Greetings, and welcome to the NGL Energy Partners 1Q 2024 Earnings Call. At this time all participants are in a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. I will now turn the conference over to your host, Brad Cooper, CFO of NGL Energy Partners. Brad, you may begin.

Good afternoon. And thank you to everyone for joining us on the call today. After the market close today, we issued an earnings release, investor presentation and filed our 10 Q. Comments today will include plans, forecasts and estimates that are forward-looking statements under the US Securities Law. These comments are subject to assumptions, risks and uncertainties that could cause actual results to differ from the forward-looking statements. Please take note of the cautionary language and risk factors provided in our SEC filing and earnings materials. With that, let's get into the quarterly results. We have continued our momentum from fiscal 2023 into the first quarter of fiscal 2020. Our Water Solutions business is on pace for another record year of adjusted EBITDA and disposal volumes with $123.2 million in adjusted EBITDA for the quarter. We are reaffirming our full year consolidated adjusted EBITDA guidance of $645 million plus. We are getting more capital efficient by spending less growth capital this year. And we are increasing our monetization guidance by 50% from $50 million to $75 million, thus increasing our free cash flow for the year. Our strategy to reduce absolute debt and leverage continues as we purchased 99.3 million of the 2025 unsecured notes early in the quarter, and reduced total leverage to 4.4 times at the end of the first quarter. As discussed on our last earnings call all the free cash flow this fiscal year will go straight to the balance sheet and will allow us to pay off the 2025 unsecured notes no later than March 31 2024. Our liquidity remains strong for this time of year. Recall earlier this year, we permanently extended our ABL commitment to $600 million through the life of the ABL. As of 6/30, we had approximately $286 million of liquidity…

Great. Thanks, Fred. Good afternoon and welcome. As you know, we do not provide quarterly adjusted EBITDA guidance, and the summer months are typically the slower ones for NGL. This is a typical first quarter with adjusted EBITDA of approximately $11 million above the prior year's first quarter. As we are only three months into the current fiscal year, it is too early to change guidance. So we are reaffirming our previous full year estimate EBITDA guidance of $640 million to $645 million plus, as you've heard. Note that our Water Solutions adjusted EBITDA this quarter was $123 million, which times four quarters is $492 million. This exceeds our current water solutions guidance of $475 million for the full year. If the second quarter is similar or better we will need to increase our Water Solutions' full year adjusted EBITDA guidance. I think we have Doug White on. Doug, if you're there, do you have any color on water?

Hey, Mike. I think the important thing to point out is we hit a new record peak day in the quarter in June, just shy of 2.8 million barrels. So that shows our abilities number one to take the water and have the ready capacity, but also that we are showing the forecasted growth that we believe in. Back half of the quarter showed some pretty heavy recycling, which is also not necessarily negative. The positive thing is when the producers are heavily recycling that just means new completions and new robust volumes to come.

Great, thanks. Okay, as I discussed in the last earnings call, our accelerated debt reduction was made possible by the non-core asset sales and reduced working capital requirements. During the first quarter, this first quarter, we sold $22 million of such non-core assets. Another $25 million have been sold since the end of the quarter, up to this timing of this call for a total of $47 million. So as Brad said, we're increasing our non-core asset sales from $50 million this year to $75 million. And of course, these additional sale proceeds will be deployed for further balance sheet improvement. With respect to growth capital expenditures, we're reducing our guidance from $75 million to $65 million, savings of 10 million. This takes our total CapEx both growth and maintenance for the full year from $125 million down to $115 million. This reduction in growth capital will not impact any of our water disposal volumes. So finally, to sum it up, we're on track to achieve our adjusted EBITDA guidance. And we are generating an additional $35 million of free cash flow for further debt reduction. We continue to be focused on increasing the adjusted EBITDA, reducing indebtedness and deleveraging further. Our goal remains repaying the '25 unsecured notes and refinancing the 2026 secured bonds. As such, we do not anticipate paying any preferred dividend or [indiscernible] in the current fiscal year. That said, I think we're approaching the time when we will regain a measure of financial flexibility. I think with that we open it to questions.

Thank you. The floor is now open for questions. [Operator Instructions]. And our first question today is coming from Sunil Sibal from Seaport Global. Sunil, your line is live. Please go ahead.

Yeah. Hi, good afternoon, everybody. So I just wanted to understand a little bit the trend in the water business, especially the sequential trends. So I believe the volumes, water volumes were essentially flat versus the previous quarter. But your margins was a little bit impacted. Could you talk a little bit about what was going on in that regard? I think we have a hard, you know, commentary from some other midstream players about challenges in Permian. Could you address that too?

Doug, do you want to take that?

Yes. Sunil, the difference between the Q4 and Q1, you are correct. We were very close to almost exact volumes in those two different quarters. As you can see, the adjusted EBITDA was very different. The main driver is that we had $12 million of MVC deficiency payments coming in Q4, of which we did not have those in Q1 with a small amount in Q1. That's typical for us for a fiscal year end. But if you see the other metrics within the business, we felt that the Q1 was an improvement over Q2 -- I'm sorry, over Q4. But the difference with an NBC volumes make it EBITDA indifferent.

Scott, [ph] what about the volumes? What are you seeing? I mean, we all read, I think there's been rig reductions in the U.S. I'm not sure much in the Permian. But what kind of -- what are you seeing activity wise? What do you expect your back half of this quarter in the next couple of quarters?

Yeah, we are forecasted for the second quarter to be our highest volumetric quarter for the fiscal year. There's a lot of recycling going on, currently, with produced water. We've seen swings of 300,000 to 400,000 barrels a day, in the Delaware. The back half of Q1 and early Q2, here we're starting to see those volumes swing back with completions coming online. And we expect September actually to be our biggest month of the entire fiscal year. So the recycling and the lower volumes are the investment in the upcoming completions. But we are still very much on track with our forecasts for the year. That has not changed.

Okay, thanks for that. And then in the liquids logistics segment, I think you mentioned about our hedges with regard to the propane and butane. And I was wondering if you could quantify that a little bit in terms of where the contango stands right now, or what kind of content goes you have logged in versus previous years?

Why don't we start with the contango? So we have the main storage in Conway. And we have locked in I think, our margins around $0.11 cents which is we're very pleased with it's more than the storage costs for that same storage. So it's going to be a net positive. Did you have anything brand on the

That's and obviously the market right now? Yeah.

It's very frustrating, because if you're in a market where you purchase at x price and the price falls, for the next several months, we are actually selling at a loss. And then we ended up gaining that back in the second half of the year. We've referred to it as way cog, which I hate that word, but it's just a timing difference of when we get the profits.

Okay, thanks for that.

Thank you. [Operator Instructions] Our next question today is coming from Tarik Hamid from JPMorgan. Tariq, your line is live. Please go ahead.

Hi, this is Navin on Tariq. Wanted to ask a little bit more about the timing to begin paying the press and whether the focus is on redeeming the profit or just paying the dividend to start.

We were looking at each other, I think what we're hyper focused on the refi, obviously, and I think that's where we're laser focused, executing operationally in the next two to three quarters and positioning the partnership for that refi. I think post refi that that will be a probably a decision and something we will continue to contemplate and kick around. My guess is it's probably arrearages first and try to get caught up on those. But I think refi first, and that's where we're hyper focused.

I just want to clarify, we are not allowed to go into the open market and buy the pref. And we know we have the Bs and Cs in trade, but the Ds are with some private equity investors. So it's difficult to go out and buy those. You'd have to make an offer to all the Bs, Cs and Ds, so it would be difficult to buy back the press.

Got you. And, second, want to get your thoughts around potential consolidation in the water industry in the Delaware basin?

Man, we have a lot of silence around here. I guess that means these are good questions. I think it makes some sense. We're not in a position where we can do that with a, you know, unit price at $4. So I think that's again to make it there's a lot of logic to it, but I don't know that it happens right away.

Got you. Makes sense. Thank you.

Thank you. And there are no further questions in queue at this time. I would now like to turn the floor back to Brad Cooper for closing comments.

Thank you guys for joining us today. It's the first quarter. We're happy with the progress we've made. Again, continue to be laser focused on the refinance. And we'll talk to you guys here in a few more months. Thank you.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.