Shares of master limited partnership NGL Energy Partners (NGL 1.82%) fell a painful 20% in early trading on June 4. The cause of the drop for this energy industry player was pretty easy to identify, given that the partnership released earnings after the close on June 3. It wasn't good reading.
NGL Energy Partners' top line grew roughly 4% year over year in its fiscal fourth quarter of 2021. However, that was largely due to strength in just one of its three main divisions, with commodity prices boosting sales in the liquids logistics segment. Water solutions and crude oil logistics both saw year-over-year revenue declines.
That said, all three of these businesses saw cost increases and posted notable year-over-year declines in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Total adjusted EBITDA for NGL Energy Partners fell roughly 42% year over year, largely driven by lower volumes.
The full-year results were equally troubling, with distributable cash flow falling just shy of 49%. It's little wonder that NGL Energy Partners ended up reducing its distribution twice in 2020 before finally suspending it altogether when it announced fiscal third-quarter earnings.
Management tried to put its best foot forward, highlighting debt-reduction efforts and the improvement in the energy sector that has started to take shape. While that should lead to improved results, the best it offered on the distribution was continued deleveraging and the hope to someday reinstate the distribution.
Notably, the partnership highlighted that distributions were dependent on the terms of its various debt agreements. That's not an inspiring update on the distribution, which is usually one of the main reasons investors buy a midstream limited partnership.
Looking at the earnings update from NGL Energy Partners, it seems like investors have good cause for their downbeat mood today. And while the future could see material improvement, thanks to a recovering energy sector, it seems like Wall Street is taking a "show me" attitude here. That's not unreasonable.