NGL Energy Partners LP Announces Cash Distribution of 55.4% of Outstanding Arrearages for Class B, Class C and Class D Preferred Units

Rhea-AI Summary

NGL Energy Partners LP (NYSE: NGL) announced a distribution of 55.4% of outstanding arrearages for Q1 2024 to preferred unit holders. Quarterly distributions for Class B and Class C Preferred Units, along with a cash distribution for Class D units, totaling $120 million.

Insights

Financial Analyst

The announcement by NGL Energy Partners LP regarding the distribution payment to holders of Class B and Class C Preferred Units represents a significant cash outflow from the company. The decision to pay 55.4% of the outstanding arrearages indicates an attempt to manage debt obligations without fully eroding the company's liquidity. Such a distribution could be a signal of the company's current financial health and its strategy to balance shareholder returns with maintaining a stable cash reserve.

From a financial perspective, the use of cash on the balance sheet and drawing from the ABL (Asset-Based Lending) facility to finance these distributions is noteworthy. It suggests that the company has sufficient liquidity to cover the distribution, but it also raises questions about the sustainability of such payments in the long term, especially if the company continues to rely on debt. Stakeholders might be concerned about the impact of these distributions on the company's leverage and interest coverage ratios.

Market Research Analyst

The preferred stock distributions reflect NGL Energy Partners LP's commitment to fulfilling its obligations to preferred shareholders, which can have implications for investor perception and stock market performance. The sizable distribution of $120 million can be seen as a positive gesture to preferred shareholders, potentially leading to increased investor confidence and a positive impact on the stock's desirability.

However, the market will also be closely monitoring the firm's ability to generate sufficient cash flow to support such distributions without compromising its financial stability. The reliance on cash reserves and additional debt could be a red flag if the company does not show an equivalent or higher rate of cash flow generation from its operations in the near future.

Energy Sector Analyst

Within the energy sector, distributions like the one announced by NGL Energy Partners can be indicative of the company's operational performance and strategic financial management. The payment of arrearages on preferred units is a commitment that companies in the energy sector must carefully manage, especially in a volatile market where cash flow can be unpredictable due to fluctuating commodity prices.

The ability to finance such a large distribution from cash reserves and ABL suggests that NGL Energy Partners has been managing its cash and debt strategically. However, the long-term viability of this approach will depend on the company's operational efficiency and the broader energy market conditions, which can affect revenues and cash flow.

TULSA, Okla.--(BUSINESS WIRE)-- NGL Energy Partners LP (NYSE: NGL) announced today that the Board of Directors of its general partner approved a distribution of 55.4% of the outstanding arrearages for the quarter ending March 31, 2024 to be paid to the holders of the Partnership’s 12.544% 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 of the Class B Preferred Units quarterly distribution of $3.0224 per unit and the Class C Preferred Units quarterly distribution of $2.6790 per unit will be made on April 18, 2024 to holders of record at the close of trading on April 12, 2024.

Additionally, the Board of Directors declared a cash distribution in the amount of $77,140,426, which represents the 55.4% of the outstanding arrearages on the Class D preferred units as of March 31, 2024. The arrearage payment on the Class D Preferred units will be made on April 18, 2024.

The total amount of the distributions will be $120,000,000 which will be financed with cash on the Balance Sheet and a draw on the ABL.

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/20240404271108/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 distribution percentage was approved by NGL Energy Partners LP?

NGL Energy Partners LP approved a distribution of 55.4% of the outstanding arrearages for the quarter ending March 31, 2024.

When will the quarterly distributions for Class B and Class C Preferred Units be made?

The quarterly distribution of $3.0224 per unit for Class B Preferred Units and $2.6790 per unit for Class C Preferred Units will be made on April 18, 2024.

How much is the cash distribution declared for Class D preferred units?

The Board of Directors declared a cash distribution of $77,140,426 for the outstanding arrearages on the Class D preferred units as of March 31, 2024.

What is the total amount of the distributions announced by NGL Energy Partners LP?

The total amount of the distributions announced is $120,000,000, which will be financed with cash on the Balance Sheet and a draw on the ABL.