NGL Energy Partners LP Announces First Quarter Fiscal 2017 Results

NGL Energy Partners LP (NYSE:NGL) (“NGL” or the “Partnership”) today
reported net income for the quarter ended June 30, 2016 of $182.8
million with revenues of $2.72 billion and cost of sales totaling $2.57
billion, resulting in $155.5 million of product margin. The Partnership
also recognized gains related to the sale of TransMontaigne Partners
L.P. (“TLP”) common units and the early extinguishment of debt and other
liabilities totaling $134.0 million and a reduction of $124.7 million of
the previously estimated $380.2 million impairment charge to finalize
the evaluation related to our Water Solutions segment. Adjusted EBITDA
was $63.8 million for the quarter ended June 30, 2016, a 28.3% year over
year decrease when compared to Adjusted EBITDA of $89.0 million during
the quarter ended June 30, 2015. This decrease was driven by the decline
in commodity prices as well as decreases in crude oil and water volumes.
Distributable Cash Flow was $29.8 million for the quarter ended June 30,
2016, compared to $52.9 million for the quarter ended June 30, 2015.

“Our quarterly results reflect our recent efforts to strengthen our
balance sheet and improve liquidity. Our Refined Products and Renewables
segment continues to perform at a high level in this commodity cycle. We
remain focused on optimizing profits across our various segments and
taking advantage of opportunities to grow our business,” stated Mike
Krimbill, CEO of NGL. “We confirm our Fiscal 2017 Adjusted EBITDA
guidance of $500 million and, with the balance sheet enhancements and
upcoming completion of the Grand Mesa pipeline, believe we have
positioned the Partnership for continued growth.”

Capitalization and Liquidity

During the quarter ended June 30, 2016, we repurchased $5.0 million of
our 5.125% Senior Notes due 2019 and $19.2 million of our 6.875% Senior
Notes due 2021 for an aggregate purchase price of $15.1 million, sold
all 3.2 million of the common units we held in TLP for approximately
$112.4 million and closed a $240 million offering of Class A Preferred
Units with Oaktree Capital Management L.P. and affiliates. These
transactions resulted in a $361.5 million reduction in outstanding
borrowings.

Total long-term debt outstanding, excluding the working capital
borrowings, was $2,211.4 million at June 30, 2016 compared to $2,294.3
million at March 31, 2016, a decrease of $83.0 million, including the
transactions mentioned above which were offset by growth capital
expenditures and other investments totaling approximately $190.0 million
during the quarter. Management expects long-term debt to continue to
decrease as cash flow coverage in excess of distributions is used to
repay borrowings, which will primarily occur in the third and fourth
quarters of our fiscal year. Working capital borrowings totaled $655.5
million at June 30, 2016 compared to $618.5 million at March 31, 2016,
an increase of $37.0 million driven by the increase in commodity prices
and inventory volumes during the period. Working capital borrowings are
fully secured by the Partnership’s net working capital, which is subject
to a monthly borrowing base and are excluded from the Partnership’s debt
compliance ratios. NGL had total liquidity (cash plus available capacity
on its revolving credit facility) of $348.6 million as of June 30, 2016.

Quarterly Results of Operations

The Partnership reported net income of $182.8 million for the quarter
ended June 30, 2016, compared to a net loss of $25.0 million during the
quarter ended June 30, 2015. During the quarter ended June 30, 2016, the
Partnership recorded a $104.1 million gain on the sale of the TLP common
units and a $30.0 million gain related to the early extinguishment of a
portion of its senior notes and other liabilities. In addition, the
Partnership reversed $124.7 million of the estimated goodwill impairment
charge recorded during the three months ended March 31, 2016 within our
Water Solutions segment, based on the final, third-party valuation.
These gains were offset by losses recorded due to the revaluation,
disposal or impairment of other long-lived assets of $38.8 million.

The following table summarizes operating income (loss) by operating
segment for the three months ended June 30, 2016 and June 30, 2015 (in
thousands):

The tables included in this release reconcile operating income (loss) to
Adjusted EBITDA for each of our operating segments.

Crude Oil Logistics

The Partnership’s Crude Oil Logistics segment generated Adjusted EBITDA
of $9.8 million during the quarter ended June 30, 2016, compared to
Adjusted EBITDA of $20.3 million for the quarter ended June 30, 2015.
The current quarter results benefited from demand for storage, which was
offset by lower crude oil volumes transported and marketed as production
in the United States continued to decline. The Partnership’s quarterly
results were also impacted by the flattening of the contango curve for
crude oil during the quarter.

The Partnership’s Grand Mesa project remains on schedule. The Saddlehorn
segment of the pipeline from Platteville-to-Cushing is complete and line
fill commenced last week. The Partnership expects the Grand Mesa
stations and pipeline tie-in to be completed and to commence line fill
in October, with commercial operations by November 1, 2016. The
Partnership currently anticipates year one EBITDA related to this
project to be approximately $120 million and year two EBITDA to be
approximately $150 million based on current contracts. The average
contract term on the pipeline is approximately nine years and all
contracts are fee-based with volume commitments. The Partnership expects
remaining capital expenditures for the project to total approximately
$50 - $60 million, including completion of infrastructure at our Cushing
facilities.

Refined Products and Renewables

The Partnership’s Refined Products and Renewables segment generated
Adjusted EBITDA of $37.3 million during the quarter ended June 30, 2016,
compared to Adjusted EBITDA of $45.6 million during the quarter ended
June 30, 2015. The seasonal decrease is a result of variability in
inventory valuation. Refined product barrels sold during the quarter
ended June 30, 2016 increased by approximately 9.9 million barrels,
compared to the same period in the prior year, driven by increased
demand for motor fuels in the current low gasoline price environment.
Refined product barrels sold are expected to remain strong through the
remainder of Fiscal 2017, as the Partnership was recently able to secure
additional line space on the Colonial pipeline. Renewable barrels sold
during the quarter ended June 30, 2016 were approximately 1.8 million,
compared to approximately 1.4 million for the quarter ended June 30,
2015.

Liquids

The Partnership’s Liquids segment generated Adjusted EBITDA of $5.6
million for the quarter ended June 30, 2016, compared to Adjusted EBITDA
of $7.3 million for the quarter ended June 30, 2015. Propane volumes
decreased by 23.7 million gallons, or 10.4%, during the quarter ended
June 30, 2016, compared to the quarter ended June 30, 2015, primarily
driven by the warmer than normal winter weather resulting in lower
propane demand during the spring. Other Liquids volumes decreased by
16.0 million gallons, or 8.3%, for the quarter ended June 30, 2016,
compared to the same period in the prior year, as butane operations were
negatively impacted by railcar costs and increased storage capacity.
Total product margin per gallon was $0.023 for the quarter ended
June 30, 2016, compared to $0.025 for the quarter ended June 30, 2015.

Retail Propane

The Partnership’s Retail Propane segment generated Adjusted EBITDA of
$7.4 million for the quarter ended June 30, 2016, compared to Adjusted
EBITDA of $8.4 million for the quarter ended June 30, 2015. Propane sold
during the quarter ended June 30, 2016 increased by approximately 1.2
million gallons, or 5.0%, compared to the quarter ended June 30, 2015.
Distillates sold during the quarter ended June 30, 2016 increased by
approximately 0.3 million gallons compared to the quarter ended June 30,
2015. Margin per gallon was $0.958 for the quarter ended June 30, 2016,
compared to $1.003 for the quarter ended June 30, 2015, resulting from
higher inventory balances at the beginning of the quarter caused by
warmer than normal temperatures last winter. Subsequent to the quarter
ended June 30, 2016, the Partnership acquired a retail propane marketer
in the southeastern United States whose operations expand the
Partnership’s existing footprint in this area. This acquisition totaled
approximately $26 million and is projected to increase retail propane
volumes by 9 million gallons annually.

Water Solutions

The Partnership’s Water Solutions segment generated Adjusted EBITDA of
$10.4 million for the quarter ended June 30, 2016, compared to Adjusted
EBITDA of $19.9 million during the quarter ended June 30, 2015, as our
Water Solutions segment continues to be negatively impacted by the
reduction in crude oil production as a result of the continued depressed
crude oil price environment. Water barrels processed during the quarter
ended June 30, 2016 were approximately 41.2 million, compared to
approximately 54.5 million for the quarter ended June 30, 2015. Revenues
from recovered hydrocarbons decreased by $8.6 million for the quarter
ended June 30, 2016, compared to the quarter ended June 30, 2015. These
revenues were hedged from April through December of this fiscal year at
an average price of $38.62 per barrel, resulting in a $3.7 million
realized loss for the quarter.

During the quarter, we had an opportunity to purchase and eliminate
certain royalty obligations related to our disposal facilities at what
we believe to be an attractive price. Included in the transaction was
the acquisition of an additional interest in one of our water pipeline
investments, land containing fresh water wells and infrastructure,
permits for four incremental disposal facilities and a two year
non-compete agreement. Additionally, we agreed to terminate our
development agreement with the counterparty. This investment totaled
approximately $47.5 million and we expect full payout to occur in the
next 4-5 years based on the current crude oil price curve. This will be
accelerated should prices recover even modestly or if volumes were to
increase.

Corporate and Other

The Adjusted EBITDA for Corporate and Other was a loss of $6.6 million
during the quarter ended June 30, 2016, compared to a loss of $12.5
million for the quarter ended June 30, 2015. Compensation expense
decreased by approximately $5.4 million during the quarter ended
June 30, 2016, compared to the quarter ended June 30, 2015, as a result
of the TLP GP sale and continued focus on cost management. Growth
capital expenditures totaled approximately $100.0 million for the
quarter ended June 30, 2016, including $58.2 million related to the
Grand Mesa pipeline project. Acquisitions and other investments,
including incremental line space on the Colonial pipeline and the water
investment, totaled approximately $90.0 million.

Fiscal Year 2017 Guidance

The Partnership continues to expect to generate Adjusted EBITDA of
approximately $500 million during Fiscal 2017, which includes Adjusted
EBITDA for the Grand Mesa project for five months at approximately $10
million per month. Distributable Cash Flow is expected to generate
approximately $175 million, or about 2.0x coverage at our current
annualized distribution rate, including distributions on the Class A
Preferred Units.

First Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled
for 11:00 am Eastern Time (10:00 am Central Time) on Thursday, August 4,
2016. Analysts, investors, and other interested parties may access the
conference call by dialing (800) 291-4083 and providing access code
59163252. An archived audio replay of the conference call will be
available for 14 days beginning at 2:00 pm Eastern Time (1:00 pm Central
Time) on August 4, 2016 and can be accessed by dialing (855) 859-2056
and providing access code 59163252.

Use of Non-GAAP Financial Measures

NGL defines EBITDA as net income (loss) attributable to NGL Energy
Partners LP, plus interest expense, gain on early extinguishment of
liabilities, revaluation of investments, income tax expense (benefit),
and depreciation and amortization expense. NGL defines Adjusted EBITDA
as EBITDA excluding net unrealized gains and losses on derivatives,
lower of cost or market adjustments, gains and losses on disposal or
impairment of assets, equity-based compensation expense, acquisition
expense and other. We also include in Adjusted EBITDA certain inventory
valuation adjustments related to our Refined Products and Renewables
segment, as described below. EBITDA and Adjusted EBITDA should not be
considered alternatives to net income, income before income taxes, cash
flows from operating activities, or any other measure of financial
performance calculated in accordance with GAAP as those items are used
to measure operating performance, liquidity or the ability to service
debt obligations. NGL believes that EBITDA provides additional
information to investors for evaluating NGL’s ability to make quarterly
distributions to NGL’s unitholders and is presented solely as a
supplemental measure. NGL believes that Adjusted EBITDA provides
additional information to investors for evaluating NGL’s financial
performance without regard to NGL’s financing methods, capital structure
and historical cost basis. Further, EBITDA and Adjusted EBITDA, as NGL
defines them, may not be comparable to EBITDA, Adjusted EBITDA, or
similarly titled measures used by other entities.

Other than NGL’s Refined Products and Renewables segment, for purposes
of the Adjusted EBITDA calculation, NGL makes a distinction between
realized and unrealized gains and losses on derivatives. During the
period when a derivative contract is open, NGL records changes in the
fair value of the derivative as an unrealized gain or loss. When a
derivative contract matures or is settled, NGL reverses the previously
recorded unrealized gain or loss and record a realized gain or loss. NGL
does not draw such a distinction between realized and unrealized gains
and losses on derivatives of NGL’s Refined Products and Renewables
segment. The primary hedging strategy of NGL’s Refined Products and
Renewables segment is to hedge against the risk of declines in the value
of inventory over the course of the contract cycle, and many of the
hedges are six months to one year in duration at inception. The
“inventory valuation adjustment” row in the reconciliation table
reflects the difference between the market value of the inventory of
NGL’s Refined Products and Renewables segment at the balance sheet date
and its cost. NGL includes this in Adjusted EBITDA because the gains and
losses associated with derivative contracts of this segment, which are
intended primarily to hedge inventory holding risk, also impact Adjusted
EBITDA.

Distributable Cash Flow is defined as Adjusted EBITDA minus maintenance
capital expenditures and cash interest expense. Maintenance capital
expenditures represent capital expenditures necessary to maintain the
Partnership’s operating capacity.

Distributable Cash Flow is a performance metric used by senior
management to compare cash flows generated by the Partnership (excluding
growth capital expenditures and prior to the establishment of any
retained cash reserves by the Board of Directors) to the cash
distributions expected to be paid to unitholders. Using this metric,
management can quickly compute the coverage ratio of estimated cash
flows to planned cash distributions. This financial measure also is
important to investors as an indicator of whether the Partnership is
generating cash flow at a level that can sustain, or support an increase
in, quarterly distribution rates. Actual distributions are set by the
Board of Directors of NGL’s general partner.

Forward Looking Statements

This press release includes “forward-looking statements.” All statements
other than statements of historical facts included or incorporated
herein may constitute forward-looking statements. Actual results could
vary significantly from those expressed or implied in such statements
and are subject to a number of risks and uncertainties. While NGL
believes such forward-looking statements are reasonable, NGL cannot
assure they will prove to be correct. The forward-looking statements
involve risks and uncertainties that affect operations, financial
performance, and other factors as discussed in filings with the
Securities and Exchange Commission. Other factors that could impact any
forward-looking statements are those risks described in NGL’s annual
report on Form 10-K, quarterly reports on Form 10-Q, and other public
filings. You are urged to carefully review and consider the cautionary
statements and other disclosures made in those filings, specifically
those under the heading “Risk Factors.” NGL undertakes no obligation to
publicly update or revise any forward-looking statements except as
required by law.

NGL provides Adjusted EBITDA guidance that does not include certain
charges and costs, which in future periods are generally expected to be
similar to the kinds of charges and costs excluded from Adjusted EBITDA
in prior periods, such as income taxes, interest and other non-operating
items, depreciation and amortization, net unrealized gains and losses on
derivatives, lower of cost or market adjustments, gains and losses on
disposal or impairment of assets, equity-based compensation,
acquisition-related expense, revaluation of liabilities and items that
are unusual in nature or infrequently occurring. The exclusion of these
charges and costs in future periods will have a significant impact on
the Partnership’s Adjusted EBITDA and the Partnership is not able to
provide a reconciliation of the Partnership’s Adjusted EBITDA guidance
to net income (loss) without unreasonable efforts due to the uncertainty
and variability of the nature and amount of these future charges and
costs and the Partnership believes that such reconciliation, if
possible, would imply a degree of precision that would be potentially
confusing or misleading to investors.

About NGL Energy Partners LP

NGL Energy Partners LP is a Delaware limited partnership. NGL owns and
operates a vertically integrated energy business with five primary
businesses: Crude Oil Logistics, Water Solutions, Liquids, Retail
Propane and Refined Products and Renewables. NGL completed its initial
public offering in May 2011. For further information, visit the
Partnership’s website at www.nglenergypartners.com.

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION
(Unaudited)

The following table reconciles NGL’s net income (loss) to NGL’s EBITDA,
Adjusted EBITDA and Distributable Cash Flow:

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