NGL Energy Partners LP: Q3 2025 Earnings Highlight Growth and Strategic Asset Sales

NGL Energy Partners LP (NYSE:NGL) reported its third quarter Fiscal 2025 financial results, showcasing growth in key segments and strategic asset sales that aim to reduce debt and volatility. The Partnership's earnings call on February 10, 2025, highlighted several positive developments and potential challenges.

Growth in Water Solutions Segment

The Water Solutions segment experienced a 10.4% increase in produced water volumes processed, reaching approximately 2.62 million barrels per day during the quarter. This growth was driven by increased volumes from contracted customers, higher fees for interruptible spot volumes, and the commencement of operations on the expanded Lea County Express Pipeline system (LEX II). The Partnership processed 10.4% more water than the previous year, contributing to higher disposal revenues and fees.



Strategic Asset Sales and Debt Reduction

NGL Energy Partners LP announced the sale of 17 natural gas liquids terminals and one terminal in Green Bay, Wisconsin, for an estimated total consideration of $95 million. These transactions are expected to close by March 31, 2025, and the proceeds will be used to reduce debt. Additionally, the Partnership sold 143 railcars for proceeds of $12.5 million and anticipates selling an additional 100 railcars for approximately $10 million. These asset sales aim to reduce volatility and improve the Partnership's financial risk profile.

Crude Oil Logistics Segment and Future Growth

The crude oil logistics segment signed a long-term acreage dedication contract with Prairie Operating, potentially increasing crude oil volumes on the Grand Mesa pipeline to 100,000 barrels per day. The Partnership also signed a term crude oil purchase and sale agreement with another DJ Basin producer and entered into an agreement with a third-party to connect their crude oil gathering system to the Riverside, Colorado terminal facility. These strategic partnerships and contracts position NGL Energy Partners LP for future growth in the crude oil logistics segment.

Potential Challenges and Volatility

Despite the positive developments, the Partnership faces potential challenges and volatility in certain business segments. The winding down of the biodiesel business negatively impacted the quarter's adjusted EBITDA by $12.1 million, and the crude oil logistics volumes on the Grand Mesa pipeline decreased to 61,000 barrels per day from 70,000 barrels per day in the previous year. Additionally, the liquid logistics adjusted EBITDA fell significantly due to the biodiesel business wind-down, and the company is experiencing performance volatility and seasonality in its liquids logistics businesses.

In conclusion, NGL Energy Partners LP's Q3 2025 earnings call highlighted growth in the Water Solutions segment, strategic asset sales for debt reduction, and potential for future growth in the crude oil logistics segment. However, the Partnership also faces potential challenges and volatility in certain business segments. As NGL Energy Partners LP continues to execute on its strategic initiatives, investors should monitor the company's progress and assess the sustainability of its growth in the long term.