NGL Energy Partners LP

Ladies and gentlemen, thank you for standing by and welcome to the third quarter fiscal year 2020 NGL Energy Partners LP earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. For instance, please press star 0. It is now my pleasure to hand the conference over to CFO Trey Karlovich. All right. Thank you and welcome, everybody.

As a reminder, this conference call includes forward-looking statements and information, words such as anticipate, project, expect, plan, goal, forecast, intend, could, believe, may, and similar expressions and statements are intended to identify forward-looking statements. While NGOs... is that its expectations are based on reasonable assumptions that can be no assurance that such expectations will prove to be correct. A number of factors could cause actual results to differ materially from the projections, anticipated results, or other expectations included in the forward-looking statements. These factors include prices and market demand for natural gas, natural gas liquids, refined products, and crude oil, level of production of crude oil, natural gas liquids, and natural gas, Natural Gas and Natural Gas Liquids, and the ability to successfully identify and consummate growth opportunities and strategic acquisitions at costs that are accretive to financial results and to successfully integrate and operate assets and businesses that are built or acquired. Other factors that could impact these forward-looking statements are described in risk factors in the Partnership's annual report on Form 10-K, quarterly reports on Form 10-Q, and other public filings and press releases. NGL Energy Partners undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events, or otherwise. This conference call also includes certain non-GAAP measures namely EBITDA, adjusted EBITDA, and distributable cash flow which management believes are useful in evaluating our financial results. Please see the partnership's earnings releases, investor presentations, and annual and quarterly reports on Form 10-K and Form 10-Q on our website at www.ngoenergypartners.com under the Investor Relations tab for more information on our use of non-GAAP measures as well as reconciliations of differences between any non-GAAP measures discussed on this conference call to the most directly comparable GAAP financial measures. I will now turn the call over to our CEO, Mr. Mike Krimbill.

Thanks, Trey. This is a historic quarter with record-adjusted EBITDA in excess of $200 million, at least 20% higher than any retail analyst's projection. Our month trailing coming year coverage ratio skyrocketed from 1 times to 1.5 times. During the quarter, we closed the Hilson acquisition, which we previously discussed. and exited additional small to refined products businesses, further reducing volatility and working capital indebtedness. The quarter benefited from the diversity of our business units with crude oil and MGL logistics, achieving record-adjusted EBITDA results. Our water volume projections are provided by our producers. We do not make these up. You can read earnings transcripts and presentations from our customers to determine the exciting future rather than looking in the rearview mirror. For instance, a super major customer has only developed 3% of its position in the Delaware. Our water future is bright. First, I'd like to address some of these research reports. that have recently been published that provide advice, promote a scorecard approach, and ask questions which are correct in many cases but misguided in others. First, is MGL focused on rateable, predictable cash flows? Obviously, yes. We've exited the two business units that were most volatile. Our food segment remains highly contracted with long-term MVCs. and our liquids business is asset heavy with 27 terminals and 5,000 rail cars. We have substantially grown long-term contracted water revenues with acreage dedications and MVCs. And we have significantly increased these long-term contracts with investment grade customers. Second, is NGO increasing its financial discipline? Again, yes. We have been decreasing indebtedness to asset sales, preferred equity issuances, and Working Capital Reductions. We are dramatically reducing CapEx in fiscal 2021 beginning this April. We are approaching free cash flow positive status net of internal growth CapEx during fiscal 2021 as a result of lower CapEx. Is MGL management aligned with common unit holders? The answer clearly is yes, more so than most. Thank you. Thank you. We have defended our $1.56 unit distribution and refused to reduce it, even though our yield has increased to as high as 15% of times. We now have a common coverage ratio of 1.5 times and increasing, so we are comfortably earning our $1.56. Four, should NGL eliminate IDRs? The answer is yes, but how best to accomplish it without impacting the common unit holder? Most eliminations involved a significant dilution to the common unit holder and a unit price decline. We are taking our time in purchasing IDRs for cash at any future dilution. There is no difference between an MLP with no IDRs and an MLP with the IDRs that is distributing nothing to the GP owners while it purchases the IDRs. Research makes no sense when analysts place NGL in the penalty box because we have IDRs but pay nothing, and they have no distribution increases projected. Fifth, should NGL convert to a C-Corp? C-Corp conversions or simplifications were disguised common unit distribution cuts. These conversions often resulted in large tax gains to the common unit holder. These C-Corps will eventually become taxable and have the added risk of rising future corporate income tax rate. NGL is aligned with the communion holder. We will not convert. We will not stick our communion holders with a large tax gain. One reason given to convert is that C-Corps returned 25% in 2019 and MLPs lost 2%. These returns are correct, but we must scratch the surface to determine why. The LP returns were down due to significant decline in the G and P sectors. During 2019, NGL actually provided a 35% total return, better than the C-Corp average. Looking ahead, we asked ourselves where the NGL commonly in order to provide a 25% annual total return for each of those five years. The answer is approximately $21, or only a $2 per year increase in the common unit price. NGL should not be penalized because it's not a C-Corp. It should not be penalized because it has IDRs that pay nothing to the owners. NGL should be embraced for successfully completing its transformation, looking out for the common end holder, and creating the attractive value proposition going forward. So finally, our focus for the future. What is it? One, self-funding. Two, continued deleveraging. These two are now possible with a 1.5-community coverage and decreasing growth CapEx requirements. Three, we're increasing ACRE's dedications, MVCs, and extending tenor of existing contracts. And fourth, turn invest rate financial metrics and credit rating. So with that, Trey, turn it back to you.