NGL Energy Partners LP Announces Third Quarter Fiscal 2021 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported its third quarter fiscal 2021 results. Highlights for the quarter include:

• Loss from continuing operations for the third quarter of Fiscal 2021 of $380.4 million, primarily a result of a $383.6 million write down of goodwill and certain intangibles related to the impact of the bankruptcy rejection of transportation contracts with Extraction Oil & Gas, Inc. (“Extraction”), compared to income from continuing operations of $49.1 million for the third quarter of Fiscal 2020
• Announcement of a global settlement agreement with Extraction which, among other consideration, provides for: (i) a new long-term supply agreement, which includes a significant acreage dedication in the DJ Basin, and retains Extraction’s crude oil volumes for shipping on the Grand Mesa Pipeline; (ii) a new rate structure under the supply agreement, with an agreed upon differential plus an increase in the rate when New York Mercantile Exchange (“NYMEX”) prices exceed $50.00 per barrel; and (iii) the receipt of $35.0 million from Extraction as a liquidated payment for the Partnership’s unsecured claims
• Successful start-up of our Poker Lake pipeline, which has an initial capacity of over 350,000 barrels per day and connects into our integrated Delaware Basin produced water pipeline infrastructure network
• Adjusted EBITDA from continuing operations for the third quarter of Fiscal 2021 of $125.0 million, impacted by lower volumes on the Grand Mesa Pipeline, lower demand in the Liquids and Refined Products segment due to the COVID-19 pandemic and lower earnings associated with biodiesel tax credits, compared to $200.5 million for the third quarter of Fiscal 2020

Subsequent to December 31, 2020, the Partnership announced the completion of a private offering of $2.05 billion of 7.5% 2026 senior secured notes (“2026 Secured Notes”) and a new $500.0 million asset-based revolving credit facility (“ABL Facility”). The proceeds received from these transactions were used to repay all outstanding amounts under the Partnership’s existing $1.915 billion revolving credit facility due in October 2021 and its $250.0 million term loan facility and terminate those agreements, as well as to pay all fees and expenses associated with the transactions. In connection with these transactions, the Partnership has temporarily suspended all common unit and preferred unit distributions until total leverage has been reduced to an agreed upon level.

“The Partnership made significant progress on numerous fronts during its fiscal third quarter. The successful completion of the Poker Lake pipeline allowed our Water Solutions segment to begin receiving disposal volumes from its Poker Lake Dedication and will facilitate future growth from the development. The finalization of our negotiations with Extraction around our future operating relationship preserved barrels to be transported on the Grand Mesa Pipeline and removed a significant point of uncertainty in our future earnings.” stated Mike Krimbill, NGL’s CEO. “Subsequent to the quarter’s end, we successfully extended our short-term debt maturities and provided the Partnership with improved liquidity and a long-term runway with which it can concentrate on deleveraging the balance sheet with an eye towards reinstating both the preferred and common unit distributions as soon as possible. Before entering into the agreement that restricts distributions, management and the Board first considered many other options and, based on the totality of the circumstances, determined and strongly believes the chosen path forward is in the best interest of all stakeholders,” Krimbill concluded.

Quarterly Results of Operations

The following table summarizes operating income (loss) and Adjusted EBITDA from continuing operations by reportable segment for the periods indicated:

	Quarter Ended
	December 31, 2020						December 31, 2019
	Operating Income (Loss)			Adjusted EBITDA			Operating Income (Loss)			Adjusted EBITDA
	(in thousands)
Crude Oil Logistics	$	(382,192	)	$	26,332		$	28,696		$	55,575
Liquids and Refined Products	32,438			41,824			89,038			93,211
Water Solutions	15,821			65,554			(583		)	62,214
Corporate and Other	(12,374		)	(8,670		)	(20,756		)	(10,489		)
Total	$	(346,307	)	$	125,040		$	96,395		$	200,511

The tables included in this release reconcile operating income (loss) to Adjusted EBITDA from continuing operations, a non-GAAP financial measure, on a consolidated basis and for each of the Partnership’s reportable segments.

Crude Oil Logistics

On December 21, 2020, the Partnership announced a global settlement agreement with Extraction, as it relates to Extraction’s emergence from bankruptcy, which occurred on January 21, 2021. Among other consideration, the global settlement agreement provides for the following: (i) a new long-term supply agreement, which includes a significant acreage dedication in the DJ Basin, and retains Extraction’s crude oil volumes for shipping on the Grand Mesa Pipeline; (ii) a new rate structure under the supply agreement, with an agreed upon differential plus an increase in the rate when NYMEX prices exceed $50.00 per barrel; and (iii) the receipt of $35.0 million from Extraction as a liquidated payment for the Partnership’s unsecured claims related to the rejected transportation contracts, which was received on January 21, 2021.

Operating income for the third quarter of Fiscal 2021 decreased compared to the third quarter of Fiscal 2020 primarily due to impairment charges of $383.6 million related to the write down of goodwill and certain intangible assets due to the impact of the rejection of transportation contracts with Extraction in connection with its bankruptcy. During the three months ended December 31, 2020, financial volumes on the Grand Mesa Pipeline averaged approximately 69,000 barrels per day, compared to approximately 134,000 barrels per day for the three months ended December 31, 2019. These volumes are expected to increase going forward as the global settlement agreement with Extraction begins to take effect and as drilling and completion activity increases in the DJ Basin.

Liquids and Refined Products

Total product margin per gallon, excluding the impact of derivatives, was $0.048 for the quarter ended December 31, 2020, compared to $0.091 for the quarter ended December 31, 2019. This decrease was primarily due to higher supply costs and lower demand resulting from the COVID-19 pandemic.

Refined products volumes decreased by approximately 112.8 million gallons, or 34.5%, during the quarter ended December 31, 2020 compared to the quarter ended December 31, 2019. Propane volumes decreased by approximately 86.7 million gallons, or 18.5%, and butane volumes decreased by approximately 63.3 million gallons, or 22.9%, when compared to the quarter ended December 31, 2019. Other product volumes decreased by approximately 46.4 million gallons, or 27.5%, during the quarter ended December 31, 2020 compared to the same period in the prior year. The decrease in refined products, propane, butane and other product volumes was also primarily due to the continued lower demand as a result of the COVID-19 pandemic.

Additionally, the Partnership received the $13.8 million one-time benefit of certain biofuel tax credits that had been accumulated in prior periods and recognized in the quarter ended December 31, 2019.

Water Solutions

The Partnership processed approximately 1.41 million barrels of water per day during the quarter ended December 31, 2020, a 10.9% decrease when compared to produced water processed per day during the quarter ended December 31, 2019. This decrease was primarily due to lower disposal volumes in all basins, other than the Northern Delaware basin, during the period resulting from lower crude oil prices, drilling activity and production volumes. The increase in disposal volumes during the three months ended December 31, 2020 in the Northern Delaware basin was primarily driven by three months of activity from the assets acquired from Hillstone Environmental Partners, LLC (“Hillstone”) in November 2019 as well as new produced water volumes received upon the completion and commencement of the Partnership’s Poker Lake pipeline. The pipeline and tie-ins, which have the initial capacity of over 350,000 barrels per day and connects into the Partnership’s integrated Delaware Basin produced water pipeline infrastructure network, was successfully completed in October 2020.

Revenues from recovered crude oil, including the impact from realized skim oil hedges, totaled $11.4 million for the quarter ended December 31, 2020, a decrease of $6.4 million from the prior year period. This decrease was the result of lower volumes and lower crude oil prices. The percentage of recovered crude oil per barrel of produced water processed has declined over the past several periods due to an increase in produced water transported through pipelines (which contains less oil per barrel of produced water) and the addition of contract structures that allow certain producers to keep the skim oil recovered from produced water.

Operating expenses in the Water Solutions segment decreased to $0.27 per barrel compared to $0.42 per barrel in the comparative quarter last year. The Partnership has taken significant steps to reduce operating costs and continues to evaluate cost saving initiatives in the current environment.

Corporate and Other

Corporate and Other expenses decreased from the comparable prior year period primarily due to lower compensation expense, in particular cash and non-cash incentive compensation, and a reduction in acquisition related expenses. These decreases were partially offset by legal costs incurred for defending the rejection of our transportation contracts in the Extraction bankruptcy proceedings.

Capitalization and Liquidity

Total debt outstanding was $3.28 billion at December 31, 2020 compared to $3.15 billion at March 31, 2020, an increase of $131 million due primarily to the funding of certain capital expenditures incurred prior to and accrued on March 31, 2020 as well as $100.0 million of deferred purchase price of Mesquite Disposals Unlimited, LLC (“Mesquite”). Capital expenditures incurred totaled $11.5 million during the third quarter (including $6.3 million in maintenance expenditures) and $65.9 million year-to-date (including $22.3 million in maintenance expenditures). These expenditures have decreased throughout Fiscal 2021 with original full year expectations totaling $100 million or less for both growth and maintenance capital expenditures combined. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $103.1 million as of December 31, 2020.

On February 4, 2021, the Partnership closed on the 2026 Secured Notes and the ABL Facility. The proceeds received were used to repay all outstanding amounts under the Partnership’s existing $1.915 billion revolving credit facility and repay its $250 million term credit facility, along with all fees and expenses associated with these repayments and the issuance of the 2026 Secured Notes and the ABL Facility. The Partnership currently has approximately $340 million in availability under the ABL Facility, net of all currently outstanding borrowings and letters of credit.

In connection with the refinancing, the Partnership agreed to certain restricted payment provisions under the 2026 Secured Notes and the ABL Facility. One of these provisions requires the Partnership to temporarily suspend the quarterly common unit distribution beginning with respect to the quarter ended December 31, 2020, as well as distributions on all of the Partnership’s preferred units, until the total leverage ratio falls below 4.75x. The cash savings from this suspension should accelerate the deleveraging of the Partnership’s balance sheet and increase liquidity, thereby creating more financial flexibility for the Partnership going forward.

Third Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled for 4:00 pm Central Time on Tuesday, February 9, 2021. Analysts, investors, and other interested parties may access the conference call by dialing [phone] and providing access code 5176744. An archived audio replay of the conference call will be available for 7 days beginning at 1:00 pm Central Time on February 10, 2021, which can be accessed by dialing [phone] and providing access code 5176744.

Non-GAAP Financial Measures

NGL defines EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, 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 net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other. NGL also includes in Adjusted EBITDA certain inventory valuation adjustments related to TransMontaigne Product Services, LLC (“TPSL”), our refined products business in the mid-continent region of the United States (“Mid-Con”) and our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”), which are included in discontinued operations, and certain refined products businesses within NGL’s Liquids and Refined Products segment, as discussed below. EBITDA and Adjusted EBITDA should not be considered as alternatives to net (loss) income, (loss) income from continuing operations 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 for the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL’s Liquids and Refined Products 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 the TPSL, Mid-Con, and Gas Blending businesses, which are included in discontinued operations, and certain businesses within NGL’s Liquids and Refined Products segment. The primary hedging strategy of these businesses 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 cover extended periods of time. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of these businesses at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. NGL includes this in Adjusted EBITDA because the unrealized gains and losses associated with derivative contracts associated with the inventory of this segment, which are intended primarily to hedge inventory holding risk and are included in net income, also affect Adjusted EBITDA.

Distributable Cash Flow is defined as Adjusted EBITDA minus maintenance capital expenditures, income tax expense, cash interest expense, preferred unit distributions and other. 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 distribution amounts are set by the Board of Directors.

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 net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition 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 its 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, a Delaware limited partnership, is a diversified midstream energy company that transports, stores, markets and provides other logistics services for crude oil, natural gas liquids and other products and transports, treats and disposes of produced water generated as part of the oil and natural gas production process.

For further information, visit the Partnership’s website at www.nglenergypartners.com.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (in Thousands, except unit amounts)
	December 31, 2020		March 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	9,223	$	22,704
Accounts receivable-trade, net of allowance for expected credit losses of $3,681 and $4,540, respectively	599,207		566,834
Accounts receivable-affiliates	17,194		12,934
Inventories	169,654		69,634
Prepaid expenses and other current assets	120,414		101,981
Total current assets	915,692		774,087
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $663,185 and $529,068, respectively	2,744,374		2,851,555
GOODWILL	744,439		993,587
INTANGIBLE ASSETS, net of accumulated amortization of $494,910 and $631,449, respectively	1,322,697		1,612,480
INVESTMENTS IN UNCONSOLIDATED ENTITIES	21,589		23,182
OPERATING LEASE RIGHT-OF-USE ASSETS	156,398		180,708
OTHER NONCURRENT ASSETS	46,521		63,137
Total assets	$	5,951,710	$	6,498,736
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade	$	506,792	$	515,049
Accounts payable-affiliates	42,604		17,717
Accrued expenses and other payables	102,769		232,062
Advance payments received from customers	17,024		19,536
Current maturities of long-term debt	2,146		4,683
Operating lease obligations	48,082		56,776
Total current liabilities	719,417		845,823
LONG-TERM DEBT, net of debt issuance costs of $20,426 and $19,795, respectively, and current maturities	3,278,443		3,144,848
OPERATING LEASE OBLIGATIONS	106,292		121,013
OTHER NONCURRENT LIABILITIES	103,888		114,079
CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively	551,097		537,283
EQUITY:
General partner, representing a 0.1% interest, 129,297 and 128,901 notional units, respectively	(51,935)		(51,390)
Limited partners, representing a 99.9% interest, 129,168,035 and 128,771,715 common units issued and outstanding, respectively	826,973		1,366,152
Class B preferred limited partners, 12,585,642 and 12,585,642 preferred units issued and outstanding, respectively	305,468		305,468
Class C preferred limited partners, 1,800,000 and 1,800,000 preferred units issued and outstanding, respectively	42,891		42,891
Accumulated other comprehensive loss	(266)		(385)
Noncontrolling interests	69,442		72,954
Total equity	1,192,573		1,735,690
Total liabilities and equity	$	5,951,710	$	6,498,736

NGL ENERGY PARTNERS LP AND SUBSIDIARIES Unaudited Condensed Consolidated Statements of Operations (in Thousands, except unit and per unit amounts)
	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
REVENUES:
Crude Oil Logistics	$	485,289		$	690,989		$	1,228,169		$	2,048,301
Water Solutions	98,925			121,607			275,668			294,639
Liquids and Refined Products	877,491			1,413,653			1,969,813			3,559,017
Other	314			280			942			799
Total Revenues	1,462,019			2,226,529			3,474,592			5,902,756
COST OF SALES:
Crude Oil Logistics	448,933			628,443			1,053,261			1,847,382
Water Solutions	3,280			14,004			8,559			4,701
Liquids and Refined Products	826,211			1,292,588			1,857,633			3,361,185
Other	455			437			1,363			1,337
Total Cost of Sales	1,278,879			1,935,472			2,920,816			5,214,605
OPERATING COSTS AND EXPENSES:
Operating	61,427			94,412			182,468			230,610
General and administrative	16,044			29,150			50,677			93,400
Depreciation and amortization	78,200			73,726			249,655			190,593
Loss (gain) on disposal or impairment of assets, net	373,776			(12,626		)	391,752			(10,482		)
Revaluation of liabilities	—			10,000			—			10,000
Operating (Loss) Income	(346,307		)	96,395			(320,776		)	174,030
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated entities	344			534			1,134			277
Interest expense	(47,252		)	(46,920		)	(138,148		)	(131,814		)
Gain on early extinguishment of liabilities, net	11,190			—			44,292			—
Other income (expense), net	440			(226		)	3,060			967
(Loss) Income From Continuing Operations Before Income Taxes	(381,585		)	49,783			(410,438		)	43,460
INCOME TAX BENEFIT (EXPENSE)	1,162			(677		)	2,237			(996		)
(Loss) Income From Continuing Operations	(380,423		)	49,106			(408,201		)	42,464
Loss From Discontinued Operations, net of Tax	(107		)	(6,115		)	(1,746		)	(192,800		)
Net (Loss) Income	(380,530		)	42,991			(409,947		)	(150,336		)
LESS: NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	34			166			(185		)	563
NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	(380,496	)	$	43,157		$	(410,132	)	$	(149,773	)
NET (LOSS) INCOME FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS	$	(403,755	)	$	28,895		$	(477,503	)	$	(123,792	)
NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS	$	(107	)	$	(6,109	)	$	(1,744	)	$	(192,607	)
NET (LOSS) INCOME ALLOCATED TO COMMON UNITHOLDERS	$	(403,862	)	$	22,786		$	(479,247	)	$	(316,399	)
BASIC (LOSS) INCOME PER COMMON UNIT
(Loss) Income From Continuing Operations	$	(3.13	)	$	0.23		$	(3.71	)	$	(0.97	)
Loss From Discontinued Operations, net of Tax	$	—		$	(0.05	)	$	(0.01	)	$	(1.52	)
Net (Loss) Income	$	(3.13	)	$	0.18		$	(3.72	)	$	(2.49	)
DILUTED (LOSS) INCOME PER COMMON UNIT
(Loss) Income From Continuing Operations	$	(3.13	)	$	0.22		$	(3.71	)	$	(0.97	)
Loss From Discontinued Operations, net of Tax	$	—		$	(0.05	)	$	(0.01	)	$	(1.52	)
Net (Loss) Income	$	(3.13	)	$	0.17		$	(3.72	)	$	(2.49	)
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING	128,991,414			128,201,369			128,845,214			127,026,510
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING	128,991,414			129,358,590			128,845,214			127,026,510

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION

(Unaudited)

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

	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
	(in thousands)
Net (loss) income	$	(380,530	)	$	42,991		$	(409,947	)	$	(150,336	)
Less: Net loss (income) attributable to noncontrolling interests	34			166			(185		)	563
Net (loss) income attributable to NGL Energy Partners LP	(380,496		)	43,157			(410,132		)	(149,773		)
Interest expense	47,253			46,946			138,159			131,969
Income tax (benefit) expense	(1,163		)	676			(2,291		)	1,015
Depreciation and amortization	77,531			72,939			247,555			191,049
EBITDA	(256,875		)	163,718			(26,709		)	174,260
Net unrealized losses on derivatives	16,529			16,787			47,657			7,851
Inventory valuation adjustment (1)	(786		)	(370		)	1,393			(25,555		)
Lower of cost or net realizable value adjustments	321			(646		)	(33,213		)	(2,465		)
Loss (gain) on disposal or impairment of assets, net	373,777			(4,837		)	392,924			171,757
Gain on early extinguishment of liabilities, net	(11,190		)	—			(44,292		)	—
Equity-based compensation expense (2)	1,120			2,213			5,678			27,209
Acquisition expense (3)	589			11,419			915			18,595
Revaluation of liabilities (4)	—			10,000			—			10,000
Other (5)	1,448			4,026			9,049			10,681
Adjusted EBITDA	$	124,933		$	202,310		$	353,402		$	392,333
Adjusted EBITDA - Discontinued Operations (6)	$	(107	)	$	1,799		$	(591	)	$	(35,362	)
Adjusted EBITDA - Continuing Operations	$	125,040		$	200,511		$	353,993		$	427,695
Less: Cash interest expense (7)	43,993			43,919			127,960			124,406
Less: Income tax (benefit) expense	(1,162		)	676			(2,237		)	995
Less: Maintenance capital expenditures	6,269			16,964			22,267			50,354
Less: Preferred unit distributions paid	23,770			12,612			53,908			31,484
Less: Other (8)	9			515			9			642
Distributable Cash Flow - Continuing Operations	$	52,161		$	125,825		$	152,086		$	219,814

(1)	Amount reflects the difference between the market value of the inventory at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge position. See “Non-GAAP Financial Measures” section above for a further discussion.
(2)	Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in the footnotes to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.
(3)	Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including Hillstone during the three months ended December 31, 2019, and Mesquite and Hillstone during the nine months ended December 31, 2019.
(4)	Amounts for the three months and nine months ended December 31, 2019 represent the non-cash valuation adjustment of our contingent consideration liability issued by us as part of our acquisition of Mesquite.
(5)	Amounts for the three months and nine months ended December 31, 2020 and 2019 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations.
(6)	Amounts include the operations of TPSL, Gas Blending and Mid-Con.
(7)	Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.
(8)	Amounts represents cash paid to settle asset retirement obligations.

 

ADJUSTED EBITDA RECONCILIATION BY SEGMENT

	Three Months Ended December 31, 2020
	Crude Oil Logistics		Water Solutions		Liquids and Refined Products		Corporate and Other		Continuing Operations		Discontinued Operations (TPSL, Mid-Con, Gas Blending)		Consolidated
	(in thousands)
Operating (loss) income	$	(382,192)	$	15,821	$	32,438	$	(12,374)	$	(346,307)	$	—	$	(346,307)
Depreciation and amortization	16,513		53,327		6,976		1,384		78,200		—		78,200
Amortization recorded to cost of sales	—		—		77		—		77		—		77
Net unrealized losses on derivatives	7,878		5,800		2,851		—		16,529		—		16,529
Inventory valuation adjustment	—		—		(802)		—		(802)		—		(802)
Lower of cost or net realizable value adjustments	(166)		—		502		—		336		—		336
Loss (gain) on disposal or impairment of assets, net	383,251		(9,967)		(43)		535		373,776		—		373,776
Equity-based compensation expense	—		—		—		1,120		1,120		—		1,120
Acquisition expense	—		4		—		585		589		—		589
Other income, net	2		1		341		96		440		—		440
Adjusted EBITDA attributable to unconsolidated entities	—		573		3		(16)		560		—		560
Adjusted EBITDA attributable to noncontrolling interest	—		(389)		(544)		—		(933)		—		(933)
Other	1,046		384		25		—		1,455		—		1,455
Discontinued operations	—		—		—		—		—		(107)		(107)
Adjusted EBITDA	$	26,332	$	65,554	$	41,824	$	(8,670)	$	125,040	$	(107)	$	124,933

	Three Months Ended December 31, 2019
	Crude Oil Logistics			Water Solutions			Liquids and Refined Products			Corporate and Other			Continuing Operations			Discontinued Operations (TPSL, Mid-Con, Gas Blending)		Consolidated
	(in thousands)
Operating income (loss)	$	28,696		$	(583	)	$	89,038		$	(20,756	)	$	96,395		$	—	$	96,395
Depreciation and amortization	17,950			48,074			6,943			759			73,726			—		73,726
Amortization recorded to cost of sales	—			—			86			—			86			—		86
Net unrealized losses (gains) on derivatives	6,060			11,924			(1,197		)	—			16,787			—		16,787
Inventory valuation adjustment	—			—			(2,099		)	—			(2,099		)	—		(2,099		)
Lower of cost or net realizable value adjustments	—			—			(18		)	—			(18		)	—		(18		)
Gain on disposal or impairment of assets, net	(182		)	(12,176		)	(26		)	(242		)	(12,626		)	—		(12,626		)
Equity-based compensation expense	—			—			—			2,213			2,213			—		2,213
Acquisition expense	—			3,967			—			7,452			11,419			—		11,419
Other income (expense), net	64			(450		)	41			119			(226		)	—		(226		)
Adjusted EBITDA attributable to unconsolidated entities	—			685			17			(34		)	668			—		668
Adjusted EBITDA attributable to noncontrolling interest	—			(203		)	(616		)	—			(819		)	—		(819		)
Revaluation of liabilities	—			10,000			—			—			10,000			—		10,000
Intersegment transactions (1)	—			—			979			—			979			—		979
Other	2,987			976			63			—			4,026			—		4,026
Discontinued operations	—			—			—			—			—			1,799		1,799
Adjusted EBITDA	$	55,575		$	62,214		$	93,211		$	(10,489	)	$	200,511		$	1,799	$	202,310

	Nine Months Ended December 31, 2020
	Crude Oil Logistics		Water Solutions		Liquids and Refined Products		Corporate and Other		Continuing Operations		Discontinued Operations (TPSL, Mid-Con, Gas Blending)		Consolidated
	(in thousands)
Operating (loss) income	$	(310,633)	$	(13,503)	$	51,338	$	(47,978)	(320,776)		$	—	$	(320,776)
Depreciation and amortization	50,540		173,680		22,158		3,277		249,655		—		249,655
Amortization recorded to cost of sales	—		—		230		—		230		—		230
Net unrealized losses on derivatives	19,199		23,525		4,933		—		47,657		—		47,657
Inventory valuation adjustment	—		—		1,399		—		1,399		—		1,399
Lower of cost or net realizable value adjustments	(29,245)		—		(3,974)		—		(33,219)		—		(33,219)
Loss (gain) on disposal or impairment of assets, net	384,391		(3,415)		4		10,772		391,752		—		391,752
Equity-based compensation expense	—		—		—		5,678		5,678		—		5,678
Acquisition expense	—		17		—		898		915		—		915
Other income, net	1,515		259		1,004		282		3,060		—		3,060
Adjusted EBITDA attributable to unconsolidated entities	—		1,883		(11)		(143)		1,729		—		1,729
Adjusted EBITDA attributable to noncontrolling interest	—		(1,317)		(1,816)		—		(3,133)		—		(3,133)
Intersegment transactions (1)	—		—		(27)		—		(27)		—		(27)
Other	6,600		2,398		75		—		9,073		—		9,073
Discontinued operations	—		—		—		—		—		(591)		(591)
Adjusted EBITDA	$	122,367	$	183,527	$	75,313	$	(27,214)	$	353,993	$	(591)	$	353,402

	Nine Months Ended December 31, 2019
	Crude Oil Logistics		Water Solutions		Liquids and Refined Products		Corporate and Other		Continuing Operations		Discontinued Operations (TPSL, Mid-Con, Gas Blending)		Consolidated
	(in thousands)
Operating income (loss)	$	101,018	$	34,380	$	113,207	$	(74,575)	$	174,030	$	—	$	174,030
Depreciation and amortization	53,228		114,066		21,034		2,265		190,593		—		190,593
Amortization recorded to cost of sales	—		—		262		—		262		—		262
Net unrealized losses on derivatives	76		5,887		1,888		—		7,851		—		7,851
Inventory valuation adjustment	—		—		(264)		—		(264)		—		(264)
Lower of cost or net realizable value adjustments	—		—		(1,489)		—		(1,489)		—		(1,489)
Gain on disposal or impairment of assets, net	(1,428)		(9,021)		(33)		—		(10,482)		—		(10,482)
Equity-based compensation expense	—		—		—		27,209		27,209		—		27,209
Acquisition expense	—		3,987		—		14,608		18,595		—		18,595
Other income (expense), net	103		(452)		41		1,275		967		—		967
Adjusted EBITDA attributable to unconsolidated entities	—		685		(5)		(170)		510		—		510
Adjusted EBITDA attributable to noncontrolling interest	—		(597)		(1,296)		—		(1,893)		—		(1,893)
Revaluation of liabilities	—		10,000		—		—		10,000		—		10,000
Intersegment transactions (1)	—		—		1,125		—		1,125		—		1,125
Other	9,284		1,247		150		—		10,681		—		10,681
Discontinued operations	—		—		—		—		—		(35,362)		(35,362)
Adjusted EBITDA	$	162,281	$	160,182	$	134,620	$	(29,388)	$	427,695	$	(35,362)	$	392,333

(1)	Amount reflects the transactions with TPSL, Mid-Con and Gas Blending that are eliminated in consolidation.

OPERATIONAL DATA (Unaudited)
	Three Months Ended		Nine Months Ended
	December 31,		December 31,
	2020	2019	2020	2019
	(in thousands, except per day amounts)
Crude Oil Logistics:
Crude oil sold (barrels)	10,733	11,217	30,203	32,929
Crude oil transported on owned pipelines (barrels)	6,368	12,202	26,836	34,913
Crude oil storage capacity - owned and leased (barrels) (1)			5,239	5,362
Crude oil inventory (barrels) (1)			1,019	866
Water Solutions:
Produced water processed (barrels per day)
Northern Delaware Basin (2)	1,032,335	845,817	939,085	788,630
Delaware Basin	183,790	279,074	188,691	271,469
Eagle Ford Basin	72,951	242,238	83,151	263,064
DJ Basin	96,383	162,456	114,256	167,178
Other Basins	26,503	55,800	28,262	62,724
Total	1,411,962	1,585,385	1,353,445	1,553,065
Solids processed (barrels per day)	1,433	6,132	1,396	5,779
Skim oil sold (barrels per day)	2,004	3,429	1,771	3,124
Liquids and Refined Products:
Refined products sold (gallons)	214,132	326,928	646,349	980,406
Propane sold (gallons)	381,590	468,332	886,572	975,782
Butane sold (gallons)	212,697	276,046	475,655	588,694
Other products sold (gallons)	122,645	169,092	351,591	475,586
Liquids and Refined Products storage capacity - owned and leased (gallons) (1)			426,962	405,281
Refined products inventory (gallons) (1)			1,190	5,208
Propane inventory (gallons) (1)			128,568	123,265
Butane inventory (gallons) (1)			31,847	50,867
Other products inventory (gallons) (1)			21,326	23,166

 

(1)	Information is presented as of December 31, 2020 and December 31, 2019, respectively.
(2)	Barrels per day of produced water processed by the assets acquired in the Mesquite and Hillstone transaction are calculated by the number of days in which we owned the assets for the periods presented.