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
Trey Karlovich

million of 9% preferred. The remainder is financed with debt doing the simple math that's around $50 million of contribution for the first year. That's how there is a ramp in those volumes over time, but that's the contribution that we're assuming in our fiscal guidance.

Analyst
Justin Jenkins

Got it. That's helpful. And last one for me, if I could. Just how we should think about maintenance capex, now that the water business is a meaningfully larger portion on a go-forward basis?

Executive
Trey Karlovich

Sure. So our maintenance capex obviously is increased as we have grown the water business. There is more infrastructure, more assets. You have regular maintenance on your pumps and your facilities will continue to have a regular maintenance plan. The maintenance capital will be more tied to volumes as well. So as volumes increase we would expect maintenance capital to also increase. We've moved our maintenance capital numbers up for this year. We're still in line with that expectation. It was a range from $50 million to $60 million. I would expect next year's maintenance capital numbers to be slightly higher, but again I don't think it's going to be significant.

Analyst
Justin Jenkins

Got it. Thanks, Trey.

Operator
Operator

Thank you. Our next question comes from the line of Shneur Gershuni from UBS. Your question please.

Analyst
Shneur Gershuni

Hi. Good morning, guys. Mike, thank you for the title reference in the prepared remarks. Just to start off, you guys had made a lot of progress on leverage over the last couple of years. And then you sort of turned around and did this acquisition this most recent quarter. When I think about the backdrop, where the rig count is, producer expectations and so forth. At what point do you take a pause in sort of -- produce where you're at in sort of focus on letting the earnings catch up to where your leverage actually is at this stage?

Executive
Trey Karlovich

So, I'll start Shneur, and then Mike can chime in. As Mike mentioned, we have reduced leverage by two turns over the past two years. We've completed these acquisitions with a significant amount of preferred equity. So we've raised $600 million of preferred Class Ds. We also issued another $100 million of preferred Class B. And so approximately half of these transactions was financed with preferred.

I think what's lost in some of the translation is the amount of debt that's coming off related to the TPSL sale as well as the wind down of remaining refined products. That's going to be $500 million. So from our perspective, we have continued to reduce leverage. Our overall target is lower than where our current leverage is because we do -- we will grow in to these two acquisitions.

The volumes are expected to ramp. But these are two significant transactions that we have actually been discussing for about a year now. These are assets that we identified in our evaluation of the basin, that we thought were core to the further development of the basin. They are underpinned