NGL Energy Partners LP

Good afternoon, ladies and gentlemen, and welcome to the NGL Energy Partners LP Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode, and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Linda Bridges. Ma'am, the floor is yours.

Hi, and again, welcome to NGL's Third Quarter Fiscal 2022 Earnings Call. I'd like to start by calling your attention to our safe harbor language, which can be found towards the end of the partnership's earnings release, which was filed after market closed this afternoon. Today's remarks may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the act, I would also like to direct your attention to the management's discussion and analysis section and the risk factors discussed in the partnership's annual report on Form 10-K, for the year ended March 31st, 2021, and in other SEC filings made by the partnership, which are available on our website and on the SEC's website. These, together with the safe harbor statement and the earnings release, set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statement. With that, I'll turn the mic over to Mike for opening remarks.

Thank you, Linda. We have our business segment leaders on the phone with us today to answer questions and provide an update on certain topics. But first, I'd like to provide context on the quarter and how that transitions to the next couple of fiscal years we spoke of on the last call. We were slightly disappointed in this quarter. We expected water solutions to come in around 90 million EBITDA, but due to lower water disposal volumes in October-November, we achieved about an $83 million EBITDA. Crude logistics EBITDA was expected to average about $35 million per quarter or $140 million annually, and we achieved a $30 million EBITDA this quarter. Liquid logistics is also below expectations, but due to the much warmer than normal temperatures during the quarter, October, November, December. Based on the fourth fiscal quarter thus far, We anticipate recouping a portion of the third quarter shortfall. We can all see the colder than normal temperatures in January and February that could benefit our liquids logistics. Crew logistics is seeing some benefits from differentials, but the DJ Basin seems to be going sideways, not adding to the rig count. But in our water solutions business, December EBITDA exceeded $30 million for the first time. For the last two weeks, we have averaged over 2 million barrels a day of produced water. This is 9% greater than the 1.84 million barrels a day received in the third quarter. As you may remember, we projected a 10% increase in our fiscal 2023 Water Solutions EBITDA, which is approximately 32 million EBITDA per month. We're almost there already this quarter, so we expect to enter fiscal 2023 at that $32 million level. So any growth in fiscal 2023 will provide upside to the water segment. With respect to skim oil, we recovered about 82,000 barrels per month in the third quarter at an average realized price of $72.50, which is about $78 before transportation costs. In January, we recovered 100,000 barrels, which we do expect to continue each month going forward. The current crude oil price is about $90 or approximately $12 a barrel above the third quarter pre-transportation price. So the current water volumes, monthly EBITDA, and skim oil recovered are all at new highs. We have slightly reduced our fiscal 2022 EBITDA range to 550 to 560, which is in line with the average analyst expectations. We are augmenting our free cash flow with asset sales of excess real estate and unused assets. We have closed on $12 million of sales thus far in fiscal 2022, and we have another $8 million in process to close before year-end, and we've identified another $20 million to sell in fiscal 2023. Our focus continues to be on repaying all of the 2023 unsecured notes prior to maturity, which we expect to achieve. So with that, I'd like to introduce our EVP of Water Solutions, Doug White, and ask him to discuss the current status of seismicity in the Delaware and Midland basins, which there's been a lot of, I think, discussion about, as well as the thinking behind the collaboration with XRI. So with that, I'll turn it over to you, Doug.