NGL Energy Partners LP Announces Cash Distribution of 50% of Outstanding Arrearages for Class B, Class C and Class D Preferred Units

Rhea-AI Summary

NGL Energy Partners LP (NGL) announced a distribution of 50% of arrearages earned and outstanding through December 31, 2023 to be paid to holders of its preferred units. Each holder of Class B Preferred Units will receive $4.4439 per unit, and each holder of Class C Preferred Units will receive $4.0746 per unit on February 27, 2024. Additionally, a cash distribution of $115,035,820.87 was declared for Class D preferred units, also to be paid on February 27, 2024.

Insights

Financial Analyst

The declaration of a distribution to preferred unit holders by NGL Energy Partners LP signifies a pivotal financial decision, reflecting the company's liquidity status and commitment to fulfilling its obligations. The distribution of 50% of the arrearages on preferred units suggests that the company has accrued unpaid dividends, which it is now partially addressing. This move could be interpreted as a positive signal to investors, indicating that NGL is generating sufficient cash flow to begin clearing its dividend backlog.

However, the payment of arrearages also raises questions about the company's past financial health and why these dividends were not paid when due. Investors might scrutinize the company's balance sheet and cash flow statements for signs of improved financial stability or potential concerns. Furthermore, the impact on the company's future dividend policy and overall financial strategy will be closely watched, as this distribution could affect the company's ability to invest in growth opportunities or pay down debt.

Market Research Analyst

The distribution announcement could have implications for the stock market perception of NGL Energy Partners LP. Preferred stocks are often seen as a hybrid between bonds and common stocks, offering fixed dividends and greater security in the event of bankruptcy. The payment of arrearages to Class B and Class C preferred unit holders and the substantial cash distribution to Class D unit holders, may boost investor confidence in the company's preferred units, potentially increasing their attractiveness relative to other income-generating investments.

It is essential to consider the broader energy sector and market conditions. If NGL's distribution aligns with industry norms, it may not significantly affect market perception. However, if it deviates from peers, either positively or negatively, it could lead to a reassessment of NGL's market position. The specifics of the fixed-to-floating rate structure should also be understood, as it affects the yield and risk profile of the preferred units over time.

Legal Expert

From a legal standpoint, the adherence to the terms outlined in the partnership agreement is crucial. The declaration of distributions must comply with the contractual obligations NGL has to its preferred unit holders. Any deviation from these terms could result in legal repercussions. It is also important to note that preferred unit distributions are typically cumulative, meaning that any missed payments are accrued and must be paid out before common unit holders can receive dividends.

Investors will likely assess the legal implications of these payments, considering the rights and protections afforded to them under the terms of the preferred units. The legal structure of these financial instruments is complex and understanding the nuances is key for stakeholders to evaluate their investment's security and priority in the capital structure.

TULSA, Okla.--(BUSINESS WIRE)-- NGL Energy Partners LP (NYSE: NGL or the “Partnership”) announced today that the Board of Directors of its general partner declared a distribution of 50% of the arrearages earned and outstanding through December 31, 2023 to be paid to the holders of the Partnership’s 12.806% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) and the 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) in accordance with the terms outlined in NGL’s partnership agreement. Each holder of the Class B Preferred Units will receive $4.4439 per unit and each holder of the Class C Preferred Units will receive $4.0746 per unit on February 27, 2024, which payments will be made to holders of record at the close of trading on February 16, 2024.

Additionally, the Board of Directors declared a cash distribution in the amount of $115,035,820.87, which represents 50% of the arrearages earned on the Class D preferred units through December 31, 2023. The Class D Preferred distribution payments will also be made on February 27, 2024.

Forward-Looking Statements

Certain matters contained in this press release include “forward-looking statements.” All statements, other than statements of historical fact, included in this press release may constitute forwarding-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause actual results to differ include, but are not limited to, the risk factors discussed from time to time in each of our documents and reports filed with the SEC.

Readers are cautioned not to place undue reliance on any forward-looking statements contained in this press release, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements.

About NGL Energy Partners LP

NGL Energy Partners LP, a Delaware limited partnership, is a diversified midstream energy company that transports, stores, markets and provides other logistics services for crude oil, natural gas liquids and other products and transports, treats and disposes of produced water generated as part of the oil and natural gas production process.

For further information, visit the Partnership’s website at www.nglenergypartners.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240206396623/en/

Investor Contact:

NGL Energy Partners LP

David Sullivan, 918-495-4631

Vice President - Finance

David.Sullivan@nglep.com

Source: NGL Energy Partners LP

FAQ

What is the distribution amount for Class B Preferred Units?

The distribution amount for Class B Preferred Units is $4.4439 per unit.

What is the distribution amount for Class C Preferred Units?

The distribution amount for Class C Preferred Units is $4.0746 per unit.

When will the distribution be paid for Class D Preferred Units?

The distribution for Class D Preferred Units will be paid on February 27, 2024.

What is the cash distribution amount for Class D Preferred Units?

The cash distribution amount for Class D Preferred Units is $115,035,820.87.