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Gold/Mining/Energy : NGL to da moon (well, maybe to $10?)!! -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (42)	1/19/2024 10:03:10 AM
From: Elroy	Respond to 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.