NGL Energy Partners LP (NYSE:NGL) Q1 2021 Earnings Conference Call - Final Transcript
Aug 10, 2020 • 05:00 pm ET
Robert W. Karlovich
in the pricing of barrels purchased and shipped on Grand Mesa. The timing of recognition of hedge gains and losses as well as profit embedded in our inventory for July sales. We have estimated approximately $16 million of profit embedded in our inventory, which is valued at weighted average cost that we expect to recognize during our second quarter. We have already realized the majority of the hedge losses associated with these barrels when we rolled those hedges forward from June, so this is just a matter of timing.
Grand Mesa volumes average 119,000 barrels per day this quarter. However, our profitability on a portion of those barrels was negatively impacted by the unprecedented calendar month average roll differentials during the quarter, which cost us an estimated $11 million compared to historical average differentials. Most of this cost was realized in May and June settlements, and the differential has come in significantly in July. This is a standard pricing mechanism for the industry, and while this loss was not expected to be made up this year, it's also not expected to continue.
Finally for Crude, we benefited from contango storage for a portion of the quarter. However, the forward curve has flattened considerably, and we do not expect to see any significant contango for the remainder of this fiscal year. So from an earnings perspective, Crude generated $31 million of adjusted EBITDA. We have deferred earnings estimated at $16 million to be recognized later this year, most likely second quarter. And we lost approximately $11 million compared to historical results from the CMA roll.
Moving to Water. Water adjusted EBITDA was $57 million for the quarter. Total disposal barrels average 1.4 million barrels per day during the quarter as volumes declined significantly in May. Delaware Basin volumes totaled 1.1 million barrels per day, approximately 80% of total volumes. Eagle Ford volumes averaged 95,000 barrels per day, down 64% compared to last year, and have been the most impacted by the decline in prices, rigs and production shut-ins. We're expecting a slower recovery of volumes in this basin. DJ volumes were down as well to about 132,000 barrels per day compared to about 170,000 barrels per day in the comparable quarter last year. We received an average disposal fee of $0.63 per barrel for the quarter, very consistent with pricing in prior quarters.
Of note, we did not sell all of our skim oil recovered during the quarter. Instead, we utilized our storage at each facility to hold barrels, and we have been selling those barrels at higher pricing during the current quarter. This should be a nice benefit to the second quarter when we are expecting about $4 million of incremental revenues. Our skim oil volumes remain hedged for calendar 2020 with approximately 3,000 barrels per day hedged at an average price just over $56 per barrel through December.
Operating expenses came down significantly and averaged $0.32 per barrel for the quarter, a 25% reduction on a per barrel basis