NGL Energy Partners to sell marine assets in deals totaling $112M

Grafissimo/E+ via Getty Images

NGL Energy Partners (NYSE:NGL) said Monday it agreed to sell all of its marine assets for $111.65M in cash in two transactions, but the company provided no further specifics.

NGL (NGL), whose marine fleet consists of 13 towboats and 25 tank barges, provided waterborne transportation of refined products and crude oil for various customers, particularry on the U.S. Gulf Coast.

NGL Energy Partners (NGL) has been trading near 52-week highs since reporting strong Q3 results three weeks ago.

Comments

[jtonson]

Nice to see this progress on reducing debt below the covenant level! NGL can now move closer to resuming shareholder returns (dividend resumption on preferreds, then common, maybe buybacks). But they do plan to put more emphasis on reducing leverage further, for better refinancing terms on other debt.

"We have reduced total debt and achieved a leverage ratio below 4.75 times Adjusted EBITDA more quickly than most thought possible,” stated Mike Krimbill, NGL’s CEO.

feeds.issuerdirect.com/...

[Timothy Stabosz]

@jtonson
Spectacular. The guidance they say they are going to give, in the upcoming earnings call, is going to catapult the stock even higher.

This entity is going to have a huge “re-rate” on the Street something fierce. I see $8-10 as a very real possibility by the end of the year.

[RuleofLaw]

@jtonson Have a look at the accompanying 8k with pro forma financials. In short, the asset sale netted about $105mm after expenses. The sold assets produced just under $6mm of EBITDA in the trailing 9 months. If you annualize to $8mm, they sold assets at 13x. Hugely deleveraging.

Makes me wonder if there are similar potential asset sales in the liquid distribution business (think underutilized terminals).

Best part about the disclosure was the fact that it happened and was detailed. I hope this is a new trend.

[Ionutene90]

@RuleofLaw also goodwill was reduced by 31 million, and that cash ended up into the revolver payment, which is what i want to see.

[Timothy Stabosz]

Adding back substantially in here….to make up for shares sold in the mid to high $3s. Golden opportunity.

[rjm22]

Down to around $3.15 bid

[rjm22]

@rjm22 $2.90 damn

[rjm22]

Latest data shows the largest indicative borrow rate increases among liquid option names include: iBio (IBIO) 286.60% +20.76, Aurora Cannabis(ACB) 11.13% +2.65, NGL Energy Partners(NGL) 36.63% +2.19, Rumble (RUM) 23.68% +0.69, Reata Pharmaceuticals(RETA) 4.54% +0.46, Canopy Growth(CGC) 99.35% +0.30, PureCycle Technologies(PCT) 1.87% +0.24, Dutch Bros(BROS) 19.29% +0.19, Arqit Quantum(ARQQ) 61.09% +0.18, and Adobe (ADBE) 0.41% +0.16.

[Henry Banana]

@rjm22

"... the largest indicative borrow rate increases among liquid option names"

Can you explain what is an indicative borrow rate increase?

[rjm22]

@Henry Banana No, it was a copy & paste without comment

[davidwkern]

Whew! Sold my NGL.B preferred stock today at about break even, after being underwater for years. Anybody know, will I ever get my missed payments?

[RuleofLaw]

@davidwkern you sold your claim to the accrued but unpaid dividends, so no, you won't get your missed payments. But whoever bought your shares may.

[SeeItSkiIt]

@davidwkern Dude...it will trade over $30 a share once they announce that the cumulative dividend will be reinstated. So add about $5.00 a share to the stock price for what's in arrears. It will trade at a premium to par and that is when I will sell. But my average is around $13 a share on the B and Cs.

[gutcheck]

what is fair value for sp now ?

[flyerguy1300]

Reducing debt even more, love it!

[GCManage]

Does this explain the insider buying just a few weeks ago? (Seems extremely coincidental.) Attractive sales price for marine and a significant reduction in debt to follow. Will this improve operating leverage whilst eliminating the distraction of managing a non core business?

[Timothy Stabosz]

@GCManage
It certainly wouldn’t “explain” the buying. (Apparently, management, or the general counsel, considered the transaction to be non-material. Not sure I would agree…but if so, then obviously the basis for the buying was the continued improvement in earnings, and future guidance, and the CEO’s increased faith in the future, generally, including their ability to refinance future debt maturities, and start paying down the preferred over-hang…at some point.)

Fantastic news, in any case, and on the high end of management’s guidance for asset sales! (Btw, the fact they gave such guidance, at the time of the earnings report, is what should put them “ in the clear,” in terms of the open market buying…or at least that would be the basis for an SEC attorney’s advice that it was ok for Insiders to buy.)

[Henry Banana]

@Timothy Stabosz Yes, I think their guidance on asset sales was $20m - $100m. This is a nice csah injection, and I think it means long term debt will $2.81 billion going forward. If they do $630m EBITDA, then $2.81b/$630m = 4.46x, well below their 4.75 leverage target.

Bump the EBITDA number up to $650m if Q1 comes in a bit ahead of expectations, and leverage is down to $4.32x. They can probably refinance at that level, but I'd wager they will try to get one more full year of improving EBITDA, and do the refinance about 15 months from now closer to 4.2x or below.

[rjm22]

@Timothy Stabosz I think the market knew the asset sales were ahead because they told us in the conference calls so while they may be material they were not non-public