NGL ENERGY PARTNERS LP (NGL)

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NGL Energy Partners LP (NGL)

F3Q13 Earnings Call

February 15, 2013 10:00 am ET

Executives

H. Michael Krimbill – Chief Executive Officer and Chief Financial Officer

Atanas H. Atanasov – Vice President of Finance and Treasurer

Analysts

Ethan H. Bellamy – Robert W. Baird & Co.

Matt Niblack – HITE Hedge Asset Management LLC

Raymond F. Wetegrove – Majadas Investment Corporation

Presentation

Operator

Good day ladies and gentlemen, and welcome to the Q3 2013 NGL Energy Partners LP Earnings Conference Call. My name is Matthew and I'll be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder this call is being recorded for replay purposes.

And now I’d like to turn the call over to Mr. Mike Krimbill, CEO and CFO of NGL Energy Partners LP. Please proceed, Sir.

H. Michael Krimbill

Thank you, and thanks for joining us this morning. This conference call will include some forward-looking statements and information, while NGL Energy Partners believe that its expectations are based on reasonable assumptions, there can be no assurance as such expectations will prove to be correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations included in the forward-looking statement. These factors include the prices and market demand for natural gas liquids, crude oil, the level of production of crude oil, natural gas, the effect of weather conditions and demand for oil, natural gas, natural gas liquids and the ability to successfully identify and contemplate strategic acquisitions at purchase prices that are accretive to financial results and the successful integrated acquired assets and businesses.

Other factors that could impact any forward-looking statements are described in risk factors in the partnerships and report in Form 10-K, quarterly report on Form 10-Q and other public filings and press releases.

NGL Energy Partners undertakes no obligations to publically update or revise any forward-looking statements as a result of new information, future events, otherwise. Please see the partnerships website at www.nglenergypartners.com under Investor Relations, for reconciliations of differences between any non-GAAP measures discussed on this call and the most directly comparable GAAP financial measures.

So with that, again we thank you for being here. As you know, our third and fourth quarters, our fiscal quarters which our third quarter is this quarter ending December 31, and next quarter ending March 31, 2013, our two largest EBITDA quarters and a chance for everyone to verify that we are hitting our numbers and for us to convert to some extend what this pro forma into some actual results.

So with that, I would like to turn it over to our Senior VP of Finance, Atanas to go through the numbers. And after that we will open it for Q&A.

Atanas H. Atanasov

Thank you, Mike. As Mike indicated we are pleased with the results for the quarter. Net income for the quarter came in at $40.5 million and $25.8 million for the nine months ended 12/31/12. Adjusted EBITDA for the quarter is $73.2 million resulting in $93.1 million of EBITDA year-to-date.

The quarterly adjusted EBITDA of $73.2 million, which includes $800,000 of acquisition costs, exceeds previous guidance of $71.9 million by $1.3 million. Excluding these one-time acquisition costs, adjusted EBITDA is $74 million and exceeds our previous guidance by $2.1 million.

The year-to-date adjusted EBITDA of $93.1 million includes $5.2 million of acquisition costs and if we exclude these one-time acquisition costs, the adjusted EBITDA is $98.3 million, which exceeds our guidance year-to-date by $6.5 million.

If you take a look at the cash flow statements in the queue, you will notice that CapEx year-to-date is at $37.4 million. This includes approximately $8.6 million of maintenance CapEx and we expect to incur about $3.4 million in the fourth fiscal quarter for a total maintenance CapEx of $12 million for fiscal 2013. We have realized that this is lower than the $22.5 million we had previously indicated and the main driver behind the lower maintenance CapEx is the result of integrating retail propane acquisitions which has allowed us to consolidate vehicle fleets and not purchase as many new vehicles. The impact of such efficiencies is generally one-time, so going forward we anticipate our maintenance CapEx to be in the range of $20 million to $22 million for fiscal 2014.

Previously we had included DCF guidance of $153 million which was based on run-rate of $210 million and this included interest expense of $35 million in maintenance CapEx of $22 million, which resulted in a distribution coverage of 1.5 times based on $1.85 distribution per unit. If we take those same numbers and simply reduce the maintenance CapEx by down to $12 million, the distribution coverage would be 1.6 times.

We confirm our previous guidance of $177 million for fiscal 2013 and that number includes $5.2 million of acquisition costs. So as we said, overall we’re very, very pleased with the quarter and we expect to be in target for the remainder of the year.

H. Michael Krimbill

Okay. Thank you and let's open it up for questions.

Question-and-Answer Session

Operator

Thank you (Operator Instructions) Your first question comes from the line of Ethan Bellamy from Baird. Please proceed.

Ethan H. Bellamy – Robert W. Baird & Co.

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