NGL Energy Partners LP (NYSE:NGL), "NGL Energy," today reported net income of $10.1 million and Adjusted EBITDA of $26.3 million for the three months ended September 30, 2012. Net income per limited partner common unit for the quarter was $0.18. General and administrative expenses during the quarter ended September 30, 2012 included $0.6 million of costs related to acquisitions.
NGL Energy’s results of operations for the three months ended September 30, 2012 include the operations acquired in a June 2012 merger with High Sierra Energy, LP (“High Sierra”), which contributed significantly to NGL Energy’s net income. High Sierra’s businesses include crude oil gathering, transportation and marketing; water treatment, disposal, and transportation; and natural gas liquids transportation and marketing.
For the six month period ended September 30, 2012, NGL Energy reported a net loss of $14.6 million and Adjusted EBITDA of $19.9 million. Net loss per limited partner common unit for the six months ended September 30, 2012 was $(0.37). The net loss was impacted by the following items:
- General and administrative expenses during the quarter ended June 30, 2012 included $3.5 million of costs related to the merger with High Sierra.
- NGL recorded a loss of $5.8 million resulting from the accelerated amortization of previously capitalized debt issuance costs upon closing of its new revolving credit facility.
- Declining propane prices during April and May 2012 had an adverse impact on margins of NGL’s wholesale marketing and supply segment, which NGL expects to recover when delivering future volumes. NGL has contracts whereby it has committed to purchase ratable volumes of propane at index prices. NGL seeks to manage the price risk associated with these contracts primarily by selling the inventory not stored immediately after it is received. When NGL sells product, it records the cost of sale at the average cost of all inventory at that location, which may include inventory purchased earlier at higher prices and stored for sale in the future. During periods of falling prices, this results in negative margins on these sales.
During October 2012, NGL Energy completed a business combination whereby it acquired certain entities that operate salt water disposal wells and related assets. During October and November 2012, NGL Energy acquired two retail propane businesses. On November 1, 2012, NGL Energy completed a business combination whereby it acquired certain entities that conduct crude oil purchasing and logistics operations in Texas and New Mexico.
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