NGL Energy Partners LP (NYSE:NGL) Q2 2020 Earnings Conference Call - Final Transcript
Nov 08, 2019 • 11:00 am ET
it be fair to say it's more than 80%, 85%?
Yes. [Speech Overlap] I'm sorry, you have to go by shale play. So if you're talking about the Permian, yes, if you're looking at the Delaware Basin, yes. When you look at the DJ, the Eagle Ford, the Midland Basin, no, it would be a smaller number. But the core basin and particularly the assets that we acquired, I think, that's -- around 80% is probably a reasonable number.
Got it. Thanks for that. And then just on the leverage question. I think you had set a 3.25 times kind of a leverage metrics for the business, some time back and I realized there have been some changes around the working capital. How that working capital is broken down, etc. So I was just kind of curious, is 3.25 times still the kind of the number that you're targeting? And if so, it seems like you indicated, you will hit forex or so sometime in next year when do we -- when can we expect to get to that 3.25 times.
Right. So the 3.25 times that -- that metric excluded working capital. And if you look at where our working capital was three months ago, it was $900 million. That's 1.5 turns. So if you took the 3.25 times and you add a 1.5 turns, you're at 4.75 times, would have been the target at that point in time, we have actually -- for a total leverage comparison.
We've actually lowered that target. We're right at that target today. We're at 4.8 times, but we have reduced our working capital. We're continuing to reduce working capital, continuing to eliminate the business, the primary use of that working capital. However, we will still have a little bit under a turn of working capital. As I indicated earlier, about $400 million, so call it, 0.6 turns, 0.7 turns. So we've really let -- the 3.25 times hasn't changed, it's just been adjusted for how the business is now structured and how the working capital will be impacted for the business. So we've really taken the 3.25 from a compliance basis which excluded working capital to 4 times, including the remaining working capital.
So we really have not changed that target, and we're expecting to be there in about a year, once we see the ramp up of volumes on Hillstone and Mesquite, and again the elimination of the remaining working capital intensive businesses associated with the Refined Products.
Okay. Got it. Thanks for that clarification. That's all I had.
Thank you. Our next question comes from the line of Spiro Dounis from Credit Suisse. Your question please.
Hey, good morning, guys. Thanks for squeezing me in here. Two quick ones. Just on drilling SWDs next year, seems like there is actually considerable headroom, just with your current injection capacity and relative to where your run rate is. Just curious why you think there is a need to drill that