Earnings call transcript: NGL Energy Partners misses Q1 2026 forecasts

NGL Energy Partners (Market Cap: $528.05M) reported its first-quarter earnings for fiscal year 2026, revealing a significant miss compared to analyst expectations. The company posted an earnings per share (EPS) of $0.04, against a forecast of -$0.04, resulting in a negative surprise of 200%. Revenue came in at $622.16 million, falling short of the expected $835.98 million, marking a revenue surprise of -25.58%. Following the announcement, the stock price fell by 1.23% in after-hours trading, closing at $4. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value model.

Key Takeaways

• NGL Energy Partners reported an EPS of $0.04, significantly missing the forecast of -$0.04.
• Revenue for the quarter was $622.16 million, below the expected $835.98 million.
• The stock price decreased by 1.23% following the earnings announcement.
• Water Solutions EBITDA saw a 13.8% year-over-year increase.
• The company continues to focus on reducing leverage and improving its balance sheet.

Company Performance

NGL Energy Partners demonstrated mixed performance in Q1 2026. While the Water Solutions segment showed strength with a 13.8% increase in EBITDA, other areas such as Crude Oil Logistics and Liquids Logistics saw declines. The company continues to strategically reduce its asset footprint and focus on core competencies, such as the Water Solutions market, where it holds a strong position.

Financial Highlights

• Revenue: $622.16 million, below the forecast of $835.98 million.
• Earnings per share: $0.04, compared to a forecast of -$0.04.
• Consolidated Adjusted EBITDA: $144 million, a 4% increase year-over-year.
• Water Solutions EBITDA: $142.9 million, up 13.8% year-over-year.
• Crude Oil Logistics EBITDA: $9.6 million, down from $18.6 million in the prior year.

Earnings vs. Forecast

NGL Energy Partners reported an EPS of $0.04, significantly missing the forecast of -$0.04, with a negative surprise of 200%. Revenue also fell short at $622.16 million, compared to the expected $835.98 million, representing a surprise of -25.58%. This marks a challenging quarter for the company, as it failed to meet market expectations.

Market Reaction

The stock price of NGL Energy Partners fell by 1.23% in after-hours trading, closing at $4. This decline reflects investor disappointment with the company’s earnings miss. The stock remains within its 52-week range, with a high of $5.73 and a low of $2.64, indicating some stability despite the earnings miss.

Outlook & Guidance

NGL Energy Partners maintains its full-year adjusted EBITDA guidance of $615-$625 million. The company anticipates stronger performance in the Crude Oil Logistics segment in the second half of the year. Additionally, it continues to focus on reducing leverage and improving its balance sheet, with potential guidance revisions if results exceed expectations.

Executive Commentary

CEO Mike Crimble stated, "Cash is being used to purchase and repay debt and equity that provides the highest return and greatest benefit to the partnership." This highlights the company’s strategic focus on capital allocation and balance sheet improvement. An unnamed executive added, "We see the volumes continuing for the balance of the year based on our customer forecast," indicating confidence in future performance.

Risks and Challenges

• Revenue shortfalls could impact future earnings and investor confidence.
• Declines in Crude Oil Logistics and Liquids Logistics EBITDA present ongoing challenges.
• Macroeconomic pressures and oil price uncertainty may affect customer activity.
• The company’s asset reduction strategy could limit growth opportunities.
• Competitive pressures in the water solutions market may impact margins.

Q&A

During the earnings call, analysts inquired about the company’s capital allocation strategy and its focus on water volume nuances. Executives explained the strategic moves in asset sales and debt repayment, emphasizing the positive impact of industry consolidation. The company’s focus remains on leveraging its strong position in the Water Solutions market while navigating industry challenges.

Full transcript - NGL Energy Partners LP (NGL) Q1 2026:

Conference Operator: Greetings. Welcome to the NGL Energy Partners 1Q twenty six Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

I will now turn the conference over to your host, Brad Cooper. You may begin.

Brad Cooper, CFO or Financial Executive, NGL Energy Partners: Good afternoon, and thank you to everyone for joining us on the call today. Our comments today will include plans, forecasts and estimates that are forward looking statements under The U. S. Securities law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward looking statements.

Please take note of the cautionary language and risk factors provided in our presentation materials and our other public disclosure materials. During the first quarter, we closed on the sale of our RAC marketing business, the interest in the Limestone Ranch and a majority of the wholesale propane business that included 17 terminals. As discussed on previous calls, we will continue to look for opportunities to shrink the remaining footprint of the Liquids segment with further asset sales. We used a portion of the proceeds to completely pay down the ABL during the quarter. We did end the quarter with a small ABL balance, but this is expected as we begin our butane build within the Liquids segment.

In addition to paying down the ABL, we opportunistically attacked other pieces of the capital structure with the proceeds. Mike will elaborate on these efforts during his prepared remarks. We continue to execute on our multiyear strategy of rightsizing the asset footprint, paying down debt and reducing overall leverage of the company. Let’s get into the quarterly results. Consolidated adjusted EBITDA for the quarter came in at $144,000,000 versus $138,600,000 in the prior year first quarter or approximately 4% higher than the prior year’s first quarter.

This increase was primarily driven by the performance of our Water Solutions business segment. We are reaffirming our full year adjusted EBITDA guidance of $615,000,000 to $625,000,000 Our water segment continues to perform above our expectations thus far, and we will reevaluate our full year guidance after the second quarter closes. Water Solutions adjusted EBITDA was $142,900,000 in the first year versus $125,600,000 in the prior first quarter, a 13.8% increase. Physical water disposal volumes were 2,770,000 barrels per day in the first quarter versus 2,470,000 barrels per day in the prior year quarter, a 12.4% increase. Total volumes we were paid to dispose that includes deficiency volumes were 3,100,000 barrels per day in the first quarter versus 2,600,000 barrels per day in the prior year first quarter.

So total volumes we were paid to dispose of were up approximately eighteen percent 2026 over 2025. The increase in EBITDA was primarily driven by higher disposal revenues due to an increase in produced water volumes processed from contracted customers, as well as higher water pipeline revenue due to the LEX II pipeline commencing operations during the quarter ended 12/31/2024. Operating expenses for the quarter on a per barrel basis were lower by $02 when compared to the same quarter the previous year. For the first quarter, our operating expenses in Water Solutions was $0.22 per barrel. With the current market sentiment and oil price uncertainty, we have not seen any drop off in activity from our customers in the core of the basin.

We have continuous conversations with the producers to monitor activity levels and the impacts the macro backdrop could have on our Water Solutions segment. As highlighted in our earnings call presentation, we are well positioned with 90% of our volumes committed through acreage dedications and MVCs. Recall, 80% of our total volumes are with investment grade counterparties. Crude oil logistics adjusted EBITDA was $9,600,000 in the ’26 versus $18,600,000 in the prior year’s first quarter. During the quarter, volumes on the Grand Mesa pipeline averaged approximately 55,000 barrels per day compared to 63,000 barrels per day for the 2025.

The decrease was due primarily to reduced sales as a result of lower production on an acreage dedicated to us in the DJ Basin and lower crude oil prices. As we have previously discussed on these calls, we have been anticipating an increase in volumes on the Grand Mesa system for a while now. For the month of July, volumes were approximately 25% higher than June volumes. So we anticipate stronger quarters ahead for the Crude Logistics segment. Liquids Logistics adjusted EBITDA was $2,900,000 in the first quarter versus $5,700,000 in the prior first quarter.

This is adjusted for the previously announced asset sales that closed in the quarter. The primary EBITDA contributor of the Liquids Logistics segment going forward will be our butane blending business. And recall that a majority of the EBITDA from this segment occurs in the back half of the fiscal year. With that, I would now like to turn the call over to our CEO, Mike Crimble.

Mike Crimble, CEO, NGL Energy Partners: Thanks, Brad. Good afternoon. I have just some brief comments. With respect to the first quarter results, as Brad said, we have exceeded our expectations. Water Solutions experienced a strong quarter, continues to reduce its cost per barrel.

We expect strength in the back half of the year from our Crude Oil Logistics segment as volumes on Grand Mesa ramp up. The remaining liquids logistics business generates enough adjusted EBITDA to cover our corporate costs. If our results continue to exceed expectations, we will consider raising guidance at the time of our second quarter earnings call in early November. Now as you can see from our first quarter actions, we are exercising an opportunistic strategy with regards to the use of our free cash flow. Cash is being used to purchase and repay debt and equity that provides the highest return and greatest benefit to the partnership while considering liquidity and leverage.

These opportunities may change as the markets continue to move. So first, during the quarter, we purchased $19,000,000 of our outstanding 2,032 notes at a discount as our bond prices temporarily declined due to the tariff announcement in early April. We paid off $72,000,000 of debt that was outstanding on our ABL at March 31. We then repurchased 70,000 units or approximately 12% of our outstanding Class D preferred units. The successful refinancing in February and the full payment of the preferred arrearages allows us to purchase any of our preferred classes B, C and D in the open market or call them at our discretion.

We have a couple of years to redeem the Class D preferred, so we are beginning that process now and anticipate additional purchases this fiscal year. And finally, under the board authorized common unit repurchase plan, we have purchased a total of approximately 4,700,000 common units at an average price of $4.3 per unit. This represents approximately 3.5% of the outstanding common units. So in conclusion, as we move forward, the balance sheet remains a priority, but we are very focused on growing our adjusted EBITDA as it reduces leverage and provides additional cash for the balance sheet improvement. And so with that, operator, let’s open up the line for Q and A.

Conference Operator: Certainly. At this time, we will be conducting a question and answer session. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

First question for today is from Tariq Hamed with JPMorgan.

Nevin, Analyst, JPMorgan: Hi. This is Nevin on for Tariq. I know you just mentioned that you’d be remaining opportunistic with capital allocation. But just going forward, do you expect further common unit repurchases? Or is this would you consider this quarter more as a one off and you’ll be remaining more concentrated on the Class Ds?

Brad Cooper, CFO or Financial Executive, NGL Energy Partners: This is Brad. I think we’ll continue to be opportunistic. If the unit prices kind of hang out in the same level they’ve been this last quarter, I think you’ll see us nibble at that. If the bonds trade down based on some macro event, we will nibble at those and we will continue to attack the Class Ds. So I don’t think we will set a path right now in terms of what we will go after solely.

It will be a little bit of each at these levels.

Nevin, Analyst, JPMorgan: Got it. Thank you.

Conference Operator: Your next question is from Derrick Whitfield with Texas Capital.

Derrick Whitfield, Analyst, Texas Capital: Good afternoon, guys, and congrats on the opportunistic purchases.

Brad Cooper, CFO or Financial Executive, NGL Energy Partners: Thanks, Derrick. With

Derrick Whitfield, Analyst, Texas Capital: respect to the produced water volumes for the quarter, they were a little bit lighter than what we were expecting. Just want to see if you could add some color as to perhaps some of the moving parts for the quarter itself.

Brad Cooper, CFO or Financial Executive, NGL Energy Partners: Doug, you want to take kind of Q1’s water volume

Derrick Whitfield, Analyst, Texas Capital: question? Sure.

Doug, Unnamed Executive, NGL Energy Partners: They were quite a bit close to where we were expecting. There were some there were in June, there were recycling jobs that ramped up, which we’re now seeing, you know, those volumes on the takeaway side this quarter. But we felt pretty good about the volumes in Q1. We came in about 79,000 barrels a day over budget for the quarter, over our internal budget. So we felt those were pretty solid.

We see that continuing for the balance of the year based on our customer forecast at this time.

Derrick Whitfield, Analyst, Texas Capital: Very good. Then Hey, Please go ahead.

Mike Crimble, CEO, NGL Energy Partners: Derek, me add to that. So Derek, when we look at volumes, we see the physical volumes we move. Then we see the, we call it financial volumes under MVCs get paid for that physically didn’t move. And then what we do not record in the quarter are additional MVC volumes we will get paid for next quarter. So you’re not seeing all the volumes that the system is actually, I’ll say, receiving.

And you won’t see until next quarter when we when, you know, when we sell up on an NBC.

Derrick Whitfield, Analyst, Texas Capital: Got it. That makes sense. And then maybe just higher level. Wanted to get your thoughts on the ARRIS acquisition by by Western. I mean, from our perspective, while we look at it and question the timing from a value recognition perspective, it definitely supports the Delaware Water thesis that we have for for your business and and the revaluing of that core space over time.

Mike Crimble, CEO, NGL Energy Partners: Yeah. I’ll start. Doug, you may have some thoughts too. But I think we congratulate ARRIS for getting a premium price for their business. That’s a price we would never have paid.

And our model is a little different too, because we do not focus on recycling. There are some other companies out there that do a great job who’s really focused on that business. And Doug, do you have any other thoughts?

Doug, Unnamed Executive, NGL Energy Partners: Yes, I think it’s great for the industry. Great sign. Consolidation has been positive in the Delaware for even on the producer side. Once these the consolidation happens, you know, they start you build and continue to to build a more of a foundation of an asset base, be it whether the producer side or the midstream side. So we welcome seeing consolidation, which also includes, you know, fewer fewer parties at the ballgame.

You know, the the remaining groups that are out there, I think a couple more of them are looking to be consolidated. So, you know, over time, this will come down to a a few parties in the midstream water business, and it will then eliminate the spending of CapEx on duplicate assets, duplicating such the existing other competitor assets, which I think is good for the good for the industry. You know, larger diameter pipes, more centralized operation of a larger contiguous area of assets. I think that’s just good good for the industry. And when it’s good for the producers, producers become more efficient, drill more wells, and and create more water.

Derrick Whitfield, Analyst, Texas Capital: Terrific. Thanks for your time and color, guys. Thanks, Derek.

Conference Operator: We have reached the end of the question and answer session, and I will now turn the call over to Brad Cooper for closing remarks.

Brad Cooper, CFO or Financial Executive, NGL Energy Partners: Thanks, everyone, for your interest in NGL. Look forward to catching up with everyone in early November during our second quarter call for fiscal twenty six.

Conference Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.