NGL Energy Partners (NGL) Q2 2027 earnings review
NGL raises its outlook on record wastewater, but borrowing climbs
NGL, which disposes of oilfield wastewater in Texas and New Mexico, handled record volumes while its water profit stood still. EBITDA excluding one-offs climbed 15% from a year ago, and chief executive Mike Krimbill raised the full-year outlook again. A write-down of crude oil assets left a net loss. By our math, the plan has growth slowing to about 4% in the second half.
| EBITDA excluding one-offs | $192.4M +15% from a year ago |
|---|---|
| Wastewater disposed per day | 3.45M barrels +23% from a year ago |
| Net result from continuing operations | −$42.6M loss $29.8M profit a year ago |
| Full-year EBITDA outlook | Raised $10M middle of the range: $740M, about 12% growth |
⚖️ Verdict: 🟢 Bullish
The story got better, because NGL lifted its outlook on water volumes that customers are already sending. Krimbill counts new contracts only once they earn money, so the higher plan rests on results. One caution: beating a cautious plan says nothing about debt, which NGL keeps adding to fund new pipelines.
The question now is whether NGL can pay down debt while it spends more on pipelines. Either winter cash cuts borrowing toward four times EBITDA by March, or spending and buying back costly preferred units keep debt high. The December and March balance sheets will tell.
🐂 Bull Case
Record Wastewater Volumes Keep Filling New Wells
NGL earns most of its money by pumping the salty water that comes up from oil wells deep underground. Chief executive Mike Krimbill said the partnership "had another strong quarter driven by our Water Solutions segment".
The Tulsa group added about 255,000 barrels a day of disposal space, and finance chief Brad Cooper said customers fill new space quickly. Doug White, who spoke for the water business, said "every well we bring online, we have it either underwritten today" or covered by customer forecasts.
- Water disposed per day: 3.45 million barrels, up 23% from a year ago
- Change from last quarter: up 4%
- Volumes customers paid for, including water promised but not sent: up 11% from a year ago
This matters because most of the water comes from the Delaware Basin, the oil field of west Texas and south-east New Mexico. Producers there have merged, but White said "we have not seen them reduce their activity". Cooper said LEX II, an 81-mile pipeline from New Mexico to Texas, is "expected to be in service over the next few weeks".
What to watch: water disposed per day in the December quarter, the first with LEX II running. A figure well above 3.45 million barrels would show the new pipeline filling as quickly as this year's wells did.
NGL Beat Its Own Plan and Raised It
NGL sets a yearly target for EBITDA excluding one-offs, its main profit measure before interest, tax and depreciation. Chief executive Mike Krimbill said new contracts stay out of that plan "until they actually are producing EBITDA", so the target counts only business already running.
By our math, the plan set in August pointed to about $180–183 million a quarter for the rest of the year. The partnership earned $192.4 million in the September quarter. Krimbill then lifted the full-year range by $10 million, the second such step this year.
"In the first two quarters here, Water Solutions is over budget in excess of $20 million," he said. The two raises add up to exactly that amount, so the higher plan rests on money already earned rather than on hoped-for contracts.
But beating a cautious plan shows the plan was cautious, not that the second half will be strong. By our math, the new range still asks for less EBITDA per quarter than the Tulsa group just delivered.
What to watch: December-quarter EBITDA against the roughly $181 million a quarter the new range implies, by our math. A result near September's level would show the new plan is as cautious as the old one.
New Terminal Contract Lifted the Fuel-Supply Business
Liquids Logistics buys butane and propane and resells them to fuel blenders and other customers. Its EBITDA reached $14.2 million, up 35% from a year ago. NGL credited "a new throughput contract at one of our terminals", which pays it fees for moving fuel through the site.
- Fee margin from storage and terminal services: $7.0 million, against $1.3 million a year ago
- Butane margin per gallon, before hedges: 11.6 cents, against 8.2 cents
Fee income does not swing with fuel prices, which is why it matters. But losses on hedges, the contracts NGL uses against price swings, still cut the unit's operating income by $2.9 million.
What to watch: Liquids EBITDA in the March quarter, when winter fuel sales bring in most of the unit's cash. Holding this year's gain then would show the terminal fees add to seasonal trading profit.
🐻 Bear Case
Water Profit Per Barrel Fell From Last Quarter
Finance chief Brad Cooper said record volumes produced "record Water Solutions adjusted EBITDA for a single quarter". NGL's own filing does not support that. The water business earned $178.3 million, slightly below the $179.9 million it made in the June quarter.
Volumes climbed about 4% over those three months, so each barrel earned less. By our math, water EBITDA per barrel slipped to 56 cents from about 60 cents.
- Water cost of sales, including oil-hedge losses: 4.0% of water revenue, up 3.4 percentage points from a year ago
- Water operating costs: 25.1% of water revenue, down 1.4 percentage points
- Payments for water promised but not sent: 1.1 million barrels, against 23.7 million a year ago
Customers now send the water they promised, so NGL collects fewer payments for missing barrels. Hedges on skim oil, the crude NGL skims off the wastewater and sells, cost it $8.7 million. The partnership also pays "higher royalty expense from increased volumes related to certain saltwater disposal wells". So profit no longer tracks volume one for one.
What to watch: water EBITDA per barrel in the December quarter, the first with LEX II, the new 81-mile water pipeline, running. A figure near 56 cents would mean profit keeps trailing the volume gains.
Borrowing Rose as Pipeline Spending Tripled
NGL is borrowing to build new water pipelines and disposal wells. Expansion spending reached $114.6 million in the quarter, nearly three times the year-ago level. Finance chief Brad Cooper presents the build as the path to retiring the costly Class D preferred units and, later, restarting payouts to common unitholders.
- Revolving credit line, a bank loan NGL can draw and repay at will: $249 million drawn, against $135 million in March
- Cash plus unused credit: about $130 million, against about $204 million in June
- Class D preferred units, paying 10.7% a year: 315,489 still outstanding
"We expect leverage to be approximately four times by the end of the fiscal year," Cooper said. By our math, that needs about $386 million of debt repayment by March on reported figures. The finance chief expects "the majority of our free cash flow from October through March", but he also plans to retire most Class D units, which competes for that cash.
What to watch: credit-line borrowing at the end of December, once winter cash starts to arrive. A balance still near $249 million would put the year-end debt target out of reach.
The Water Treatment Permit Slipped Again
NGL wants to clean some of its wastewater and release it into the Pecos River basin instead of injecting it underground. That needs a TPDES permit, a Texas licence to discharge treated water, and executive Doug White said NGL has worked toward it for three years.
Last quarter, White said NGL would receive the permit that month. On this call the timetable moved again: "we expect to have our final draft permit maybe as early as tomorrow". He also said NGL "entered into an MOU with a developer of data centers", an early, non-binding agreement.
The plan matters because treated water would give NGL an outlet if regulators limit injection. But the treatment business earns nothing yet, and the partnership disclosed no terms for the data-centre agreement.
What to watch: whether Texas regulators issue the final permit before the February call. Without it, the desalination plants NGL is planning at Barrow Ranch and Orla remain plans only.
Risks this quarter didn't answer
Several standing risks to the water business got no new numbers this quarter, though each could move the case once NGL discloses more about them.
- Titus lawsuit: an oil producer says NGL's disposal wells flooded its mineral rights and wants Texas to suspend some Reeves County permits; no discovery yet, and nobody raised it on the call. A hearing date or a permit ruling would move it.
- Dependence on one oil field: water earned 93% of EBITDA, almost all from the Delaware Basin of west Texas and New Mexico. A split of volumes by customer would show the exposure.
- Oil prices: NGL did not say how much skim oil, the crude it recovers from wastewater, it has hedged for the rest of the year. A hedge figure would show how much profit rides on crude.
- Texas regulation: a new Railroad Commission member arrives in a few months, and White expects the commissioner to stay supportive of the industry. The first rulings on disposal wells will test that.
👓 Other Themes
NGL Wrote Down Crude Assets and Cut Staff
NGL wrote down its Crude Oil Logistics assets by $58.1 million, citing "a strategic realignment of the segment", and paid $4.7 million in severance. The unit buys crude and ships it on Grand Mesa, a pipeline from Colorado to Oklahoma. Volumes there fell to 64,000 barrels a day from 74,000 in June, on "lower production on acreage dedicated to us in the DJ Basin".
💲 Other KPIs
Distributable cash flow, the cash left after upkeep spending, cash interest and preferred payouts, climbed 22% from a year ago. Its share of EBITDA slipped to 41% from 50% in June, because maintenance spending and other cash costs rose. The share still sits above the 39% of a year earlier.
Fuel stocks jumped 47% since March as NGL built up butane ahead of winter gasoline blending. Butane alone reached $47.3 million, against $26.2 million. The seasonal build ties up cash until January through March, when the fuel-supply business collects most of its money.
Operating profit dropped to 2.4% of revenue from 14.0% a year ago. Higher crude and butane prices pushed cost of sales up by 11.4 percentage points of revenue, because NGL passes those prices on to customers. Asset write-downs added another 5.5 points.
The unit count held steady from June and sits 2% below a year ago, after last year's buybacks. NGL bought no units under the $100 million repurchase programme it approved in April, as cash went to pipelines and debt.
🔮 Guidance
Raised. The plan now puts full-year EBITDA at about $740 million in the middle of the range. That is roughly 12% above last year. By our math, the second half gets about $361 million, only 4% above a year earlier. This is the second raise this year, each worth $10 million.
Raised. NGL now plans more spending on new water capacity than the $200 million it planned in August. By our math, the first half used $211 million, leaving about $49 million for the rest of the year. Most of the profit from these projects arrives next year, finance chief Brad Cooper said.
Unchanged. The plan keeps upkeep spending at about $45 million for the year. By our math, the first half used $33.2 million, so the second half gets only about $12 million. That would sit well below the $17.8 million spent in the September quarter alone.
Unchanged. The target still has debt at about four times EBITDA by March. On our simple measure, reported debt over the last four quarters of EBITDA, the ratio stood at 4.6 times in September. It has eased from 4.9 times in March. NGL has not said how it measures the target.
❓ Key Questions
Which wells does the Titus complaint target?
Titus asked Texas regulators to suspend some Reeves County injection permits. NGL has not said which wells, or what share of its Delaware volume they handle, so readers cannot size the risk to the core business.
How much skim oil is hedged for the rest of the year?
Hedges on recovered oil cost the water business money this quarter. The hedged share for the coming months decides how much water profit still rides on crude prices.
Why did water profit per barrel fall from June?
Volumes climbed but water EBITDA did not. NGL could split the change between lost payments for undelivered water, hedge losses, royalties and temporary power costs, which it now leaves out of EBITDA.
How does NGL measure its four-times debt target?
On reported debt, the target needs large repayments by March. NGL should give its definition and say how much of the Class D redemption it will fund with new borrowing.
What does the data-centre agreement commit NGL to?
White disclosed a memorandum of understanding with a data-centre developer. Volumes, prices and timing would show whether treated water can become a paying business.