NGL Energy Partners LP (NYSE:NGL) Q2 2020 Earnings Conference Call - Final Transcript

Nov 08, 2019 • 11:00 am ET

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NGL Energy Partners LP (NYSE:NGL) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Executive
Mike Krimbill

you do it, how do you make it, say fair to a GP owner, but very attractive to the Partnership. So when we look at our next few years projections, and we look at more what's the DCF per unit, clearly we're not going to raise the distribution for trading at 12% or 13%, where we currently are. We think it's very attractive to buy GP interest back today at what ultimately would become a multiple below, say, the current market, where we're seeing whatever 9 times to 15 times. I hope that answers the question. Trey, do you have...

Executive
Trey Karlovich

Just to add, TJ, obviously we're not making decisions in a box. We're obviously looking at the market, looking at what our expectations are for where the units will trade to determine whether we're buying back units or increasing distributions in the future. Obviously, the way that we look at running our business and generating excess cash flow supports distribution growth, but obviously that decision is not going to be made, if you're trading at 13%, 14% yield. At that point in time, you would devote those funds to buying back units which again may not support a higher GP valuation because you don't have the increase in distributions, but that's what is implied in our overall valuation of how we look at the business on a longer-term basis.

So hopefully that helps. Again, I think that at the current unit price level, raising the distribution we would most likely be buying back units rather than doing that. We don't expect the units to stay at this level, again it's as it's proven out that our distribution is predictable study, coverage increases and leverage continues to decrease and hits our target levels, we wouldn't expect to trade at this level, but again the market is -- the market will have to make that decision at the time.

Analyst
TJ Schultz

Okay. That make sense. Thank you.

Operator
Operator

Thank you. Our next question comes from the line of Justin Jenkins from Raymond James. Your question please.

Analyst
Justin Jenkins

Great, thanks. I guess first on the exit rate for the year for water volumes that's fiscal year and not calendar year, is that right.

Executive
Trey Karlovich

That's correct, Justin.

Analyst
Justin Jenkins

Okay. And then you mentioned, Trey, that the five months of contribution from Hillstone in the updated guidance. Can you give us a better sense of potential financial contribution in the early stages here? And I guess, secondarily, has the outlook changed at all for those assets given what we've seen with operator activity levels heading into calendar 2020?

Executive
Trey Karlovich

There has been no change to our expectations on the Hillstone assets. Again we closed that business a week ago. The largest dedication is a 20-year Poker Lake dedication. That development comes online a year from now. Between now and then, our expectation is that the Hillstone EBITDA contribution essentially offsets the -- it's not accretive or dilutive. It offsets the financing cost of the business, and that business is financial $200