What happened

Units of NGL Energy Partners (NYSE:NGL) soared 54% during the first half of 2019, according to data provided by S&P Global Market Intelligence. The master limited partnership (MLP) has bounced back after a challenging 2018, which saw its units plunge 32%. Not only has the midstream company continued to shore up its financial profile, but it's significantly improved its growth prospects.

So what

NGL Energy Partners has undertaken several actions to bolster its balance sheet over the past year. The turnaround started late last year when the company sold its Bakken saltwater disposal unit for $91 million and some of its Permian Basin water disposal assets for $238.8 million. Those two deals helped push the company's leverage ratio below its 3.25 times target.

A recovery and growth bar chart drawn on a blackboard.

Image source: Getty Images.

The MLP has continued to make moves to improve its balance sheet this year. In February, it redeemed $328 million in notes that would have matured in March. It followed that up by issuing $45 million of preferred units and $450 million in new debt, which it used to redeem higher-cost preferred units and pay down its credit facility. These and other moves have improved the company's leverage ratio from 4.4 times in 2018 to 2.6 times in 2019, which is comfortably below its target level.

NGL Energy Partners has used its improved financial position to enhance its growth prospects. In January, for example, the company bought DCP Midstream's wholesale propane business. Meanwhile, in May the MLP agreed to buy a water pipeline and disposal system for $890 million. The company closed that deal in early July, which it financed with the help of an investment by several private equity funds.

All this wheeling and dealing has NGL Energy Partners on track to generate between $565 million and $650 million in EBITDA next year. That's up significantly from the $408 million it earned last year and the $440 million it's on pace to haul in during 2019. Furthermore, the company anticipates that its leverage ratio will remain below its target level while it will generate enough cash to fully cover its 10.3%-yielding distribution.

Now what

NGL Energy Partners has engineered quite the turnaround in the past year. The MLP has significantly improved its balance sheet while at the same time bolstering its growth prospects. The only remaining concern is distribution coverage. While that metric is on track to go from a worrisome 0.8 times in 2018 up to an anticipated 1.0 times this year, it remains well below its 1.3 times target level. Because of that, NGL Energy Partners is still a bit too risky for income-seeking investors, though it's becoming an intriguing MLP to watch.

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