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NGL Energy Partners LP provides financial update

Published by , Editorial Assistant
World Pipelines,

NGL Energy Partners LP is providing certain information regarding its global settlement with Extraction Oil and Gas, Inc. (Extraction) following its expected emergence from bankruptcy, including Adjusted EBITDA guidance for the fiscal year ending 31 March 2021 (Fiscal 2021) and the fiscal year ending 21 March 2022 (Fiscal 2022).

Extraction, in its Chapter 11 bankruptcy proceeding, rejected its two transportation service agreements (TSAs) with Grand Mesa Pipeline, LLC, a subsidiary of the Partnership. Grand Mesa disputed the rejection and appealed the bankruptcy court’s approval of the rejection of the TSAs. The parties reached a global settlement of the dispute which, among other consideration, provided for the following:

  • A new, long-term supply agreement between NGL Crude Logistics LLC (NGL Crude) and Extraction (the Supply Agreement), which includes a significant acreage dedication in the DJ Basin and retains Extraction’s crude oil volumes for shipping on the Grand Mesa Pipeline;
  • A new rate structure under the Supply Agreement which is based on calendar month average NYMEX prices with an agreed upon differential plus an increase in the rate when those NYMEX prices exceed US$50/bbl; and
  • The Partnership will receive US$35 million as a liquidated payment for Grand Mesa’s remaining claim on the effective date of Extraction’s plan of reorganisation.

“We are pleased to be able to complete the new Supply Agreement with Extraction and look forward to working with their management team as they develop their significant DJ Basin position and execute their business strategy,” stated Mike Krimbill, NGL’s CEO. “This new contract positions NGL to retain and transport significant crude oil volumes for Extraction and aligns the two companies for future success.”

Based on actual year-to-date results and estimated results for the remainder of Fiscal 2021, including the impact of the Extraction bankruptcy, the Partnership is re-instating Fiscal 2021 Adjusted EBITDA guidance at US$500 million. Fiscal 2021 Adjusted EBITDA includes an estimated reduction of US$45 million associated with lower crude oil volumes delivered by Extraction plus the litigation costs associated with the bankruptcy. Additionally, the Partnership expects to recognise a non-cash impairment charge that could be in the range of US$380 million to US$400 million in the quarter ending 31 December 2020 associated with certain intangible assets and goodwill which had a net book value of approximately US$768 million at 30 September 2020 in its Crude Oil Logistics segment because of the Extraction bankruptcy and settlement. Management does not expect to recognise any impairment of tangible assets in this segment related to this matter.

The Partnership is also initiating Adjusted EBITDA guidance for Fiscal 2022 with a range of US$570 million to US$600 million. Capital expenditures are expected to be between US$100 million and US$125 million for Fiscal 2022, including both growth and maintenance expenditures. Additional details regarding Adjusted EBITDA and capital expenditures guidance will be provided when the Partnership announces its operating results for the quarter ending 31 December 2020.

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