near term debt maturities, and we remain focused on further sheet improvement. That, I will turn the call over to Mike.

H. Michael Krimbill: Thanks, Brad. Fiscal 26 represents another important step forward in our transformation into a more focused, less volatile, higher growth improved quality business. There are 3 key takeaways I would highlight First, Water Solutions continues to deliver strong growth with attractive returns. Second, our business mix transformation is improving adjusted EBITDA stability, reducing volatility and seasonality. And third, we have built a strong pipeline of contracted projects that supports continued growth in fiscal 27 and into fiscal 28.

Strategically, we remain focused on 3 priorities, accelerating our transition to a pure play water company by expanding our water infrastructure and monetizing unrelated assets, continuing to strengthen the balance sheet, and opportunistically repurchasing both preferred and common equity when it creates value. Our 2027 outlook We are guiding consolidated adjusted EBITDA to a range of $715 to $725 million This represents approximately 10% growth year over year at the high end of our adjusted EBITDA guidance in 2027. We expect this growth to be driven primarily by continued expansion in water solutions supported by projects already contracted. The larger of which we have previously announced.

Our adjusted EBITDA guidance does not include any new contracts which may be entered into from this point forward nor the benefits from the current crude oil price levels. From a capital standpoint, we are guiding to approximately $200 million of growth capital and about $45 million of maintenance capital. This capital includes the increased cost of the pipeline portion of the new projects, we are absorbing and not passing on to our customers. With that we are ready to open the line for questions.

Operator: Thank you. At this time, we will be conducting a Q&A session. You would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 1 moment please while we poll for questions. Once again, please press 1 if you have a question, or a comment. And the first question comes from Derrick Whitfield with Texas Capital. Please proceed.

Analyst (Derrick Whitfield): Good afternoon, guys, and congrats on the strength of your water business and the progress you have made just recently in improving the capital structure. it is been quite a been quite overhaul for you guys. Wanted to start first with wanted to start first with your growth capital. With regard to the growth CapEx of $200 million for 2027, does that include growth projects beyond the LEX II expansion?

Brad Cooper: A bulk of that $200 million is the LEX II. There are some incremental projects embedded in that in that $200 million.

Analyst (Derrick Whitfield): Gregg. And then just with respect to the LEX II expansion, how would you characterize the split between new and existing clients for underwriting that capacity?

Brad Cooper: And can lead the need for further expansion up to 650 thousand barrels based on those discussions. Yes. Current customers Douglas, I do not know if you want to take the latter part of the expansion up to 650.

Douglas W. White: Yeah. This is Douglas. We really amended and extended an existing agreement which included longer term additional barrel count, volume commitments, and then the large 4 township dedication. On this expansion. And then the question, can you clarify the question on the further expansion? Derek?

Analyst (Derrick Whitfield): Yeah. Just the need for to further expand to 650 based on what your client discussions that you are having today There is an incredible amount of demand for additional capacity in the basin.

Douglas W. White: That should answer that question. it is continuing to increase and continuing to have a line out the door of demand for additional capacity.

Analyst (Derrick Whitfield): Gregg. And just on the activity out outlook side, I know that you guys stated in your prepared remarks that you did not place any increased activity into your plans. Having said that, with you guys reporting nearly a month after most of the sector, What are you guys hearing around plans of acceleration beyond just the pull forward in activity that most of the independents announced during Q1 earnings?

Douglas W. White: The pull forward was has really been what we have been seeing. Probably more important is what I just mentioned. The dearth of available capacity with the you know, at least 10% growth of what the water volumes have really driven a lot of interest in new underwriting and new projects to be underwritten. And just more of a the deal flow that we are seeing. it is not so much driven by the commodity price as it has just been driven by the acceleration of development over the last couple of years. And it is the efficiencies are really driving a lot more demand for the service.

Analyst (Derrick Whitfield): Gregg. And maybe shifting over to beneficial reuse and other gen opportunities. Based on your announcements over the last couple of quarters with Natura and progress you guys have talked about on the water desalination side, How would you characterize where those opportunities sit today And again, the opportunities you see ahead of you for that next gen type business.

Douglas W. White: We are continuing to make progress on those previously announced projects. We expect our draft permit from TCEQ any day now, the next certainly within the next few weeks, which is has taken a lot of effort, making a lot of progress. Lots of progress on the energy campus project, which would include the nuclear power and you know, we are looking at the data center addition to that campus. As well as the large scale desal. But we are making a lot of progress on those projects.

Analyst (Derrick Whitfield): Gregg. And finally, if I could, maybe shifting over to Crude Oil Logistics segment. While water is clearly the driver here, how are you thinking about EBITDA and production outlook for 2027?

Brad Cooper: Douglas, do you want to maybe see about what you are seeing the DJ from producers?

Douglas W. White: Sure. This is Douglas again. We are really seeing very, very good activity in the DJ this year. We are also seeing the you know, some of, quote, the smaller players, private equity backed players really have consolidated acreage and have a more cohesive development plan moving forward. So we are seeing certainly an uptick in activity and we see that carrying in into this fiscal year and the next couple of fiscal years versus what it has been in the past.

Analyst (Derrick Whitfield): Terrific. And then just maybe to clarify 1 thing. I had a inbound come from a client, but just on the build multiple for the LEX II expansion, is all of that capital accounted for within 2027, or would there be capital to extend beyond 2027?

Brad Cooper: It looks to quite be at this point. It will all be in this fiscal year to bulk of it is in the first couple of quarters here, 2, 3 quarters of the fiscal year. Perfect. Great update, guys. Thanks, Derek.

Operator: Thank you. We have reached the end of the Q&A session. And I will now turn the call over to Brad Cooper for closing remarks.

Brad Cooper: Thanks, everyone. We will talk to you in a few months. Take care.

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.