Exchange: NYSE | Sector: Energy | Industry: Oil Gas Midstream
Q1 2025
Published: Aug 8, 2024
Earnings Highlights
Revenue of $1.39B down 14.2% year-over-year
EPS of $-0.14 decreased by 193.3% from previous year
Gross margin of 12.1%
Net income of 9.68M
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NGL Energy Partners LP (NGL) QQ1 2025 Results — Margin Resilience Amid Heavily Levered Balance Sheet and Cash-Flow Pressures
Executive Summary
NGL Energy Partners’ QQ1 2025 results reflect a revenue decline against prior year and seasonality, but with a narrow positive operating income and modest net income despite a heavy leverage burden. Revenue for the quarter was $1.387 billion, down 14.16% year over year and 14.87% quarter over quarter, while gross profit totaled $168.1 million and gross margin held at roughly 12.1%. The company delivered operating income of $74.95 million and EBITDA of $137.70 million, with net income of $9.68 million and an EPS of -$0.14 for the quarter. The bottom line benefited from margin stability in a challenging commodity backdrop, yet remained thin due to elevated interest and depreciation charges.
Balance-sheet and cash-flow metrics highlight the sustainability risk embedded in NGL’s model. The quarter produced operating cash flow of -$18.06 million and free cash flow of -$77.98 million, while capex was $59.92 million and dividends paid reached $218.09 million. Net debt sits near $3.116 billion with cash and equivalents of only about $5.27 million at quarter end, yielding a current ratio of 1.15 and an alarmingly weak cash ratio (~0.006). Interest expense of ~$69.74 million drives a stated interest coverage of ~1.08x, underscoring the leverage sensitivity to commodity cycles and rates.
Taken together, the QQ1 2025 results suggest a defensible operating footprint and a gradual improvement in operating income metrics, but the leverage burden and near-term cash-flow constraints imply a cautious stance on near-term profitability and distributions. The key questions for investors revolve around debt refinancing options, potential restructuring or optimization of the dividend policy, and the pace at which cash flow normalization could be achieved through volume, mix, and cost discipline.
Transcript data not provided in the supplied dataset. As a result, no management quotes or thematic highlights from the QQ1 2025 earnings call could be extracted. (If a transcript becomes available, we will extract themes on strategy, operations, market conditions, and confirm guidance details.)
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Forward Guidance
No explicit forward guidance is contained in the provided data. Given the balance-sheet dynamics and cash-flow trajectory, the key near-term questions focus on monetization of assets, dividends sustainability, and debt maturities. Investors should monitor:
- Liquidity trajectory and covenant headroom as interest expense remains a material burden with an implied coverage around 1.08x.
- Any announcements on capex discipline, asset optimization, or asset sales aimed at deleveraging.
- Potential adjustments to the dividend policy in light of negative free cash flow, with attention to payout stability vs. maintenance of financial flexibility.
- Debt refinancing activity or covenant amendments that could reduce near-term funding risk.
- Commodity pricing and volume trends in Water Solutions, Crude Oil Logistics, and Liquids Logistics that could unlock incremental margin or volume-based growth.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
NGL Focus
12.12%
5.40%
1.21%
17.31%
NGL-PC
12.10%
5.40%
1.21%
83.96%
NS-PC
37.70%
26.60%
4.13%
19.16%
DLNG-PA
56.50%
50.80%
2.57%
19.87%
TNP-PE
33.40%
29.80%
3.21%
3.55%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Under current QQ1 2025 results, NGL presents a cautious to negative near-term investment outlook due to substantial leverage and limited liquidity, despite a margin-resilient quarter. The stock trades with a low per-share earnings signal and a weak free-cash-flow profile, implying a need for deleveraging or substantial cash-flow improvement to restore distribution sustainability. The investment thesis hinges on debt refinancing progress, potential capital actions to strengthen liquidity, and a clearer path to positive free cash flow. If management articulates a credible plan to reduce leverage, optimize the dividend policy, and improve cash generation, the long-term investment case could shift toward a more constructive stance.
Key Investment Factors
Growth Potential
Diversified midstream footprint across Water Solutions, Crude Oil Logistics, and Liquids Logistics provides multiple revenue streams and potential upside from export capacity and terminal utilization if NGL capitalizes on demand pull in NGLs and refined products.
Profitability Risk
Material leverage with net debt around $3.12B and interest coverage ~1.08x; negative free cash flow in QQ1 2025; high dividend payout relative to cash flow; dependence on commodity cycles and regulatory/regional pipeline dynamics; liquidity constraints (cash ~$5.3M) and capital-intensive exposure.
Financial Position
Leverage remains elevated with debt-to-capitalization near 0.80 and debt-to-equity around 3.9x; liquidity metrics are tight (cash ratio near 0); the company relies on ongoing cash flow generation and potential refinancing to support distributions and capex.
SWOT Analysis
Strengths
Diversified, asset-rich midstream platform (Water Solutions, Crude Oil Logistics, Liquids Logistics) with a nationwide terminal and pipeline footprint.
Stable gross margin around 12% in QQ1 2025 and EBITDA visibility from multiple segments.
Established long-term commercial relationships and a large asset base could support future volumes and ancillary services.
Weaknesses
Very high leverage relative to peers (net debt ~$3.12B, debt to capitalization ~0.80).
Negative free cash flow in QQ1 2025 and dependence on dividends for cash return; narrow liquidity runway (cash ~$5.3M).
Low interest coverage (~1.08x) indicating sensitivity to rate and commodity cycles.
Opportunities
Rationalization/refinancing of debt to improve coverage and maturity profile.
Volume growth and export opportunities via Liquids Logistics terminal network and pipelines; potential optimization of water solutions and disposal/recycling services to improve margins.
Threats
Commodity price volatility and seasonal demand affecting volumes and spreads.
Regulatory, environmental, and rate risk in midstream operations; potential covenant stress or restrictiveness if cash flow deteriorates.
Competitive dynamics and capital intensity in a fragmented midstream sector could pressure pricing and margins.