Units of midstream energy player NGL Energy Partners (NYSE:NGL) fell 12% in the first half hour of trading on Aug. 11. Although units of the master limited partnership gained back some of that sharp drop, by 10 a.m. EDT they were still down by around 7%. The early-day decline was precipitated by the after-market release of earnings on Aug. 10.
The headline numbers for NGL Energy's fiscal first-quarter 2021 results were pretty rough. Revenue was off by about 55%. Adjusted EBITDA was lower by 12%. And distributable cash flow declined by 26%. It's little wonder that the partnership chose to cut the April distribution by nearly 50%. Only, based on the quarter's results, it looks fair that investors might fear even that cut wasn't deep enough, noting that distribution coverage appeared to be pretty tight in the quarter.
That said, management of the midstream energy company did its best to highlight the positives. For example, it has been able to materially reduce its operating costs. It has trimmed its growth capital spending plans and maintenance budget. And while it noted that demand for its services has been weak because of low oil prices, it has increased market share in key operating regions and was able to shift the sale of oil, allowing it to benefit from recent oil price gains. Moreover, it believes that May and June will be the low point for its business as demand has risen along with oil prices. In other words, NGL Energy Partners is stressing that the future looks like it's improving.
When you net the negatives against the positives here, taking into account the still uncertain path of COVID-19, investors don't appear to have come away with a clean outlook for the future. The most likely outcome, in fact, is more volatility. Today's sharp drop and partial recovery, all within 30 minutes of the open, serve to highlight that trend.