NGL Energy Partners LP Announces LEX II Large Diameter Pipeline Supported by New MVC and Extension of Acreage Dedication

Rhea-AI Summary

NGL Energy Partners LP (NYSE:NGL) announced the expansion of its Lea County Express Pipeline System from 140,000 to 340,000 barrels per day in 2024. The addition of a second large-diameter pipeline, disposal wells, and facilities will expand the capabilities of NGL's produced water super-system and create a larger outlet for produced water disposal within the Delaware Basin. The expansion is fully underwritten by a minimum volume commitment contract with an investment grade oil and gas producer, providing additional cash flow certainty to the Partnership.

Insights

Energy Sector Analyst

The announcement by NGL Energy Partners LP regarding the expansion of its Lea County Express Pipeline System (LEX II Expansion) is a strategic move that underscores the company's commitment to enhancing its water disposal infrastructure within the Delaware Basin. The significant increase in capacity from 140,000 to 340,000 barrels of water per day addresses the growing demand for produced water management solutions in one of the most active oil and gas regions in the United States.

The expansion is noteworthy for its potential to boost NGL's revenue streams through the minimum volume commitment contract, which not only secures a steady flow of business from an investment-grade oil and gas producer but also extends the acreage dedication. This contractual agreement provides a layer of financial predictability and stability for the partnership, which is crucial for investors seeking to assess the company's future cash flows and overall financial health.

Furthermore, the expansion's scalability, with the system potentially growing to handle up to 500,000 barrels per day, positions NGL to capitalize on future opportunities and customer needs. This adaptability is a competitive advantage in the dynamic energy sector where production and disposal needs can fluctuate with market conditions.

Environmental & Sustainability Analyst

The LEX II Expansion project aligns with broader industry trends focusing on environmental responsibility and sustainable operations within the energy sector. The development of larger and more efficient water disposal systems is essential for managing the byproducts of oil and gas production, specifically produced water, which is a mixture of water extracted from the ground along with the hydrocarbons and other substances.

By increasing the capacity and extending the geographic reach of its disposal operations, NGL is not only anticipating regulatory pressures but also potentially reducing the environmental impact associated with produced water. Efficient management of such waste is critical, as improper disposal can lead to contamination of surface and groundwater resources. The expansion could therefore enhance NGL's reputation as a responsible steward of environmental resources, which is becoming increasingly important to investors who are factoring Environmental, Social and Governance (ESG) considerations into their investment decisions.

Infrastructure Investment Analyst

The capital investment in the LEX II Expansion highlights the importance of infrastructure development in supporting the oil and gas industry's operational efficiency. The construction of the new pipeline and the addition of disposal wells and facilities are indicative of the capital-intensive nature of the energy infrastructure sector. For stakeholders, the key considerations include the return on investment and the time frame for the realization of benefits from such infrastructure projects.

Given the project is fully underwritten by a minimum volume commitment contract, the financial risk associated with the expansion is mitigated. This kind of arrangement ensures that there will be a baseline level of utilization for the new infrastructure, which is critical for justifying the upfront investment. Investors will be interested in the impact of these developments on NGL's balance sheet, particularly in terms of capital expenditures, debt levels and the potential for increased operational efficiency leading to cost savings.

TULSA, Okla.--(BUSINESS WIRE)-- NGL Energy Partners LP (NYSE:NGL) (“NGL,” or the “Partnership”) announced today that NGL Water Solutions is commencing expansion of its Lea County Express Pipeline System from a capacity of 140,000 barrels of water per day to 340,000 barrels per day in 2024 (LEX II Expansion). The addition of a second large-diameter pipeline, disposal wells, and facilities will greatly expand the capabilities of NGL’s existing produced water super-system and create a significantly larger outlet for produced water disposal within the Delaware Basin. The construction of the 27-mile, 30-inch produced water pipeline will transport water to areas outside the core of the basin thereby further diversifying NGL’s geographic location of its disposal operations. The LEX II Expansion is fully underwritten by a recently executed minimum volume commitment contract that includes an acreage dedication extension with an investment grade oil and gas producer.

LEX II Expansion Highlights:

• 27-mile 30-inch diameter produced water pipeline
• Initial capacity 200,000 barrels per day
• Incremental increase in committed acreage and volumes under dedication from the producer
• Lea County Express Pipeline System expandable to 500,000 barrels per day

“NGL remains focused on our commitment to deliver reliable produced water management for our customers while remaining focused on the environment and the sustainability of our operations,” commented Doug White, EVP of NGL Water Solutions. “Today’s announcement highlights our investment in the long-term future growth and reliability of our infrastructure which provides our customers with confidence to plan their long-term developments in the Delaware Basin. This large minimum volume commitment provides additional cash flow certainty to the Partnership as NGL continues to improve its balance sheet.”

NGL owns and operates the largest integrated network of large diameter wastewater pipelines, disposal wells and produced water handling systems in the Delaware Basin. NGL’s Water Solutions segment operates in several of the most prolific crude oil and natural gas producing basins, including the Delaware, Eagle Ford and DJ Basins.

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/20240121038978/en/

Contact for Expansion Opportunities

NGL Water Solutions

Christian Holcomb, 303-815-1010

Senior Vice President & Chief Operating Officer – NGL Water Solutions

Christian.Holcomb@nglep.com

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 Lea County Express Pipeline System's capacity expansion timeline?

The capacity expansion from 140,000 to 340,000 barrels per day is set to occur in 2024.

Who is underwriting the LEX II Expansion?

The LEX II Expansion is fully underwritten by a recently executed minimum volume commitment contract with an investment grade oil and gas producer.

In which basins does NGL's Water Solutions segment operate?

NGL's Water Solutions segment operates in several prolific crude oil and natural gas producing basins, including the Delaware, Eagle Ford, and DJ Basins.

What is the size of the new produced water pipeline for the LEX II Expansion?

The new produced water pipeline for the LEX II Expansion is 27 miles long and has a 30-inch diameter.

How will the expansion benefit NGL's customers?

The expansion will provide NGL's customers with confidence to plan their long-term developments in the Delaware Basin and improve the reliability of its infrastructure.