NGL Energy Partners LP: Form 10-Q for the period ended Dec 31, 2024

The following is a discussion of NGL Energy Partners LP’s (“we,” “us,” “our,” or the “Partnership”) financial condition and results of operations as of and for the three months and nine months ended December 31, 2024. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (“Quarterly Report”), as well as Part II, Item 7–“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on June 6, 2024.

Overview

We are a Delaware master limited partnership. NGL Energy Holdings LLC serves as our general partner (“GP”). At December 31, 2024, our operations included three segments: Water Solutions, Crude Oil Logistics and Liquids Logistics. See Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of these businesses.

Consolidated Results of Operations

The following table summarizes our unaudited condensed consolidated statements of operations for the periods indicated:

(in thousands)

Items Impacting the Comparability of Our Financial Results

Our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to commodity price volatility, demand fluctuations, acquisitions, dispositions and other transactions. Our results of operations for the three months and nine months ended December 31, 2024 are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2025.

Recent Developments

Dispositions

Disposition transactions impact the comparability of our results of operations between our current and prior fiscal years. See Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of dispositions that occurred during the current fiscal year.

Other Developments

Global Pandemic, International Conflicts and Market Update

Since March 2020, and throughout the last four years, global markets and commodity prices have been extremely volatile due to the impacts from the COVID-19 pandemic, with further impacts on volatility caused by the war in Ukraine that began in February 2022, the current conflict between Israel and Hamas that began in October 2023 and conflicts involving Iran and its proxy forces. While we have seen continued recovery in commodity prices since the beginning of the pandemic, there is still volatility that we expect to continue at least for the near-term and possibly longer, due to these conflicts. This volatility could result in economic recession or depression and negatively impact future prices for crude oil, natural gas, petroleum products and industrial products.

In addition, if we see a continuation or acceleration of inflationary conditions, rising interest rates, supply chain disruptions and tight labor markets, we may also see higher costs of operating our assets and executing on our capital projects in fiscal year 2025. In an effort to curb inflation, the U.S. Federal Reserve raised interest rates during fiscal year 2023, in May 2023 and most recently in July 2023. If the U.S. Federal Reserve implements additional increases, costs under our variable-rate debt and preferred units will increase (see “Item 3. Quantitative and Qualitative Disclosures About Market Risk–Interest Rate Risk” included in this Quarterly Report). On the other hand, our ability to pass along rate increases reflecting changes in producer and/or consumer price indices to our customers, under our contracts, should help to counterbalance the impact of inflation on our costs.

Seismic Activity

The subsurface injection of produced water for disposal has been associated with induced seismic events in Texas and New Mexico. While these events have been of relatively low magnitude, industry and relevant state regulators are, nevertheless, taking proactive measures to attempt to prevent similar induced seismic events. More specifically, we are engaged in various collaborative industry efforts with other disposal operators and relevant state regulatory agencies, working to collect and review data, enhance understanding of regional fault systems, and ultimately develop and implement appropriate longer-term mitigation strategies. As part of this effort, we have implemented reductions in injected volumes at certain facilities, and where appropriate have temporarily shut-in facilities. To date, due to the capacity of our integrated system in the affected areas, the diverse locations of our disposal facilities, and the connectivity of our system, our ability to dispose of produced water has not been materially impacted by these actions, and with our unique positioning outside of the affected areas, we have the ability to grow our asset base.

Regulatory Developments

On March 6, 2024, the SEC adopted a new set of rules that require a wide range of climate-related disclosures, including material climate-related risks, information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition, Scope 1 and Scope 2 greenhouse gas emissions on a phased-in basis by certain larger registrants when those emissions are material and the filing of an attestation report covering the same, and disclosure of the financial statement effects of severe weather events and other natural conditions including costs and losses. Compliance dates under the final rule are phased in by registrant category. Multiple lawsuits have been filed challenging the SEC’s new climate rules, which have been consolidated and will be heard in the U.S. Court of Appeals for the Eighth Circuit. On April 4, 2024, the SEC issued an order staying the final rules until judicial review is complete.

Subsequent Events

See Note 17 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of transactions that occurred subsequent to December 31, 2024.

Segment Operating Results for the Three Months Ended December 31, 2024 and 2023

Water Solutions

The following table summarizes the operating results of our Water Solutions segment for the periods indicated:

(in thousands, except per barrel and per day amounts)

(1) Total produced water barrels processed during the three months ended December 31, 2024 and 2023 were 241,343,277 and 218,646,417, respectively. These amounts do not include 16,410,749 barrels and 20,992,750 barrels for the three months ended December 31, 2024 and 2023, respectively, related to payments made by certain producers for committed volumes not delivered, as discussed further below. In addition, water pipeline revenue, which is included in Other Revenues, includes payments from a producer for 9,938,582 committed barrels not delivered during the three months ended December 31, 2024.

(2) Excluding payments made by certain producers for committed volumes not delivered, service fees for produced water processed ($/barrel) would have been $0.60/barrel and $0.61/barrel during the three months ended December 31, 2024 and 2023, respectively.

Water Disposal Service Fee Revenues. The increase was due primarily to an increase in produced water volumes processed from contracted customers and higher fees charged for interruptible spot volumes. These increases were partially offset by the expiration of certain higher fee per barrel contracts which were replaced with lower fee per barrel contracts with an extended term and higher volumes received under contracts with lower fees per barrel. There was also a decrease in payments made by certain producers for committed volumes not delivered.

Recovered Crude Oil Revenues. The decrease was due primarily to lower realized crude oil prices received from the sale of skim oil barrels, partially offset by an increase in skim oil barrels sold due to more skim oil recovered from receiving more water in higher oil cut basins.

Recycled Water Revenues. Revenue from recycled water includes the sale of produced water and recycled water for use in our customers’ completion activities. The decrease was due primarily to a decrease in recycled water volumes related to timing of water to be used in completions.

Other Revenues. Other revenues primarily include reimbursements from construction projects, booster operating fees and generator rentals, water pipeline revenues, solids disposal revenues, land surface use revenues and brackish non-potable water revenues. The increase was due primarily to higher water pipeline revenue, including payments from a producer for committed volumes not delivered, due to our expanded Lea County Express Pipeline system (“LEX II”) commencing operations during the current quarter. This increase was partially offset by lower land surface use revenues, mining revenues and lease revenue from certain surface use and compensation agreements primarily due to the sale of our ranches in April 2024 (see Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report). We also had lower reimbursements from construction projects, booster operating fees and generator rentals.

Cost of Sales-Excluding Impact of Derivatives. The decrease was due primarily to lower recycling costs and a decrease in disposal fees paid to third-parties, partially offset by costs incurred that will be reimbursed by producers for generator and fuel costs at various booster stations.

Derivative Loss (Gain). We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the crude oil we expect to recover when processing produced water and selling recovered skim oil. During the three months ended December 31, 2024, we had $1.9 million of net unrealized losses on derivatives and less than $0.1 million of net realized losses on derivatives. During the three months ended December 31, 2023, we had $6.4 million of net unrealized gains on derivatives and $1.1 million of net realized losses on derivatives.

Operating and General and Administrative Expenses. The decrease was due primarily to lower utilities expense due to a negotiated long-term utility contract with lower rates, lower chemical expense due to purchasing fewer chemicals and using them more efficiently and lower repairs and maintenance expense due to the timing of repairs and tank cleaning. These decreases were partially offset by higher royalty expense due to volumes related to the LEX II pipeline commencing operations and increased volumes at certain other saltwater disposal wells.

Depreciation and Amortization Expense. The increase was due primarily to depreciation of newly developed facilities and infrastructure, partially offset by certain long-term assets being fully amortized, impaired or sold during the fiscal year ended March 31, 2024 and nine months ended December 31, 2024.

Loss (Gain) on Disposal or Impairment of Assets, Net. During the three months ended December 31, 2024, we recorded a net loss of $7.4 million primarily related to the write down of the value of certain saltwater disposal wells as well as abandonment of certain capital projects and the retirement of certain other assets. We also recorded a $3.4 million loss from the settlement of a dispute related to a force majeure event, which resulted in the plugging and abandoning of a disposal well in a prior period. In addition, we recorded a gain of $0.2 million from insurance recoveries for certain saltwater disposal facilities and boosters damaged in a prior period. During the three months ended December 31, 2023, we recorded a gain of $2.3 million from insurance recoveries for certain saltwater disposal facilities and boosters damaged in a prior period. In addition, we recorded a net loss of $0.9 million related to the abandonment of certain capital projects and the retirement of certain assets and a net loss of $0.9 million primarily related to the sale of certain assets.

Revaluation of Liabilities. During the three months ended December 31, 2024, there was a decrease in expense related to the write-off of a portion of our contingent consideration liability related to royalty agreements acquired as part of certain business combinations, as we no longer expect to make royalty payments for a certain saltwater disposal well that was plugged and abandoned.

Crude Oil Logistics

The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated:

(in thousands, except per barrel amounts)

(1) Revenues include $0.2 million and $0.1 million of intersegment sales during the three months ended December 31, 2024 and 2023, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.

(2) Information is presented as of December 31, 2024 and December 31, 2023, respectively.

(3) Cost and product margin per barrel excludes the impact of derivatives.

Crude Oil Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were due primarily to lower sales volumes due to lower production on acreage dedicated to us in the DJ Basin during the three months ended December 31, 2024, compared to the three months ended December 31, 2023. Lower crude oil prices also contributed to the decrease.

During the three months ended December 31, 2024, the crude oil product margin decreased primarily due to lower volumes as discussed further above. The increase in the crude oil product margin per barrel for the three months ended December 31, 2024 was favorably impacted from the sale of the remaining pipeline transportation deficiency credits included in gross margin. When the impact of the sale of the pipeline transportation deficiency credits is removed, crude oil product margin per barrel realized is consistent during the three months ended December 31, 2024, compared to the three months ended December 31, 2023. Crude oil product margin calculations do not include gains and losses from derivatives that may offset the movement in the physical margin.

Derivative Loss (Gain). Our cost of sales during the three months ended December 31, 2024 included $0.5 million of net realized losses on derivatives and $1.5 million of net unrealized losses on derivatives. Our cost of sales during the three months ended December 31, 2023 included $59.6 million of net realized gains on derivatives and $52.0 million of net unrealized losses on derivatives. The amounts for the three months ended December 31, 2023 included net realized gains of $61.5 million and net unrealized losses of $61.0 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under “Non-GAAP Financial Measures.” The CMA hedge expired as of December 31, 2023 and we did not enter into another hedge.

Crude Oil Transportation and Other Sales. The increase was primarily due to higher tariff revenue on the Grand Mesa Pipeline as a result of signing a new shipper during the open season that ended January 5, 2024 and higher throughput revenue. These increases were partially offset by lower storage fees at our Cushing terminal during the three months ended December 31, 2024, compared to the prior period.

During the three months ended December 31, 2024, physical volumes on the Grand Mesa Pipeline averaged approximately 61,000 barrels per day, compared to approximately 70,000 barrels per day during the three months ended December 31, 2023. Lower contracted volumes were shipped on the Grand Mesa Pipeline due to lower production on acreage dedicated to us in the DJ Basin.

Operating and General and Administrative Expenses. The increase was primarily due to a higher incentive compensation expense accrual during the three months ended December 31, 2024. This increase was partially offset by lower utilities expense on the Grand Mesa Pipeline and at our Cushing terminal from lower volumes flowing through the system and lower corporate cost allocations during the three months ended December 31, 2024, compared to the three months ended December 31, 2023.

Depreciation and Amortization Expense. The decrease was primarily due to certain assets becoming fully depreciated during the year ended March 31, 2024.

Loss on Disposal or Impairment of Assets, Net. During the three months ended December 31, 2023, we recorded a net loss of $2.0 million primarily due to disposals and retirements of certain real estate assets.

Liquids Logistics

The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated:

(in thousands, except per gallon amounts)

43

(in thousands, except per gallon amounts)

(1) Information is presented as of December 31, 2024 and December 31, 2023, respectively.

(2) Cost and product margin (loss) per gallon excludes the impact of derivatives.

Refined Products Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, during the three months ended December 31, 2024 were primarily due to lower commodity prices during the current quarter and a decrease in volumes due to lower demand.

Refined Products product margins, excluding the impact of derivatives, decreased during the three months ended December 31, 2024. This decrease was primarily related to lower commodity prices, aggressive prices in the market from our competitors and lower volumes in some key markets due to supplier issues.

Refined Products Derivative Gain. Our cost of refined products sales during the three months ended December 31, 2024 included unrealized gains of less than $0.1 million and the three months ended December 31, 2023 included realized gains of $0.1 million.

Propane Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were due primarily to lower volumes. Volumes decreased during the three months ended December 31, 2024 due to reduced retail customer demand resulting in lower contracted volumes due to the warmer than normal winters the past several years and lower spot market volumes due to the warmer weather during the period. This decrease was partially offset by higher average propane prices during the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Propane product margins, excluding the impact of derivatives, decreased during the three months ended December 31, 2024 due to lower volumes. During the three months ended December 31, 2023, we sold lower priced inventory into a market in which prices were increasing. Also, we incurred higher than anticipated costs to clean and repair railcars coming off lease during the three months ended December 31, 2024.

Propane Derivative Gain. Our cost of propane sales during the three months ended December 31, 2024 included net unrealized gains of $1.9 million on derivatives and $1.3 million of net realized losses on derivatives. Our cost of propane sales during the three months ended December 31, 2023 included $3.0 million of net unrealized gains on derivatives and $1.9 million of net realized losses on derivatives.

Butane Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in sales and cost of sales, excluding the impact of derivatives, were primarily due to increased commodity prices during the three months ended December 31, 2024 compared to prices during the three months ended December 31, 2023. These increases were offset by lower volumes due to a weaker gasoline blending season and a weaker spot market during the three months ended December 31, 2024.

Butane product margins, excluding the impact of derivatives, increased during the three months ended December 31, 2024 due to selling lower priced butane into a market in which prices were increasing.

Butane Derivative Loss. Our cost of butane sales during the three months ended December 31, 2024 included $3.5 million of net unrealized gains on derivatives and $11.2 million of net realized losses on derivatives. Our cost of butane sales during the three months ended December 31, 2023 included $6.5 million of net unrealized losses on derivatives and $0.5 million of net realized losses on derivatives.

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were due to a decrease in commodity prices, primarily biodiesel prices and prices for renewable identification numbers (“RINs”), during the three months ended December 31, 2024 compared with the three months ended December 31, 2023. This was partially offset by increased volumes as we decided to wind down our biodiesel business and worked to close out our open purchase and sale contracts. Volumes also increased due to strong spot markets for natural gasoline and isobutane and consistent supply of asphalt during the three months ended December 31, 2024.

Other products sales product margins, excluding the impact of derivatives, increased during the three months ended December 31, 2024 due to the increase in volumes, as discussed above, and improved differentials for natural gasoline and isobutane as a result of the strong spot market. In addition, during the three months ended December 31, 2023, the supply of biodiesel increased in the market due to the Environmental Protection Agency (“EPA”) final renewable fuels standards (“RFS”) mandate, which lowered biodiesel and RIN’s prices, which impacted margins.

Other Products Derivative Loss (Gain). Our derivatives of other products during the three months ended December 31, 2024 included $1.1 million of net unrealized losses on derivatives and $1.4 million of net realized losses on derivatives. Our derivatives of other products during the three months ended December 31, 2023 included $0.1 million of net unrealized losses on derivatives and $5.4 million of net realized gains on derivatives.

Service Sales and Cost of Sales. The sales includes storage, terminaling and transportation services income. Revenues and cost of sales during the three months ended December 31, 2024 were consistent with the three months ended December 31, 2023.

Operating and General and Administrative Expenses. The decrease during the three months ended December 31, 2024 compared to three months ended December 31, 2023 is due primarily to a decrease in incentive compensation due to lower than expected earnings and lower travel and entertainment expenses due to our efforts in the prior year to visit all customers.

Depreciation and Amortization Expense. Depreciation and amortization expense remained consistent year over year.

Gain on Disposal or Impairment of Assets, Net. During the three months ended December 31, 2024, we recorded a net gain of $0.6 million due to the sale of land. During the three months ended December 31, 2023, we recorded a net gain of $1.6 million on the sale of a terminal.

Corporate and Other

The operating loss within “Corporate and Other” includes the following components for the periods indicated:

(in thousands)

Service Revenues. These revenues relate to billings to the noncontrolling interest holders for usage of the airplanes acquired in June and October 2024.

Cost of Sales - Derivative Gain. Our cost of sales during the three months ended December 31, 2023 included $0.2 million of net realized gains on derivatives and $1.6 million of net unrealized gains on derivatives. We entered into economic hedges to protect our liquidity positions and leverage from a significant increase in commodity prices that drive our working capital demands. There were no open hedge positions that would impact cost of sales as of December 31, 2024.

General and Administrative Expenses. The expenses during the three months ended December 31, 2024 decreased due to business insurance expense being lower for the period, as we paid an insurance company during the three months ended December 31, 2023 for the release of any supplementary calls related to our former crude marine business and a reduction in current year automobile claims. In addition, legal expenses were lower as several large cases ended and lease expense decreased due to subleasing part of our office space in Denver, Colorado and reducing our office space in Tulsa, Oklahoma.

Depreciation and Amortization Expense. The decrease during the three months ended December 31, 2024 was due to software that became fully depreciated during the year ended March 31, 2024.

Loss (Gain) on Disposal or Impairment of Assets, Net. During the three months ended December 31, 2024, we recorded a net loss of less than $0.1 million due to the write-off of information technology equipment. During the three months ended December 31, 2023, we sold an airplane for a gain of $0.7 million.

Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated entities was $1.4 million during the three months ended December 31, 2024, compared to $0.8 million during the three months ended December 31, 2023. The increase of $0.5 million during the three months ended December 31, 2024 was due primarily to higher earnings from certain membership interests related to specific land and water services operations.

Interest Expense

The following table summarizes the components of our consolidated interest expense for the periods indicated:

(in thousands)

The debt interest expense increased $14.6 million during the three months ended December 31, 2024 primarily due to higher interest rates on the Term Loan B, the $900.0 million of 8.125% senior secured notes that mature on February 15, 2029 (“2029 Senior Secured Notes”) and the $1.3 billion of 8.375% senior secured notes that mature on February 15, 2032 (“2032 Senior Secured Notes”) compared to our outstanding debt instruments in the prior year period.

Gain on Early Extinguishment of Liabilities, Net

We did not repurchase any debt during the three months ended December 31, 2024 or 2023.

Other Income, Net

Other income, net of $0.5 million during the three months ended December 31, 2024 consisted of a gain on the expiration of an option, interest income on loan receivables and an unrealized loss on an investment. Other income, net of $0.5 million during the three months ended December 31, 2023 consisted primarily of interest income on loan receivables (see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Income Tax Benefit (Expense)

Income tax benefit was $0.3 million during the three months ended December 31, 2024, compared to income tax expense of $0.2 million during the three months ended December 31, 2023. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Noncontrolling Interests - Redeemable and Nonredeemable

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. Noncontrolling interest income was $1.1 million during the three months ended December 31, 2024, compared to $0.1 million during the three months ended December 31, 2023. The increase of $1.0 million during the three months ended December 31, 2024 was due primarily to higher income from certain water solutions operations.

Segment Operating Results for the Nine Months Ended December 31, 2024 and 2023

Water Solutions

The following table summarizes the operating results of our Water Solutions segment for the periods indicated:

(in thousands, except per barrel and per day amounts)

(1) As of March 31, 2023, approximately 34,380 barrels of skim oil were stored and were sold during the nine months ended December 31, 2023.

(2) Total produced water barrels processed during the nine months ended December 31, 2024 and 2023 were 712,392,342 and 666,972,306, respectively. These amounts do not include 35,804,097 barrels and 44,866,717 barrels for the nine months ended December 31, 2024 and 2023, respectively, related to payments made by certain producers for committed volumes not delivered, as discussed further below. In addition, water pipeline revenue, which is included in Other Revenues, includes payments from a producer for 9,938,582 committed barrels not delivered during the nine months ended December 31, 2024.

(3) Excluding payments made by certain producers for committed volumes not delivered and the one-time item discussed below, service fees for produced water processed ($/barrel) would have been $0.60/barrel and $0.62/barrel during the nine months ended December 31, 2024 and 2023, respectively.

Water Disposal Service Fee Revenues. The increase was due primarily to an increase in produced water volumes processed from contracted customers and higher fees charged for interruptible spot volumes. These increases were partially offset by the expiration of certain higher fee per barrel contracts which were replaced with lower fee per barrel contracts with an extended term and higher volumes received under contracts with lower fees per barrel. There was also a decrease in payments made by certain producers for committed volumes not delivered. In addition, during July 2023, we entered into a transaction in which a portion of the total consideration received was allocated to revenue due to the termination of a minimum volume water disposal contract.

Recovered Crude Oil Revenues. The increase was due primarily to an increase in skim oil barrels sold due to more skim oil recovered from receiving more water in higher oil cut basins, partially offset by lower realized crude oil prices received from the sale of skim oil barrels. Also, during the nine months ended December 31, 2023, we sold approximately 34,380 barrels of skim oil that were stored as of March 31, 2023 due to tighter pipeline specifications.

Recycled Water Revenues. The decrease was due primarily to lower pricing for recycled water, partially offset by an increase in recycled water volumes related to timing of water to be used in completions.

Other Revenues. The decrease was due primarily to lower land surface use revenues, mining revenues and lease revenue from certain surface use and compensation agreements primarily due to the sale of our ranches in April 2024 (see Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report). We also had lower reimbursements from construction projects, booster operating fees and generator rentals. These decreases were partially offset by higher water pipeline revenue, including payments from a producer for committed volumes not delivered, due to our LEX II pipeline commencing operations during the current quarter.

Cost of Sales-Excluding Impact of Derivatives. The decrease was due primarily to lower recycling costs and a decrease in disposal fees paid to third-parties, partially offset by costs incurred that will be reimbursed by producers for generator and fuel costs at various booster stations.

Derivative Gain. During the nine months ended December 31, 2024, we had $1.4 million of net unrealized losses on derivatives and $2.7 million of net realized gains on derivatives. During the nine months ended December 31, 2023, we had $2.0 million of net unrealized gains on derivatives and $1.1 million of net realized losses on derivatives.

Operating and General and Administrative Expenses. The decrease was due primarily to lower chemical expense due to purchasing fewer chemicals and using them more efficiently and lower repairs and maintenance expense due to the timing of repairs and tank cleaning. These decreases were partially offset by higher business insurance expense for remediation costs incurred, higher royalty expense due to volumes related to the LEX II pipeline commencing operations and increased volumes at certain other saltwater disposal wells and lower severance taxes in the prior year quarter as a result of a severance tax refund in September 2023 related to prior periods.

Depreciation and Amortization Expense. The increase was due primarily to depreciation of newly developed facilities and infrastructure, partially offset by certain long-term assets being fully amortized, impaired or sold during the fiscal year ended March 31, 2024 and nine months ended December 31, 2024.

Loss on Disposal or Impairment of Assets, Net. During the nine months ended December 31, 2024, we recorded a net loss of $11.0 million primarily related to the write down of the value of certain saltwater disposal wells as well as abandonment of certain capital projects and the retirement of certain other assets. We also recorded a $3.4 million loss from the settlement of a dispute related to a force majeure event, which resulted in the plugging and abandoning of a disposal well in a prior period. In addition, we recorded a net gain of $10.5 million primarily related to the sale of certain assets (see Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report) and a gain of $2.0 million from insurance recoveries for certain saltwater disposal facilities and boosters damaged in a prior period. During the nine months ended December 31, 2023, we recorded a net loss of $17.1 million primarily related to the sale of certain assets and a net loss of $7.9 million related to the abandonment of certain capital projects and the retirement of certain assets. In addition, we recorded a gain of $3.2 million from insurance recoveries for certain saltwater disposal facilities and boosters damaged in a prior period.

Revaluation of Liabilities. During the nine months ended December 31, 2024, there was a decrease in expense related to the write-off of a portion of our contingent consideration liability related to royalty agreements acquired as part of certain business combinations, as we no longer expect to make royalty payments for a certain saltwater disposal well that was plugged and abandoned.

Crude Oil Logistics

The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated:

(in thousands, except per barrel amounts)

(1) Revenues include $0.4 million and $0.4 million of intersegment sales during the nine months ended December 31, 2024 and 2023, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.

(2) Information is presented as of December 31, 2024 and December 31, 2023, respectively.

(3) Cost and product margin per barrel excludes the impact of derivatives.

Crude Oil Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were due primarily to lower sales volumes due to lower production on acreage dedicated to us in the DJ Basin during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023.

During the nine months ended December 31, 2024, the crude oil product margin decreased primarily due to lower volumes as discussed further above. Contributing to the decrease in product margin and margin per barrel was the expiration of certain higher-margin purchase contracts on December 31, 2023, which resulted in lower margin realized on barrels purchased during the nine months ended December 31, 2024 , compared with the nine months ended December 31, 2023. The decrease in margin per barrel for the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023 was partially offset by higher price and quality differentials realized, and the sale of the remaining pipeline transportation deficiency credits included in gross margin in the nine months ended December 31, 2024. Crude oil product margin calculations do not include gains and losses from derivatives that may offset the movement in the physical margin.

Derivative (Gain) Loss. Our cost of sales during the nine months ended December 31, 2024 included $1.3 million of net realized losses on derivatives and $4.5 million of net unrealized gains on derivatives. Our cost of sales during the nine months ended December 31, 2023 included $61.1 million of net realized gains on derivatives and $61.7 million of net unrealized losses on derivatives. The amounts for the nine months ended December 31, 2023 included net realized gains of $60.9 million and net unrealized losses of $61.4 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under “Non-GAAP Financial Measures.” The CMA hedge expired as of December 31, 2023 and we did not enter into another hedge.

Crude Oil Transportation and Other Sales. The increase was primarily due to higher tariff revenue on the Grand Mesa Pipeline as a result of signing a new shipper during the open season that ended January 5, 2024. Additionally, the nine months ended December 31, 2024 also benefited from higher terminaling revenue from an acreage dedication in the Eagle Ford Basin and higher throughput revenue. These increases were partially offset by lower throughput fees due to lower volumes, and lower storage fees at our Cushing terminal during the nine months ended December 31, 2024, compared to the prior period.

During the nine months ended December 31, 2024, physical volumes on the Grand Mesa Pipeline averaged approximately 62,000 barrels per day, compared to approximately 71,000 barrels per day during the nine months ended December 31, 2023. Lower contracted volumes were shipped on the Grand Mesa Pipeline due to lower production on acreage dedicated to us in the DJ Basin.

Operating and General and Administrative Expenses. The decrease was primarily due to lower utilities expense and lower materials and supplies expense on the Grand Mesa Pipeline and at our Cushing terminal from lower volumes flowing through the system during the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023. Additionally, the nine months ended December 31, 2024 benefited from lower cleaning, repairs and maintenance costs on our owned railcars, lower environmental costs at one of our terminals, and lower corporate cost allocations. These decreases were partially offset by higher incentive compensation expenses and higher ad valorem taxes on our Grand Mesa Pipeline assets due to a higher assessed value by the State of Colorado, which we appealed and entered into a settlement in November 2024. The accrual for the three months ended December 31, 2024 was adjusted to reflect the settled amount per month which was consistent with the three months ended December 31, 2024.

Depreciation and Amortization Expense. The decrease was primarily due to certain assets becoming fully depreciated during the year ended March 31, 2024.

(Gain) Loss on Disposal or Impairment of Assets, Net. During the nine months ended December 31, 2024, we recorded a net gain of $0.4 million primarily due to a gain on the sale of certain assets. During the nine months ended December 31, 2023, we recorded a net loss of $2.5 million primarily due to disposals and retirements of certain assets.

Liquids Logistics

The following table summarizes the operating results of our Liquids Logistics segment for the periods indicated:

(in thousands, except per gallon amounts)

52

(in thousands, except per gallon amounts)

(1) Information is presented as of December 31, 2024 and December 31, 2023, respectively.

(2) Cost and product margin (loss) per gallon excludes the impact of derivatives.

Refined Products Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, during the nine months ended December 31, 2024 were primarily due to lower commodity prices during the nine months ended December 31, 2024 and a decrease in volumes due to lower demand.

Refined Products product margins, excluding the impact of derivatives, decreased during the nine months ended December 31, 2024. This decrease was due primarily to higher margins during the nine months ended December 31, 2023 due to higher demand in several markets experiencing tighter supply.

Refined Products Derivative (Gain) Loss. Our cost of refined products sales included unrealized gains of less than $0.1 million and realized gains of $0.1 million during the nine months ended December 31, 2024. During the nine months ended December 31, 2023, our cost of refined products sales included realized losses of less than $0.1 million.

Propane Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were due primarily to decreased volumes during the nine months ended December 31, 2024. Propane volumes decreased during the nine months ended December 31, 2024 due to lower contracted volumes and reduced retail customer demand.

Propane product margins, excluding the impact of derivatives, decreased as we sold higher priced inventory into a market of declining prices during the nine months ended December 31, 2024 compared to selling lower priced inventory into a market with rising prices during the nine months ended December 31, 2023. Also contributing to the decrease is the continued consolidation in the retail propane industry. We incurred higher than anticipated costs to clean and repair railcars coming off lease during the nine months ended December 31, 2024.

Propane Derivative Gain. Our cost of propane sales included $4.4 million of net unrealized losses on derivatives and $6.8 million of net realized gains on derivatives during the nine months ended December 31, 2024. During the nine months ended December 31, 2023, our cost of propane sales included $6.2 million of net unrealized gains on derivatives and $5.8 million of net realized losses on derivatives.

Butane Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in sales and cost of sales, excluding the impact of derivatives, during the nine months ended December 31, 2024, as compared to the nine months ended December 31, 2023, were due to higher butane prices during the nine months ended December 31, 2024, as compared to the nine months ended December 31, 2023.

Butane product margins, excluding the impact of derivatives, increased during the nine months ended December 31, 2024, as compared to the nine months ended December 31, 2023 due to selling lower priced butane into a market in which prices were increasing.

Butane Derivative Loss. Our cost of butane sales during the nine months ended December 31, 2024 included $4.2 million of net unrealized losses on derivatives and $11.1 million of net realized losses on derivatives. Our cost of butane sales included $4.2 million of net unrealized losses on derivatives and $2.2 million of net realized gains on derivatives during the nine months ended December 31, 2023.

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were primarily due to a decrease in commodity prices, primarily biodiesel prices and prices for RINs during the nine months ended December 31, 2024. This was partially offset by an increase in natural gasoline and isobutane sales due to stronger spot markets and consistent supply of asphalt during the nine months ended December 31, 2024.

Other products sales product margins, excluding the impact of derivatives, during the nine months ended December 31, 2024 increased due to the increase in volumes and improved differentials for natural gasoline and isobutane as a result of the strong spot market and an increase in asphalt sales due to the consistent supply during the nine months ended December 31, 2024. Also, market prices for biodiesel decreased during the three months ended December 31, 2023, due to the EPA’s final RFS mandate which lowered the required amount of biodiesel to be blended, thus increasing the amount of supply in the market and impacting margins.

Other Products Derivatives Loss (Gain). Our derivatives of other products during the nine months ended December 31, 2024 included $17.1 million of net unrealized losses on derivatives and $7.8 million of net realized gains on derivatives. Our derivatives of other products during the nine months ended December 31, 2023 included $0.1 million of net unrealized losses on derivatives and $13.7 million of net realized gains on derivatives.

Service Sales and Cost of Sales. The sales includes storage, terminaling and transportation services income. Revenues and cost of sales during the nine months ended December 31, 2024 were consistent with the nine months ended December 31, 2023.

Operating and General and Administrative Expenses. The decrease during the nine months ended December 31, 2024 compared to the nine months ended December 31, 2023 was primarily due to a decrease in incentive compensation due to lower than expected earnings, a decrease in travel and entertainment expenses due to our efforts in the prior year to visit all customers and lower office lease expense due to the sale of certain terminals in the prior year. These decreases were partially offset by an increase to the provision for expected credit losses.

Depreciation and Amortization Expense. The decrease during the nine months ended December 31, 2024 compared to the nine months ended December 31, 2023 was due to a customer relationship intangible asset being fully amortized as of June 30, 2023.

Gain on Disposal or Impairment of Assets, Net. During the nine months ended December 31, 2024, we recorded a net gain of $0.6 million due to the sale of land. During the nine months ended December 31, 2023, we recorded a net gain of $9.4 million due to the sale of three terminals.

Corporate and Other

The operating loss within “Corporate and Other” includes the following components for the periods indicated:

(in thousands)

Service Revenues. These revenues relate to billings to the noncontrolling interest holders for usage of the airplanes acquired in June and October 2024.

Cost of Sales - Derivative Gain. Our cost of sales during the nine months ended December 31, 2023 included $0.2 million of net realized losses on derivatives and $1.2 million of net unrealized gains on derivatives. We entered into economic hedges to protect our liquidity positions and leverage from a significant increase in commodity prices that drive our working capital demands. There were no open hedge positions that would impact cost of sales as of December 31, 2024.

General and Administrative Expenses. The expenses during the nine months ended December 31, 2024 were lower than the nine months ended December 31, 2023 due to lower legal expenses as several large cases ended and lower business insurance expense as we paid an insurance company in the prior year for the release of any supplementary calls related to our former crude marine business. Compensation expense was lower due to the elimination of share-based compensation expense due to all outstanding long-term incentive plan awards being fully vested in November 2023. In addition, lease expense decreased due to subleasing part of our office space in Denver, Colorado and reducing our office space in Tulsa, Oklahoma.

Depreciation and Amortization Expense. The decrease during the nine months ended December 31, 2024 was due to software that became fully depreciated during the year ended March 31, 2024.

Loss (Gain) on Disposal or Impairment of Assets, Net. During the nine months ended December 31, 2024, we recorded a net loss of less than $0.1 million due to the write-off of information technology equipment. During the nine months ended December 31, 2023, we sold an airplane for a gain of $0.7 million.

Equity in Earnings of Unconsolidated Entities

Equity in earnings of unconsolidated entities was $3.2 million during the nine months ended December 31, 2024, compared to $1.8 million during the nine months ended December 31, 2023. The increase of $1.4 million during the nine months ended December 31, 2024 was due primarily to higher earnings from certain membership interests related to specific land and water services operations.

Interest Expense

The following table summarizes the components of our consolidated interest expense for the periods indicated:

(in thousands)

The debt interest expense increased $40.5 million during the nine months ended December 31, 2024 primarily due to higher interest rates on the Term Loan B, the 2029 Senior Secured Notes and the 2032 Senior Secured Notes compared to our outstanding debt instruments in the prior year period.

Gain on Early Extinguishment of Liabilities, Net

Gain on early extinguishment of liabilities, net of $6.9 million during the nine months ended December 31, 2023 consisted of a net gain (inclusive of debt issuance costs written off) primarily related to the early extinguishment of a portion of the outstanding senior unsecured notes. We did not repurchase any debt during the nine months ended December 31, 2024.

Other Income, Net

Other income, net of $2.5 million during the nine months ended December 31, 2024 consisted of a gain on the expiration of an option, an unrealized gain on an investment and interest income on loan receivables. Other income, net of $1.1 million during the nine months ended December 31, 2023 consisted primarily of interest income on loan receivables (see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Income Tax Benefit (Expense)

Income tax benefit was $4.8 million during the nine months ended December 31, 2024, compared to income tax expense of $0.6 million during the nine months ended December 31, 2023. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Noncontrolling Interests - Redeemable and Nonredeemable

Noncontrolling interest income was $2.8 million during the nine months ended December 31, 2024, compared to $0.6 million during the nine months ended December 31, 2023. The increase of $2.2 million during the nine months ended December 31, 2024 was due primarily to higher income from certain water solutions operations.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided the non-GAAP financial measures of EBITDA and Adjusted EBITDA. These non-GAAP financial measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other entities, even when similar terms are used to identify such measures.

We define EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA excluding net unrealized gains and losses on derivatives, lower of cost or net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, revaluation of liabilities and other. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, income before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. We believe that EBITDA provides additional information to investors for evaluating our ability to make quarterly distributions to our unitholders and is presented solely as a supplemental measure. We believe that Adjusted EBITDA provides additional information to investors for evaluating our financial performance without regard to our financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as we define them, may not be comparable to EBITDA, Adjusted EBITDA, or similarly titled measures used by other entities.

For purposes of our Adjusted EBITDA calculation, we make a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, we record changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, we reverse the previously recorded unrealized gain or loss and record a realized gain or loss. In our Crude Oil Logistics segment, we purchase certain crude oil barrels using the West Texas Intermediate (“WTI”) calendar month average (“CMA”) price and sell the crude oil barrels using the WTI CMA price plus the Argus CMA Differential Roll Component (“CMA Differential Roll”) per our contracts. To eliminate the volatility of the CMA Differential Roll, we entered into derivative instrument positions in January 2021 to secure a margin of approximately $0.20 per barrel on 1.5 million barrels per month from May 2021 through December 2023. Due to the nature of these positions, the cash flow and earnings recognized on a GAAP basis differed from period to period depending on the current crude oil price and future estimated crude oil price which were valued utilizing third-party market quoted prices. We recognized in Adjusted EBITDA the gains and losses from the derivative instrument positions entered into in January 2021 to properly align with the physical margin we hedged each month through the term of this transaction. This representation aligns with management’s evaluation of the transaction. The derivative instrument positions we entered into related to the CMA Differential Roll expired as of December 31, 2023, and we have not entered into any new derivative instrument positions related to the CMA Differential Roll.

As previously reported, for purposes of our Adjusted EBITDA calculation, we did not draw a distinction between realized and unrealized gains and losses on derivatives of certain businesses within our Liquids Logistics segment. The primary hedging strategy of these businesses is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges cover extended periods of time. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of these businesses at the balance sheet date and its cost. We include this in Adjusted EBITDA because the unrealized gains and losses for derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA. Beginning April 1, 2024, and going forward, we will now be drawing a distinction between realized and unrealized gains and losses on derivatives and will no longer include the activity on the “inventory valuation adjustment” row in the reconciliation table for these certain businesses within our Liquids Logistics segment. This change aligns with how management now views and evaluates the transactions within these businesses and is also consistent with the calculation of Adjusted EBITDA used in our other businesses. If this change was made as of April 1, 2023, Adjusted EBITDA for the three months and nine months ended December 31, 2023 would have been $149.9 million and $461.8 million, respectively.

The following table reconciles net income to EBITDA and Adjusted EBITDA for the periods indicated:

(in thousands)

(1) Excludes amounts related to unconsolidated entities and noncontrolling interests.

(2) Adjustment to align, within Adjusted EBITDA, the net gains and losses of the Partnership’s CMA Differential Roll derivative instruments positions with the physical margin being hedged. See “Non-GAAP Financial Measures” section above for a further discussion.

(3) Amounts represent the difference between the market value of the inventory at the balance sheet date and its cost. See “Non-GAAP Financial Measures” section above for a further discussion.

(4) Amounts represent the write-off of a portion of our contingent consideration liability related to royalty agreements acquired as part of certain business combinations in our Water Solutions segment as we no longer expect to make royalty payments for a certain saltwater disposal well that was plugged and abandoned.

(5) Amounts represent accretion expense for asset retirement obligations, expenses incurred related to legal and advisory costs associated with acquisitions and dispositions and unrealized gains/losses on investments and marketable securities.

The following tables reconcile depreciation and amortization amounts per the EBITDA table above to depreciation and amortization amounts in our unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the periods indicated:

(in thousands)

58

(in thousands)

The following table reconciles interest expense per the EBITDA table above to interest expense in our unaudited condensed consolidated statements of operations for the periods indicated:

(in thousands)

The following tables reconcile operating income (loss) to Adjusted EBITDA by segment for the periods indicated:

(in thousands)

59

(in thousands)

(in thousands)

(in thousands)

60

Liquidity, Sources of Capital and Capital Resource Activities

General

Our principal sources of liquidity and capital resource requirements are cash flows from our operations, borrowings under the $600.0 million asset-based revolving credit facility (“ABL Facility”), issuing long-term notes, common and/or preferred units, loans from financial institutions, asset securitizations or asset sales. We expect our primary cash outflows to be related to capital expenditures, interest, repayment of debt maturities and distributions.

We believe that our anticipated cash flows from operations and the borrowing capacity under the ABL Facility will be sufficient to meet our liquidity needs. Our borrowing needs vary during the year due in part to the seasonal nature of certain businesses within our Liquids Logistics segment. Our greatest working capital borrowing needs generally occur during the period of June through December, when we are building our natural gas liquids inventories in anticipation of the butane blending and propane heating seasons. Our working capital borrowing needs generally decline during the period of January through March, when the cash inflows from our Liquids Logistics segment are the greatest. In addition, our working capital borrowing needs vary with changes in commodity prices. A significant increase in commodity prices could drive up our working capital demands and limit our ability to continue to delever our balance sheet and restrict our financial flexibility. To protect our liquidity and leverage, we have in the past and may in the future enter into economic hedges that mitigate this exposure when we are building inventory. There were no open hedge positions as of December 31, 2024.

Cash Management

We manage cash by utilizing a centralized cash management program that concentrates the cash assets of our operating subsidiaries in joint accounts for the purposes of providing financial flexibility and lowering the cost of borrowing, transaction costs and bank fees. Our centralized cash management program provides that funds in excess of the daily needs of our operating subsidiaries are concentrated, consolidated or otherwise made available for use within our consolidated group. All of our wholly-owned operating subsidiaries participate in this program. Under the cash management program, depending on whether a participating subsidiary has short-term cash surpluses or cash requirements, we provide cash to the subsidiary or the subsidiary provides cash to us.

Short-Term Liquidity

Our principal sources of short-term liquidity consist of cash flows from our operations and borrowings under the ABL Facility, which we believe will provide liquidity to operate our business, manage our working capital requirements and repay current maturities.

Commitments under the ABL Facility are $600.0 million, subject to a borrowing base, and includes a sub-limit for letters of credit of $200.0 million. At December 31, 2024, $226.0 million was outstanding under the ABL Facility and we had letters of credit outstanding of $87.6 million. The ABL Facility is scheduled to mature at the earliest of (a) February 2, 2029 or (b) 91 days prior to the earliest maturity date in respect to any of our indebtedness in an aggregate principal amount of $50.0 million or greater, subject to certain exceptions.

For additional information related to the ABL Facility, see Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

As of December 31, 2024, our current assets exceeded our current liabilities by approximately $169.4 million.

Long-Term Financing

We expect to fund our long-term financing requirements by issuing long-term notes, common units and/or preferred units, loans from financial institutions, asset securitizations or asset sales.

Senior Secured Notes

On February 2, 2024, we closed on our private offering of $900.0 million of the 2029 Senior Secured Notes and $1.3 billion of the 2032 Senior Secured Notes. Interest on the 2029 Senior Secured Notes and 2032 Senior Secured Notes is payable on February 15, May 15, August 15 and November 15 of each year, beginning on May 15, 2024.

Term Loan B

On February 2, 2024, we entered into a new seven-year $700.0 million senior secured Term Loan B. The Term Loan B matures on February 2, 2031 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal amount beginning with the quarter ended June 30, 2024, with the balance payable on maturity.

For additional information related to our long-term debt, see Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Capital Expenditures, Acquisitions and Other Investments

The following table summarizes expansion, maintenance and other non-cash capital expenditures (which excludes additions for tank bottoms and linefill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated.

(in thousands)

(1) Amounts for the three months and nine months ended December 31, 2024 are related to a transaction classified as an acquisition of assets in a prior period.

(2) There were no acquisitions during the three months or nine months ended December 31, 2024 or 2023.

(3) Amounts for the nine months ended December 31, 2024 and 2023 relate to contributions made to unconsolidated entities. There were no other investments during the three months ended December 31, 2024 or 2023.

Capital expenditures for the fiscal year ending March 31, 2025 are expected to be approximately $210 million.

Distributions Declared

On February 4, 2021, the board of directors of our GP temporarily suspended all distributions, including common unit distributions which began with the quarter ended December 31, 2020 and preferred unit distributions which began with the quarter ended March 31, 2021.

On April 4, 2024, the board of directors of our GP declared a cash distribution of 55.4% of the outstanding distribution arrearages through the quarter ended March 31, 2024 to the holders of the Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”), the Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) and the 9.00% Class D Preferred Units (“Class D Preferred Units”). The total distribution of $120.0 million was made on April 18, 2024 to the holders of record at the close of trading on April 12, 2024.

On April 9, 2024, the board of directors of our GP declared a cash distribution to fully pay the remaining distribution arrearages and interest through the quarter ended March 31, 2024 to the holders of the Class B Preferred Units, the Class C Preferred Units and the Class D Preferred Units. The total distribution of $98.1 million, which included a distribution of $27.3 million earned during the quarter ended March 31, 2024, was made on April 25, 2024 to the holders of record at the close of trading on April 19, 2024.

As of April 25, 2024, all preferred unit distributions in arrears have been paid.

On June 21, 2024, the board of directors of our GP declared a cash distribution for the quarter ended June 30, 2024 to the holders of the Class B Preferred Units, the Class C Preferred Units and the Class D Preferred Units. The total distribution of $28.8 million was made on July 15, 2024 to the holders of record at the close of trading on July 1, 2024.

On September 19, 2024, the board of directors of our GP declared a cash distribution for the quarter ended September 30, 2024 to the holders of the Class B Preferred Units, the Class C Preferred Units and the Class D Preferred Units. The total distribution of $30.8 million was made on October 15, 2024 to the holders of record at the close of trading on October 1, 2024.

On December 12, 2024, the board of directors of our GP declared a cash distribution for the quarter ended December 31, 2024 to the holders of the Class B Preferred Units, the Class C Preferred Units and the Class D Preferred Units. The total distribution of $28.9 million was made on January 15, 2025 to the holders of record at the close of trading on January 1, 2025.

The board of directors of our GP expects to evaluate the reinstatement of the common unit distributions in due course, taking into account a number of important factors, including our leverage, liquidity, the sustainability of cash flows, upcoming debt maturities, capital expenditures and the overall performance of our businesses.

For additional information related to the payment of distributions, see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Contractual Obligations

Our contractual obligations primarily consist of purchase commitments, outstanding debt principal and interest obligations, operating lease obligations, pipeline commitments, asset retirement obligations and other commitments.

For a discussion of contractual obligations, see Note 7, Note 8 and Note 14 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Sources (Uses) of Cash

The following table summarizes the sources (uses) of cash and cash equivalents for the periods indicated (see the footnotes to our unaudited condensed consolidated financial statements included in this Quarterly Report for the footnotes referenced in the table):

(in thousands)

Operating Activities. The decrease in net cash provided by operating activities during the nine months ended December 31, 2024 was due primarily to lower earnings from operations as well as fluctuations in working capital, particularly accounts receivable and accounts payable, due to lower crude oil volumes and lower crude oil prices and the timing of invoices and payments on construction projects, partially offset by increased purchases and sales of natural gas liquids due to seasonal demand and fluctuations in inventory due to increased purchases and sales of natural gas liquids.

On June 13, 2024, we paid LCT Capital, LLC (“LCT”) $63.3 million related to the legal judgment against us, of which $27.2 million represented interest and $0.1 million of costs awarded to LCT.

Environmental Legislation

See our Annual Report for a discussion of proposed environmental legislation and regulations that, if enacted, could result in increased compliance and operating costs. However, at this time we cannot predict the structure or outcome of any future legislation or regulations or the eventual cost we could incur in compliance.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements that are applicable to us, see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires the selection and application of appropriate accounting principles to the relevant facts and circumstances of our operations and the use of estimates made by management. We have identified certain more critical judgment areas in the application of our accounting policies that are most important to the portrayal of our consolidated financial position and results of operations. The application of these accounting policies, which requires subjective or complex judgments regarding estimates and projected outcomes of future events, and changes in these accounting policies, could have a material effect on our consolidated financial statements. There have been no material changes in the critical accounting estimates previously disclosed in our Annual Report.

Interest Rate Risk

A portion of our long-term debt is variable-rate debt. Changes in interest rates impact the interest payments of our variable-rate debt but generally do not impact the fair value of the liability. Conversely, changes in interest rates impact the fair value of our fixed-rate debt but do not impact its cash flows.

The ABL Facility is variable-rate debt with interest rates that are generally indexed to the prime rate or a secured overnight financing rate (“SOFR”). At December 31, 2024, $226.0 million was outstanding under the ABL Facility at a weighted average interest rate of 7.74%. A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $0.3 million, based on borrowings outstanding at December 31, 2024.

The Term Loan B is variable-rate debt with interest rates that are generally indexed to SOFR. At December 31, 2024, $694.8 million was outstanding under the Term Loan B with an interest rate of SOFR of 4.36% plus a margin of 3.75%. A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $0.9 million, based on borrowings outstanding at December 31, 2024.

In March and April 2024, we entered into interest rate swaps totaling $400.0 million to reduce the variability of cash outflows associated with our floating-rate, SOFR-based borrowings, including borrowings on the Term Loan B. In September 2024, for the $200.0 million interest rate swap entered into in April 2024, we entered into a transaction to extend the original maturity date and to blend the existing swap rate (see Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion). An increase of 10% in the value of the underlying interest rate swaps would result in a net change in the fair value of our interest rate swaps of less than $0.1 million at December 31, 2024.

The current distribution rate for the Class B Preferred Units is a floating rate of the three-month CME Term SOFR plus a tenor spread adjustment plus a spread of 7.213% (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion). A change in interest rates of 0.125% would result in an increase or decrease of our Class B Preferred Unit distribution of $0.1 million, based on the Class B Preferred Units outstanding at December 31, 2024.

The current distribution rate for the Class C Preferred Units is a floating rate of the three-month CME Term SOFR plus a spread of 7.384% (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly

Report for a further discussion). A change in interest rates of 0.125% would result in an increase or decrease of our Class C Preferred Unit distribution of less than $0.1 million, based on the Class C Preferred Units outstanding at December 31, 2024.

The current distribution rate for the Class D Preferred Units is a floating rate of the three-month CME Term SOFR plus a spread of 7.00% (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion). A change in interest rates of 0.125% would result in an increase or decrease of our Class D Preferred Unit distribution of $0.2 million, based on the Class D Preferred Units outstanding at December 31, 2024.

Commodity Price Risk

Our operations are subject to certain business risks, including commodity price risk. Commodity price risk is the risk that the market value of crude oil, natural gas liquids, or refined and renewables products will change, either favorably or unfavorably, in response to changing market conditions. Procedures and limits for managing commodity price risks are specified in our market risk policy. Open commodity positions and market price changes are monitored daily and are reported to senior management and to marketing operations personnel.

The crude oil, natural gas liquids, and refined and renewables products industries are “margin-based” and “cost-plus” businesses in which our realized margins depend on the differential of sales prices over our supply costs. We have no control over market conditions. As a result, our profitability may be impacted by sudden and significant changes in the price of crude oil, natural gas liquids, and refined and renewables products.

We engage in various types of forward contracts and financial derivative transactions to reduce the effect of price volatility on our product costs, to protect the value of our inventory positions, and to help ensure the availability of product during periods of short supply. We attempt to balance our contractual portfolio by purchasing volumes when we have a matching purchase commitment from our wholesale and retail customers. We may experience net unbalanced positions from time to time. In addition to our ongoing policy to maintain a balanced position, for accounting purposes we are required, on an ongoing basis, to track and report the market value of our derivative portfolio.

Although we use financial derivative instruments to reduce the market price risk associated with forecasted transactions, we do not account for financial derivative transactions as hedges. All changes in the fair value of our physical contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our unaudited condensed consolidated statements of operations, regardless of whether the contract is physically or financially settled, and within cash flows from operations in our unaudited condensed consolidated statements of cash flows.

The following table summarizes the hypothetical impact on the December 31, 2024 fair value of our commodity derivatives of an increase of 10% in the value of the underlying commodity (in thousands):

Changes in commodity prices may also impact the volumes that we are able to transport, dispose, store and market, which also impact our cash flows.

Credit Risk

Our operations are also subject to credit risk, which is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract. Procedures and limits for managing credit risk are specified in our credit policy. Credit risk is monitored daily and we believe we minimize exposure through the following:

• requiring certain customers to prepay or place deposits for our products and services;
• requiring certain customers to post letters of credit or other forms of surety;
• monitoring individual customer receivables relative to previously-approved credit limits;
• requiring certain customers to take delivery of their contracted volume ratably rather than allow them to take delivery at their discretion;
• entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions;
• reviewing the receivable aging regularly to identify issues or trends that may develop; and
• requiring marketing personnel to manage their customers’ receivable position and suspend sales to customers that have not timely paid outstanding invoices.

At December 31, 2024, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers.

Fair Value

We determine the fair value of our exchange traded derivative financial instruments utilizing publicly available prices, and for non-exchange traded derivative financial instruments, we utilize pricing models for similar instruments including publicly available prices and forward curves generated from a compilation of data gathered from third-parties.

We maintain disclosure controls and procedures, as defined in Rule 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), that are designed to ensure the information required to be disclosed in our filings and submissions under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer of our GP, as appropriate, to allow timely decisions regarding required disclosure.

We completed an evaluation under the supervision and with participation of our management, including the principal executive officer and principal financial officer of our GP, of the effectiveness of the design and operation of our disclosure controls and procedures at December 31, 2024. Based on this evaluation, the principal executive officer and principal financial officer of our GP have concluded that as of December 31, 2024, such disclosure controls and procedures were effective.

There have been no changes in our internal controls over financial reporting (as defined in Rule 13(a)-15(f) of the Exchange Act) during the three months ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

There have been no material changes in the risk factors previously disclosed in Part I, Item 1A–“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.