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

Nov 08, 2019 • 11:00 am ET


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


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Q & A
Trey Karlovich

by long-term contracts with the best producers in the basin as well. So we do feel confident in the assets that have been acquired.

The question to what's next, Mike mentioned, our continuing growth capital will be focused on tying these assets together via pipeline, expanding pipeline capacity where necessary. We have 2.8 million barrels a day of disposal capacity in the basin. So over the next 12 months to 18 months, we should see higher utilization of that capacity and a reduction in growth capital. And there is not any significant M&A that we're evaluating at this point in time. Mike, if you want to add anything more to that.

Mike Krimbill

Yes. It's wonderful to thank you can just say, I'm going to put the business on pause and I'm not going to lose any competitive advantage, but that's not the way it works. You have -- in this basin, there was a shortage of disposal capacity in New Mexico. So producers were signing contracts to make sure that they get rid of their water. Those producers are larger independents and majors that there is a limited number. So we have to -- get as many contracts as we can for the future growth in health of the business.

So in the basin, you had us, ourselves, Mesquite, Hillstone, [Indecipherable] and Solaris. That was it really, you know for large systems that we felt the two best were Mesquite and Hillstone, with their physical assets, but also their contract profiles. As you know [Indecipherable] and Solaris is doing whatever they're doing today.

So if we just had to purchase these two businesses and leverage will increase somewhat, but it assures our business really of being the franchise in the Delaware. So now what's left, well there's really nothing left. So there may be a few producer systems out there that may come up for sale, but otherwise, there's all the systems are divide up [Phonetic] and the producers are pretty much divide up.

So by getting Hillstone and Mesquite, then I think we're at the point now where we were just waiting for the water to flow to us. And there is nothing in a large -- any kind of larger, medium-scale acquisition to be done.

Shneur Gershuni

Okay. So to paraphrase, you're mostly done with acquisitions and we can sort of expect the operating leverage of everything you put into place where you just have the connection capital going forward. And we should see a faster clip or faster growth rate it from an EBITDA perspective on a go forward basis. Does that encapsulate what you're basically saying?

Trey Karlovich

Yes. And that we've tried to say that as well with this SWDs next year and the year after being in this 10 to 20. As you know the ones in -- that on the Texas side are $1.5 million to $2 million each. So there is -- we've spent the capital, but it's because we expect the water here. We're seeing it