Earnings call transcript: NGL Energy Q3 2025 misses earnings forecast

NGL Energy Partners LP (NYSE:NGL) reported its third-quarter 2025 earnings, revealing a significant miss on earnings per share (EPS) and revenue compared to analyst forecasts. The company posted an EPS of -$0.12 against a forecast of $0.19, and revenue of $1.55 billion, below the expected $1.71 billion. Following the announcement, NGL’s stock price saw a modest decline in aftermarket trading, dropping 0.36% to $5.48. According to InvestingPro data, despite recent challenges, the stock has shown strong momentum with a 28.37% gain over the past six months, though it currently appears overvalued based on Fair Value analysis.

Key Takeaways

• NGL Energy missed both EPS and revenue forecasts significantly.
• Stock price declined slightly in aftermarket trading.
• The company updated its full-year EBITDA guidance to $620 million.
• Strategic divestments were made, including the sale of 17 natural gas liquids terminals.
• Focus is shifting towards becoming a Water Solutions partnership.

Company Performance

NGL Energy Partners reported a consolidated adjusted EBITDA of $147.7 million for Q3 2025, a slight decrease from $151.7 million in the same quarter of 2024. However, excluding the impact of biodiesel, adjusted EBITDA rose to approximately $160 million, marking a 5% year-over-year increase. The company continues to strategically realign its focus towards Water Solutions, with significant contributions from this segment. InvestingPro analysis reveals the company’s last twelve months EBITDA stands at $523.36 million, with a market capitalization of $735.31 million. InvestingPro subscribers can access detailed financial health metrics, showing a FAIR overall score of 2.31.

Financial Highlights

• Revenue: $1.55 billion, down from the forecasted $1.71 billion.
• EPS: -$0.12, missing the forecast of $0.19.
• Water Solutions EBITDA: $132.7 million, up from $121.3 million.
• Crude Oil Logistics EBITDA: $17.4 million, slightly up from $17 million.
• Liquids Logistics EBITDA: $8.2 million, down from $26.3 million.

Earnings vs. Forecast

NGL Energy’s actual EPS of -$0.12 fell short of the forecasted $0.19, marking a significant miss. The revenue also came in below expectations at $1.55 billion versus the projected $1.71 billion. This earnings miss contrasts with the company’s previous performance, where it typically met or slightly exceeded expectations.

Market Reaction

In response to the earnings miss, NGL Energy’s stock experienced a slight decline of 0.36% in aftermarket trading, closing at $5.48. This movement reflects investor concerns over the earnings miss, although the stock remains within its 52-week range of $3.84 to $6.195.

Outlook & Guidance

NGL Energy updated its full-year EBITDA guidance to $620 million, reflecting its strategic focus on Water Solutions and divestment of non-core assets. The company continues to explore further asset sales and aims to reduce leverage and improve cash flow predictability.

Executive Commentary

CEO Mike Crimble stated, "We are now on our way to becoming a Water Solutions partnership," highlighting the company’s strategic shift. He also noted, "Exiting the biodiesel business and selling substantially all of our wholesale propane business will improve the repeatability of our cash flows."

Risks and Challenges

• Continued pressure on revenue and earnings due to market volatility.
• Challenges in executing strategic divestments and asset sales.
• Potential impact of seasonal slowdowns in logistics volumes.
• Dependence on successful integration and performance of new projects like LEX II.

Q&A

During the earnings call, analysts inquired about the impact of asset sales on EBITDA and the remaining assets in the Liquids Logistics segment. The company clarified its strategy to reduce business volatility and leverage, aiming for a more predictable cash flow.

Full transcript - NGL Energy Partners LP (NGL) Q3 2025:

Conference Operator: Welcome to the NGL Energy Partners 3Q twenty five 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, CFO. You may begin.

Brad Cooper, CFO, NGL Energy Partners: Thank you. 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. Before we start discussing our third quarter results, I would like to update everyone on some of the operational and corporate strategic initiatives that we completed during the third quarter and subsequent to quarter end. First, a few quarters ago, we mentioned on an earnings call that we had line of sight to a few new customers that would put additional barrels on Grand Mesa, and these new volumes could build our volume up to 100,000 barrels per day of crude oil on the pipeline. In November, we entered into a deal with Prairie Operating for a long term acreage dedication, where we will provide water disposal services as well as gather and ship crude oil on Grand Mesa.

This transaction was press released by Prairie on November 18. After the quarter ended, we entered into an additional contract with a producer. In addition to these two deals, the recent news regarding Prairie Operations acquisition of Bayswater, we believe provides some additional upside to our volume projections for Grand Mesa. Second, on February 5, we signed a purchase and sale agreement to sell 17 of our natural gas liquids terminals. In late January, we signed an additional agreement to sell one terminal in Green Bay, Wisconsin.

Total (EPA:TTEF) proceeds for both transactions inclusive of working capital is approximately $95,000,000 We anticipate closing both transactions by March 31. During the third quarter, we also wound down the majority of our biodiesel marketing business. I will get into the impacts this decision had on our financials for the quarter, but the elimination of this business permanently reduces our working capital needs by $30,000,000 to $40,000,000 on average per year. With the additional sale of substantially all of the wholesale propane business, we have eliminated a total of $60,000,000 to $70,000,000 of working capital on average per year. During the peak inventory builds throughout the year, the working capital requirements for these two has been historically as high as $100,000,000 These strategic actions are the next step in our strategy to simplify the asset base, reduce working capital, smooth out the seasonality of our EBITDA on free cash flow and ultimately reduce debt by selling non core assets at attractive deleveraging multiples.

Third, the LEX II project commenced operations in October and is performing as expected. Fourth, as previously mentioned on November 22, we purchased $23,375,000 of the $25,500,000 outstanding warrants for $6,900,000 This transaction represented approximately 92% of the outstanding warrants and eliminates the potential future dilution to our LP unitholders. Fifth, due to the structural changes in the biodiesel market and our desire to exit the business, we started the process of winding down our biodiesel marketing business by allowing our storage lease and certain railcar leases to expire and closing out the open purchase and sale contracts. Other than the railcar and storage leases, this business did not have any other long lived assets. We expect to have all our inventory liquidated by the February and to sublease the remaining railcars by 03/31/2025.

Year to date, biodiesel has generated negative adjusted EBITDA of $10,300,000 with negative $12,100,000 in adjusted EBITDA in the third quarter. And lastly, in January and February, we sold 143 railcars for proceeds of $12,500,000 and expect to close on additional railcars before March 31. Total proceeds are expected to be approximately $20,000,000 All of the sales proceeds I have mentioned will be deployed to the balance sheet and we currently project an undrawn ABL balance at March 31. Let’s get into the quarterly results. Consolidated adjusted EBITDA for the quarter came in at $147,700,000 in the third quarter versus $151,700,000 in the prior year third quarter.

As I just mentioned, we are winding our biodiesel business, which negatively impacted adjusted EBITDA in the quarter by 12,100,000 So if you exclude the impact of biodiesel, adjusted EBITDA was approximately $160,000,000 for the quarter or approximately 5% higher than the prior third quarter. Water Solutions adjusted EBITDA was $132,700,000 in the third quarter versus $121,300,000 in the prior third quarter. Physical water disposal volumes were 2,620,000 barrels per day in the third quarter versus 2,380,000 barrels per day in the prior third quarter. Total volumes we were paid to dispose that includes deficiency volumes were 2,910,000 barrels per day in the third quarter versus 2,600,000 barrels per day in the prior third quarter. So total volumes we were paid to dispose of were up twelve percent third quarter of fiscal twenty twenty five over the third quarter of fiscal twenty twenty four.

The team continues to maximize the expense side of the ledger. Operating expenses in the Water Solutions segment decreased for the quarter ended 12/31/2024 compared to the quarter ended 12/31/2023 due to primarily due to lower utility expenses, lower chemical expense and lower repairs and maintenance expense. Operating expense per produced barrel process was $0.21 for the quarter ended 12/31/2024, compared to $0.25 in the comparative quarter last year. Crude oil logistics adjusted EBITDA was $17,400,000 in the third quarter of fiscal ’twenty five versus $17,000,000 in the prior year’s third quarter. Fiscal volumes on Grand Mesa averaged approximately 61,000 barrels per day compared to 70,000 barrels per day for the quarter ended 12/31/2023.

As I discussed earlier, Prairie operating signed and press released a long term dedication in the PJ Basin with the Partnership and we entered into another acreage dedication agreement with a second producer. These are the potential contracts on Grand Mesa we alluded to in prior earnings calls that would get us to 100,000 barrels per day. With variable maintenance capital needed for this business segment, the growth in the EBITDA will create a dollar for dollar increase in our free cash flow. Liquids Logistics adjusted EBITDA was $8,200,000 in the third quarter versus $26,300,000 in the prior third quarter. The winding down of biodiesel significantly impacted the quarter with negative adjusted EBITDA of $12,100,000 for the quarter.

So excluding the impact of biodiesel, the remaining businesses within liquids logistics generated $20,300,000 for the quarter. We are optimistic with the cold weather most of the country has experienced in January and that looks to continue through February that we will have strong results from the wholesale propane division to report for the fiscal fourth quarter. As for our full year results, we are updating the guide to reflect additional weakness in our Liquids segment. For the full year, we are guiding to $620,000,000 of EBITDA. 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, everyone. For several years now, we have experienced performance below expectations in certain of our liquids logistics businesses, as well as declining volumes on Grand Mesa crude oil pipeline. Our results have reflected this volatility. And in addition, our liquids businesses contained a seasonality that made it difficult to predict quarterly earnings and was further complicated by warm weather.

That is changing going forward as we are now on our way to becoming a Water Solutions partnership with the Crude Oil Logistics segment. Exiting the biodiesel business and selling substantially all of our wholesale propane business will improve the repeatability of our cash flows and reduce the seasonality and volatility of our adjusted EBITDA. With respect to crude oil logistics, we are bouncing off the bottom of our DJ Basin performance, adding new customers, which we expect to significantly enhance the volumes and profitability of Grand Mesa going forward. We continue to work on other non core asset sales, which will further reduce indebtedness and leverage. If successful, we expect to announce these in the next few months.

Once we have reduced our leverage further, we can begin redemption of our Class D preferred shares. So with that, operator, please open up the line for Q and A.

Conference Operator: Thank you. You. The first question comes from Derek Whitfield with Texas Capital. Please proceed.

Derek Whitfield, Analyst, Texas Capital: Good afternoon, all, and congrats on your divestiture announcements.

Brad Cooper, CFO, NGL Energy Partners: Thanks, Derek.

Derek Whitfield, Analyst, Texas Capital: Perhaps starting there with your announced NGL terminal and railcar transactions, how should we think about the annual run rate EBITDA of your remaining assets in liquid logistics following these transactions?

Brad Cooper, CFO, NGL Energy Partners: So historically, Derek, that segment’s got four really four legs of the stool, wholesale propane, biodiesel, Iraq marketing, our Centennial business. Between bio the wind down of bio and the wholesale transaction, it’s probably 15% to 20% of our EBITDA in that business unit historically.

Mike Crimble, CEO, NGL Energy Partners: I’ll add to that, Brad. I think it’s too early for us to give any numbers. We are still looking at some additional opportunities. So we don’t want to mislead you by giving you a number that turns out to be not accurate.

Derek Whitfield, Analyst, Texas Capital: Understood. Maybe shifting over to the Crude Oil Logistics segment. How should we think about the growth trajectory associated with the announcements from this quarter to really achieve that 100,000 barrel mark you referenced in your prepared remarks?

Brad Cooper, CFO, NGL Energy Partners: I’d say again, we’ll probably wait for

Mike Crimble, CEO, NGL Energy Partners: our fiscal twenty twenty six guidance to really quantify that, I think you can see that the volume increase will be 50%. So if nothing else, you could take 50% of EBITDA this year and add it to our numbers.

Derek Whitfield, Analyst, Texas Capital: That’s great. Thanks for taking my questions.

Conference Operator: The next question comes from James Spicer with TD Securities. Please proceed.

James Spicer, Analyst, TD Securities: Yes. Hi. Thanks for taking the question. It sounds like if you’re projecting an undrawn revolver balance at the end of next quarter, that would imply that the majority of your asset sale proceeds and free cash flow were all going to pay down the ABL balance. Just wondering if that’s the case?

And if so, what metrics are you looking for to hit before you start addressing the principle on the Series D preferreds?

Brad Cooper, CFO, NGL Energy Partners: Yes, that’s correct. Assuming that all the assets as well as they go straight to the ABL. I think it’s probably just continued deleveraging. I don’t know if we have a hard fast line in the sand in terms of where we want to be, but the way that our growth capital projects typically occur and we don’t have anything lined up for next year. If you take this year as an example, the Lex two spin was in the first half of the year.

So assuming there is a repeatable transaction like that, James, I would assume kind of a back half of fiscal twenty twenty six in terms of Class D redemption. That’s not signaling that we’ve got another deal lined up. It’s really just trying to illustrate if we have a repeat of this year how our free cash flow really flows through the partnership.

James Spicer, Analyst, TD Securities: Okay, got it. And then on the liquid logistics business, just a point of clarification. What assets are left in the liquids logistics business now post these divestitures and which are the primary sources of cash flow at this point?

Brad Cooper, CFO, NGL Energy Partners: Yes, recall that wholesale propane is really the only business unit within the four legs of the stool that had hard assets. What’s remaining is Ambassador, so that’s the propane pipeline there in Michigan, Chesapeake, which is a butane export facility and then Port Hudson (NYSE:HUD) and West Point, we have a terminal in West Point, Virginia. So those four residual assets.

James Spicer, Analyst, TD Securities: Okay, thanks. And then just one more. I think you have been guiding to Water Solutions EBITDA of I can’t remember the number now, like $540,000,000 to $550,000,000 or something in that range. Just wondering with your updated total guidance, what that implies in terms of water?

Mike Crimble, CEO, NGL Energy Partners: Yes, it implies water will be below that range, but it’s not clear to us where we’re going to end up. So we decided not to provide another any more guidance on water.

James Spicer, Analyst, TD Securities: Okay. That’s it for me. Thanks guys.

Conference Operator: Okay. The next question comes from Tarek Hamed with JPMorgan. Please proceed.

Nevan, Analyst, JPMorgan: Hi, good afternoon. This is Nevan on for Tarek. I was just wondering if you could comment on the relative profitability on the volumes related to Lex two compared to the previously existing assets.

Brad Cooper, CFO, NGL Energy Partners: No, I mean in my prepared comments, it’s performing as expected. That’s really all we’ve got at this point.

Nevan, Analyst, JPMorgan: Got it. But in terms of additional volumes coming online compared to original, our LexOne, is there any difference in terms of the contract that was struck?

Brad Cooper, CFO, NGL Energy Partners: Could you repeat the question? It’s a little fuzzy here on this side breaking up.

Nevan, Analyst, JPMorgan: Sorry, just looking for whether or not you could provide any commentary on the contracts that were struck for Lexus II in terms of pricing and profitability.

Brad Cooper, CFO, NGL Energy Partners: At this time, there’s no additional contracts that we’ve signed up as a result of Lex two pipeline, if that’s what you’re asking.

Derek Whitfield, Analyst, Texas Capital: Got it. Thank you.

Conference Operator: Okay. We have a follow-up coming from Derrick Whitfield with Texas Capital. Please proceed.

Derek Whitfield, Analyst, Texas Capital: Good afternoon, guys. Just to clarify the comment on modern logistics volumes. Should we be thinking about that more from a seasonal perspective? I mean, it’s certainly not surprising to see seasonal CapEx down across upstream industry. I mean, I would think that you would start to see that front loaded in the first half of the year.

So that’s I mean, it’s just a seasonal factor. Is that the right way to think about it?

Brad Cooper, CFO, NGL Energy Partners: So my comments on the growth capital, Derek, around next to?

Derek Whitfield, Analyst, Texas Capital: No. More around those, the volumes. So you had a slight decline in logistics water logistics volumes in Delaware in Q3 versus Q2. And I thought the previous question yes, go ahead, sorry.

Brad Cooper, CFO, NGL Energy Partners: I think the third quarter we’ve seen we saw quite a bit of recycling from some of our larger customers. I don’t know if that’s seasonal. Doug, are you there? Maybe you’ve got some thoughts on the seasonality of recycling versus the rest of the year and how it lays out in the calendar year?

Doug, Unnamed Executive, NGL Energy Partners: This is Doug. Typically, we see the slowdown over the holidays. That began to change in 2023, where we saw the producers stay very busy through the holiday season. But once again, it’s flipped back in 2024. We saw the and I don’t know if it’s the calendar situation where there was Thanksgiving and Christmas certainly had a lot more leaned a lot more towards time off just in general.

But we did see a slowdown compared to prior year because of that. And can we call it seasonal? Maybe it’s more operational. Things are going certainly in the Delaware, staying very steady, but there was a ramp of recycling this year in that last quarter of the calendar year and we’re already seeing those numbers quickly turn back around in this first calendar quarter of the year with a lot of wells being brought online.

Derek Whitfield, Analyst, Texas Capital: Terrific. That’s what I was expecting.

Conference Operator: We’ve 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, NGL Energy Partners: Thanks everyone for your interest in NGL and we look forward to catching up with everyone in a couple of months on the year end earnings call. Thanks and have a nice week.

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

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