NGL Energy Partners Lays an Egg

Large master limited partnership NGL Energy Partners (NGL) released their earnings–or in this case, their losses, for the quarter ending 12/31/2021.

The company is a crude oil pipeline and storage company as well as a marketer of crude oil and related products.

Being in the energy business is always dicey and it becomes much dicier when you transact business with one of the very weak companies that operate in this sector. In this case the company depended upon Extraction Oil and Gas (XOG) for a large chunk of their pipeline revenue. XOG filed Chapter 11 in June and last month has emerged from bankruptcy. The company rejected contracts with NGL and the bankruptcy courts allowed the rejection–bottom line is that NGL took a $384 million non cash write down of goodwill and related intangibles.

The company has suspended their payment of common and preferred stock dividends and shares are now trading in the $10-$11 range. They are cumulative dividends so they will continue to accrue until they are paid or the company is bankrupt. The suspension was caused by new financing which requires the suspension until leverage is reduced.

Below is a chart of the 9% cumulative preferred over the course of the last 9 months or so. The 2 outstanding fixed to floating rate preferreds can be seen here.

Will the company restart dividends down the road? There is a good review on Seeking Alpha here which shares thoughts on the possibility.

The company earnings release can be found here.

3 thoughts on “NGL Energy Partners Lays an Egg”

  1. The people who run NGL just aren’t that smart. The problem with debt maturities had been well known for years. It could have and should have been dealt with in such a way that the company wouldn’t have to end up with a loan shark and a suspended dividend.

    There are some very smart people in the midstream business, and companies with much better moats than NGL. Put your money with them.

  2. Anyone picking up the deferred preferred should know that if you buy into a taxable account, you probably will owe taxes on phantom dividends since it is an MLP company.

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