What happened

Units of NGL Energy Partners (NGL 0.41%) declined by 15.7% in March, according to data provided by S&P Global Market Intelligence. The master limited partnership (MLP) cooled off after a scorching triple-digit rally in February. The slump came despite more good news from the energy company as it has continued to improve its balance sheet over the past month. 

So what

Units of NGL Energy Partners skyrocketed in February after the company reported strong fiscal third-quarter results. That enabled it to generate more cash to shore up its balance sheet, including repaying a portion of its unsecured notes set to mature in June. That was part of an ongoing effort to pay off those notes by their maturity date. It achieved that objective in February after its lenders permanently increased the borrowing capacity on its asset-based lending (ABL) facility to $600 million. That allowed the company to call for the early redemption of its remaining 7.5% 2023 senior notes, which it completed at the end of last month. 

NGL Energy also stated it was pursuing other ways to generate cash, including noncore asset sales, to pay down additional debt. The MLP delivered on that objective last month. It agreed to sell its marine assets via two transactions for $111.65 million. CEO Mike Krimbill commented on the sale in a press release. He stated: "This non-core asset sale should allow NGL to further reduce leverage by March 31, 2023, as these proceeds will be used for debt reduction. Our near-term focus continues to be reducing absolute debt and leverage." 

The company announced earlier this month that it closed that asset sale. NGL Energy Partners used the asset sale proceeds to repay the associated $39 million marine equipment note and some of the ABL balance. 

With last month's paydown, NGL Energy Partners has reduced debt by $600 million since the end of September. That has lowered the company's total debt to $2.9 billion. As a result, its leverage ratio has fallen to about 4.5 times total debt to its trailing-12-month adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). That achieves the company's target of getting leverage below 4.75 times. It's a significant improvement for the company considering leverage was above 6 times most of last year. 

Now what

NGL Energy Partners has achieved its near-term leverage target ahead of schedule. Because of that, the MLP could reinstate a distribution to its investors. It also gives the company more financial flexibility to make growth-related investments. That prospect of a payout and a much improved financial profile puts the MLP in a better position to grow value for its investors in the future.