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Gold/Mining/Energy NGL to da moon (well, maybe to $10?)!!

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To: FIFO_kid2 who wrote (37)	1/18/2024 7:00:03 AM
From: Elroy	of 109

NGL had news yesterday afternoon, so maybe you don't get put at $5.00 NGL Energy Partners LP Announces $700 Million Senior Secured Term Loan Facility and Provides Financial Update finance.yahoo.com I can't tell if the news is price moving, it actually seems about exactly in line with their forward guidance from last quarter. If the offering prices before Friday, the rate may affect the unit price, in either direction. I doubt $5,000 will trigger $1,000 in UBTI, so you're probably safe. I think NGL options can trade in pennies.

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From: Elroy	1/18/2024 7:20:32 AM
	of 109

From Yahoo chat board - they say the ratings companies have assigned ratings to the proposed $700m term loan. S&P highlights: "The company will use proceeds from this issuance to repay its outstanding senior unsecured notes due 2025 and 2026." "we assigned our 'B+' issue-level rating to its new $700 million TLB" - TLB is Term Loan B "NGL Energy will use the $700 million senior secured TLB to repay around $600 million of existing senior notes due in 2025 and 2026." "We expect credit metrics to continue improving. Through fiscal 2025, we anticipate EBITDA of $700 million-$720 million per year. We also project adjusted leverage of around 5x for fiscals 2024 and 2025, with a further decline to 4.5x in 2026. We expect this leverage reduction to stem from the repayment of accrued distributions on preferred equity and gradual repayment of Class D balance." "We expect NGL Energy to continue selling additional noncore assets, assisting in reducing preferred equity balance." Fitch Highlights: "Fitch has assigned a 'BB-'/'RR2' rating to Operating's proposed senior secured term loan B" "Fitch has assigned the senior secured notes, which are co-issued by Operating and NGL Energy Finance Corp (Finance), a 'BB-'/'RR2' rating" "The rating also reflects NGL's plan to end the arrearage on the preferred units with cash payments." ------------ The big news in that writing is the EBITDA forecast for the next fiscal year. Fiscal 2024 (March) is supposed to be $645m+, so EBITDA improving to $700m or more in the next twelve months sounds quite good.

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From: Elroy	1/18/2024 7:27:31 AM
	of 109

Fitch Rates NGL Energy Partners' Long-Term IDR 'B' fitchratings.com. Fitch expects the proposed term loan B to lower the financial burden by allowing NGL to address the preferreds arrearages currently accruing at high interest rates, and to accelerate NGL's efforts in addressing the potential liquidity overhang caused by the class D preferred units in the medium term. Management expects the leverage to be at approximately 4.5x by FYE 2024.

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From: Elroy	1/18/2024 7:59:02 AM
	of 109

Moody's upgrades NGL Energy's CFR to B2, rates new term loan B2 New York, January 17, 2024 -- Moody's Investors Service ("Moody's") upgraded NGL Energy Partners LP's (NGLEP or NGL Energy) corporate family rating (CFR) to B2 from B3, probability of default rating (PDR) to B2-PD from B3-PD, and senior unsecured notes rating to Caa1 from Caa2 and changed the outlook to stable from positive. Moody's also assigned a B2 rating to NGL Energy Operating LLC's proposed $700 million backed senior secured first-lien term loan B and affirmed the B2 rating on the existing $2.05 billion senior secured first lien notes due 2026 and changed the outlook to stable from positive. NGLEP's SGL-3 speculative grade liquidity rating was unchanged. Management plans to apply all near term free cash flow to reduce debt and repurchase preferred shares with a goal to permanently delever the business.

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From: Elroy	1/18/2024 9:02:40 AM
	of 109

Lets see, S&P gives the proposed $700m term loan a B+ rating. Does anyone know what rate that translates to for a coupon? Here's something that says a "B" rating is at 7.67%. ycharts.com

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To: Elroy who wrote (42)	1/19/2024 10:03:10 AM
From: Elroy	of 109

This is pretty odd. I've created a S&P Global Account, and can access their report on the $700m term loan. The S&P report says this - Through fiscal 2025, we anticipate EBITDA of $700 million-$720 million per year. Where does S&P get that forecast from? Any idea? NGL has guided EBITDA to $645m+ for the fiscal year ending March 2024, and has given no fiscal 2025 guidance. Do we think NGL shared their fiscal 2025 EBITDA forecast with S&P, and S&P has (oddly) released it? Or.......S&P is just guessing (seems like strange behavior for a ratings agency). --- NGL Energy Partners L.P. Upgraded To 'B' On Extending Maturity Profile; Debt Rating Assigned; Outlook Stable On Jan. 17, NGL Energy Partners L.P., a diversified midstream energy company, announced its intention to issue a $700 million senior secured term loan B (TLB) due 2031. The company will use proceeds from this issuance to repay its outstanding senior unsecured notes due 2025 and 2026. Following the announcement, S&P Global Ratings raised its issuer credit rating on NGL Energy to 'B' from 'B-'. At the same time, we assigned our 'B+' issue-level rating to its new $700 million TLB. Our '2' recovery rating indicates our expectation for substantial (70%-90%; rounded estimate: 70%) recovery in the event of default. We also affirmed our 'B+' issue-level rating on the company's existing $2 billion senior secured notes due 2026. Our '2' recovery rating on that debt indicates our expectation for substantial (70%-90%; rounded estimate: 70%) recovery. The stable outlook reflects our expectation that NGL Energy will continue to generate strong EBITDA and free cash flow, while reducing its adjusted leverage to about 4.5x-5x in fiscal years 2025 and 2026. We expect the company to address its additional maturities in the near term. NEW YORK (S&P Global Ratings) Jan. 17, 2024—S&P Global Ratings today took the rating actions listed above. Our issuer credit rating 'B' on NGL Energy is underpinned by a series of strategic financial decisions and its robust operational performance. The company's plan to repay existing senior notes is set to significantly improve its debt maturity profile and reduce refinancing risk. We anticipate the company will address the remaining maturities in its capital structure in the near term. We also expect NGL Energy to use free cash flow to repay accrued distributions of its preferred shares. NGL Energy's strong performance in its water solutions segment, particularly in the Delaware basin, has been a key driver of profitability and contributes to its increasing scale of operations and EBITDA. Anticipated capital structure refinancing will improve NGL Energy's credit profile. NGL Energy will use the $700 million senior secured TLB to repay around $600 million of existing senior notes due in 2025 and 2026. We believe this is a first step to address the capital structure and expect NGL to also address its $2,050 million senior secured notes due in February 2026. This refinancing, while not increasing total debt balance, should positively impact NGL's weighted average debt maturity, extending it from two years to over six years, and significantly reduce refinancing risks. Additionally, the company will have sufficient cash flow in the next 12 months to address its $253 million accrued distributions on preferred equity classes B, C, and D. Our base-case scenario anticipates NGL Energy to repay the outstanding preferred equity class D balance by 2028 with support from robust operational cash flows and potential asset sales. Robust performance in its water solutions segment underpins operational success. NGL Energy has significant operational scale with a presence in key production areas like the Delaware, DJ and Eagleford basins. Notably, its water solutions operations in the Delaware basin contribute approximately 70% to its EBITDA. This segment's EBITDA has doubled over the past three years, reaching $463 million in fiscal-year 2023 (ended March 2023), supported by ongoing oil and gas production growth. Projections indicate about an 8% rise in natural gas productions in the Delaware basin over the next two years, while Permian crude oil output potentially peaks at around 8 million barrels per day by 2029. However, NGL Energy is exposed to crude oil and liquids price volatility as these segments account for about 30% of its EBITDA. We expect credit metrics to continue improving. Through fiscal 2025, we anticipate EBITDA of $700 million-$720 million per year. We also project adjusted leverage of around 5x for fiscals 2024 and 2025, with a further decline to 4.5x in 2026. We expect this leverage reduction to stem from the repayment of accrued distributions on preferred equity and gradual repayment of Class D balance. This aligns with NGL Energy's strategic focus to strengthen its financial position while maintaining operational growth. Leverage reduction is partly due to the company's strategy of selling noncore assets, a move that has proven effective in the past year with asset sales at a low double-digit EBITDA multiple. We expect NGL Energy to continue selling additional noncore assets, assisting in reducing preferred equity balance. We anticipate NGL Energy to generate an average of $250 million in free cash flow from operations annually. This consistent cash flow could combine with noncore asset sales to position NGL Energy to further strengthen its financial standing and enhance its credit profile. The stable outlook reflects an improved capital structure and our expectation that NGL will continue to generate strong EBITDA and free cash flows sufficient to repay its accrued distributions on preferred equity. It also reflects our expectation that the company will address the additional maturities in its capital structure in the near term. We expect adjusted leverage to decline to about 5x in fiscal-year 2025 and 4.5x in fiscal-year 2026. We could take a negative rating action if NGL Energy's adjusted leverage exceeds 6.5x. This could happen due to: A substantial decline in EBITDA driven by commodity price volatility; Lower drilling activity on its dedicated acreage; or An accrual of distributions on preferred units. Additionally, we could lower the rating if NGL cannot refinance its $2,050 million senior notes in the near term. Although unlikely during the next 12 months, we could consider a positive rating action if we expect the company to maintain leverage below 4.5x while increasing its EBITDA. Environmental factors are a moderately negative consideration in our credit rating analysis of NGL. Although the partnership's water solutions segment supports the longevity of its business, it also faces multiple risks related to energy transition. This includes longer-term volume risks from reduced drilling activity and demand due to the transition to renewable energy sources. Governance is also a moderately negative consideration because of NGL's history of leveraging acquisitions, which have stretched its balance sheet and led us to assess its financial risk profile as highly leveraged.

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From: Elroy	1/20/2024 12:26:19 PM
	of 109

Some NGL numbers....... NGL's fiscal year is June to March, so ........ NGL's FY '24 (ends March 2024) EBITDA guidance is $645m+ of that, $500m is expected to be EBITDA from the Water division. The other two divisions are Liquids Logistics - distributes Butane and Propane between refineries and sellers, and Crude Logistics - oil pipelines, primarily Grand Mesa. June Q EBITDA was $142.2m Sep Q EBITDA was $176.2m Dec Q EBITDA is just announced as $150m-$160m. March Q is always the biggest EBITDA quarter of the fiscal year, because this is the Q where they sell off all the propane / butane inventory that they built up over the preceding warmer seasons. Last year in 2023 March delivered $173.3m EBITDA. They've been saying that they expect a jump in water volumes in March 2024 as new connections are coming on line in the first quarter of 2024. On the other hand, they've also said that they expect to sell some assets before March 31st 2024, and that sale may reduce EBITDA as the sold asset was producing EBITDA. If we ignore the asset sale, and we assume Dec Q was in the middle of their pre-announced guidance of 150-160m EBITDA, in other words we assume Dec 2023 EBITDA was $155m, then NGL needs to deliver $172m EBITDA in March 2024 to meet their full year EBITDA guidance. That would be flat with last year's March. Water EBITDA for fiscal 2024 is already running well ahead of water EBITDA for fiscal 2023, AND they've said they think water volumes bump higher in March 2024, so ..... it's pretty easy to see NGL beating their full year EBITDA guidance of $645m+ when they report the March 2024 Q. The really interesting thing is if the water bump forecast for March 2024 sustains throughout fiscal 2025, we may get another year of nice EBITDA growth in fiscal 2025 (ends March). S&P Global Credit in their rating report for the $700m term loan said they expect $700m-$720m EBITDA in fiscal 2025. If so.....NGL's unit price is going higher. How much higher? Well.....it's probably reasonable to give NGL a 6x EBITDA enterprise value. It perhaps should be more than 6x as the EBITDA has grown tremendously over the past few years, and if fiscal 2025 goes above $700m, that's four+ years of very strong growth, worth more than a 6x multiple. But even if the multiple on Ebitda is just 6x, that's 6x $700m EBITDA = $4.2b, subtract $2.8b long term debt, and Preferred + arrearage + line of credit borrowings of about $1.3b, and ...... hmmm, it doesn't work. A 6x EBITDA multiple says the common is only worth $100m. Oh well! I guess we gotta wait for EBITDA to get up higher than $700m, or assign a higher multiple to the $700m EBITDA. The preferreds are the problem. If they could just go away, NGL would be amazing. Getting them down to a manageable level may take 3+ years of free cash flows though.....

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To: Elroy who wrote (44)	1/21/2024 12:59:23 PM
From: Elroy	of 109

Lets do a bit more financial analysis of NGL Assumptions - Annual EBITDA is $650m, and probably growing. Lets says EBITDA is about the same as cash flows. Annual Cap Ex is about $120m, and likely to grow if paying more for Cap Ex delivers EBITDA growth. Balance sheet 2025 debt is about $281m 2026 debt is about $2.37m NGL has a $600m bank line of credit, which currently has $50m drawn. Preferred stock is about $900m, with a floating rate (now around 12%) Preferred stock dividends are suspended, and unpaid dividends are now about $320m. In sum, NGL needs to come up with $281m + $2.37b to roll forward it's long term debt, and $1.22b to completely repurchase it's preferred stock obligations. Total = $3.9 billion would do it. -- The latest press releases indicate NGL is going to issue a new $700m 2031 term loan in conjuntion with $2.1b of fresh 2031 long term debt. That $2.8b cash will be used to repurchase the 2025 and 2026 debt, leaving $100m cash after expenses. Lets say the coupon on this $2.8 billion new debt is 7.5%. NGL's 2026 7.5% debt trades above par, so the coupon on fresh senior secured debt may actually be lower than 7.5% In Q1 2024 NGL will probably generate $100m free cash as it's the high cash flow quarter of the fiscal year, so the can pay down the $50m line of credit owed, and about $150m cash on hand. NGL could then theoretically in Q2 2024 issue $1 billion junk debt of some sort, give it a 10% coupon (probably lower), and use the $150 cash, this $1 billion, and the use $70m of the untapped $600m revolver ($1b + $150m + $70m = $1.33b) to pay the $320m arrearage and repurchase ALL the $900m preferred stock. At that point NGL will have annual EBITDA of $650m (and growing), and the following annual expenses: $2.8b long term secured senior debt at 7.5% = $210m interest $1 billion junk debt at 10% = $100m interest expense $80m line of credit at 10% = $8m interest expense (and $520m line of credit available for "working capital" needs). Total interest expense = $318m. It's very manageable. $650m EBITDA - $318m interest expense = $338m cash available for Cap Ex (growth and maintenance), further debt reduction and distributions. NGL can spend up to $162m Cap Ex, and still have $150m ($1.15 per share) available for distributions. Then, if $650m EBITDA grows (as expected), NGL can pay for growth Cap Ex, pay a healthy distribution, and grow EBITDA to levels where the $1 billion 10% junk debt can eventually be refinanced into regular long term debt.

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From: Elroy	1/22/2024 7:29:42 AM
	of 109

NGL Energy Partners LP Announces LEX II Large Diameter Pipeline Supported by New MVC and Extension of Acreage Dedication finance.yahoo.com 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 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.\ --- This sounds good!

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From: Elroy	1/22/2024 9:50:02 AM
	of 109

Ok, NGL has preferred stock outstanding, about $930m. These are in classes B, C and D. NGL hasn't paid dividends on any of this preferred stock for a few years. They are accumulating obligations each year. I think the total unpaid amount was about $210m last March, and will be roughly $330m this March 2024. The B&C preferreds became floating rate, and accrue at (roughly) 3 month Libor + 7.4%, so about 13% per year (yikes!). Maybe the March 2024 total arrearage will be $340m..... B and C are publicly traded. They are both around $29, so the market thinks the arrearage will get paid in the near term, or at least that it will get paid eventually. The D preferred tranche ($551m) is privately held. This says the D holders have the ability to restrict NGL's use of cash until the arrearage is paid off. -- In connection with the offering of the 2026 Senior Secured Notes, we were required to obtain a consent (the “Class D Preferred Consent”) from the holder of themajority of our Class D Preferred Units (the “Class D Preferred Majority”) to, among other things, enable us to consummate the transaction. The Class D Preferred Consentmodifies certain voting and approval rights granted to the Class D Preferred Majority under our Partnership Agreement. Specifically, the Class D Preferred Consent requiresus to obtain the approval of the Class D Preferred Majority for: •incurrences of indebtedness, other than (i) under the ABL Facility, (ii) the issuance of the 2026 Senior Secured Notes and (iii) certain indebtedness outstandingas of the closing of the transaction; •acquiring or disposing of any assets with an aggregate purchase price of greater than $50.0 million during any fiscal year; and •making investment capital expenditures or expansion capital expenditures in excess of $75.0 million in the aggregate during any fiscal year. These approval rights supplement the existing approval rights in our Partnership Agreement for the Class D Preferred Majority. They became effective upon the closing of the transaction and will remain in effect until we are no longer in arrears --- The class D preferred can become floating rate beginning with July 1st, 2024 - -- On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time totime, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in thePartnership Agreement) plus a spread of 7.00% (“Class D Variable Rate”, as defined in the Partnership Agreement). Each Class D Variable Rate election shall be effective forat least four quarters following such election. -- As of March 31, 2023, there were 600,000 preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of 25,500,000 commonunits outstanding. The warrants appear to allow the Class D preferred holders to purchase NGL at prices between $13.50 and $17.50. The warrants expire if not exercised by 2029. --- At any time on or after the eighth anniversary of theClosing Date, each Class D Preferred Unitholder will have the right to require the Partnership to redeem on a date not prior to the 180th day after such anniversary all or aportion of the Class D Preferred Units then held by such preferred unitholder for the then-applicable redemption price, which may be paid in cash or, at the Partnership’selection, a combination of cash and a number of common units not to exceed one-half of the aggregate then- applicable redemption price, as more fully described in thePartnership Agreement. I think that says in 2027 (8 years after issuance in 2019) the Class D preferred holders can force NGL to purchase the Class D preferred stock using either cash or equity. So......there's 4-5 years to figure out what to do about the Class D preferred stock. That seems fine. --- On July 1, 2022, the Class B Preferred Units distribution rate changed from a fixed rate of 9.00% to a floating rate of the three-month LIBOR interest rate (4.77%for the quarter ended March 31, 2023) plus a spread of 7.213%. For our Class C Preferred Units, distributions on and after April 15, 2024 will accumulate at a percentage of the $25.00 liquidation preference equal to theapplicable three-month LIBOR interest rate (or alternative rate as determined in the Partnership Agreement) plus a spread of 7.384%. --- Interesting, so the Class B is already floating and earning about 13%, but the class C doesn't float until April 15th 2024. ---- Ok, the preferred doesn't seem to contain anything super painful. Once the preferred begins to float, it makes sense (I think) to somehow refinance them.

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