Source: Streetwise Reports 03/19/2020
Shares of NGL Energy Partners traded higher after the company confirmed its fiscal 2020 EBITDA guidance and provided an update on current operations and capital expenditure reductions.
Midstream energy firm NGL Energy Partners LP (NGL:NYSE) today provided an update on its business operations in the face of the current commodity price environment. The partnership reported that its three primary businesses should continue to perform as expected in the near term.
The firm advised that “fiscal Year 2020 ending March 31, 2020 Adjusted EBITDA from continuing operations guidance range remains unchanged at $565-595 million.” The partnership additionally indicated that current produced water transportation and disposal volumes on its systems have increased in March to a record 1.9 MMbbl/d, including about 1.5 MMbbl/d in the Delaware Basin. The company additionally stated that it expects that the balance outstanding on its $1.9 billion revolving credit line will be about $1.5 billion as of March 31, 2020.
The company’s CEO Mike Krimbill commented, “Like many companies across our industry, the current environment will present us with real challenges going forward, but also presents us with new opportunities…We must be thoughtful and prudent in our response to greater crude oil supply and lower demand resulting from the effects of the coronavirus. We have taken a number of pro-active steps to solidify our financial position while keeping our operations running smoothly.”
The partnership advised that has undertaken several measures to strengthen its business operations. Specifically, it stated that it “high graded its Fiscal 2021 planned capital expenditure budget to leverage off the significant infrastructure investment made during this past year…and expects that for the fiscal year beginning April 1, 2020, growth capital expenditures will approximate $50 million all of which would be funded using free cash flow.”
The firm also advised that will exit its Gas Blending business by March 31, 2020, which will reduce working capital indebtedness by at least $50 million.
The partnership noted that “it operates in the most economic basins in the U.S. with some of strongest producers in the country under long-term, fee-based contracts and management views this as an opportunity to grow and strengthen those relationships and demonstrate NGL’s reliability as a midstream service provider.”
The firm pointed out that producers that are significantly hedged in calendar 2020 should continue producing and drilling and added that presently, “crude oil forward prices now reflect a contango market from which NGL can benefit by utilizing its approximately 1.5 million barrels of crude oil storage.”
CEO Krimbill added, “We are responding quickly in anticipation of an environment that could get increasingly challenging in calendar 2021. While our businesses continue to perform as expected, we are taking steps that will bolster our operating and financial results should the current commodity price environment continue for an extended period. We will continue to drive our costs down, seek out creative ways to use excess capacity across all of our assets, and maximize our financial position.”
NGL Energy Partners is a diversified midstream energy company with its main offices located in Tulsa, Okla. The company transports, stores, markets and provides logistics services for crude oil, natural gas liquids and other products. In addition, the firm transports, treats and disposes of produced water generated as part of the oil and natural gas production process.
NGL Energy Partners started the day with a market capitalization of around $192.5 million with approximately 128.3 million shares outstanding and a short interest of about 5.5%. NLG shares opened 54% higher today at $2.31 (+$0.81, +54.00%) over yesterday’s $1.50 closing price. The stock has traded today between $1.68 and $2.97 per share and is currently trading at $2.77 (+$1.27, +84.67%).
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