NGL Energy Partners LP Announces Fourth Quarter and Record Full Year Fiscal 2020 Financial Results

NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” “we,” or the “Partnership”) today reported its fourth quarter and full year fiscal 2020 results.

“Our fourth quarter and record Fiscal 2020 earnings came in at the high-end of our guidance range, despite the significant downturn in the crude oil environment and the economy,” stated Mike Krimbill, NGL’s CEO. “Our Crude Oil and Liquids businesses continued to outperform expectations. We completed our sales of certain Refined Products businesses, significantly reducing both volatility in earnings and working capital debt balances, and we successfully executed on all of our plans to complete the integration of our Delaware Basin Water Solutions infrastructure. We saw increased volumes on that system throughout the fiscal fourth quarter, with approximately 1.9 million barrels per day processed across all our systems for the month of March. Since our fiscal year-end, we have taken significant steps to improve our balance sheet and liquidity, including reductions in capital expenditures, distributions and operating costs, while also taking advantage of our diversified business platform to maximize cash flows. As we stated previously, we see significant challenges and opportunities in this uncertain environment but believe our business model and diversified asset footprint will continue to prove beneficial through this cycle.”

Highlights for the quarter and fiscal year ended March 31, 2020 include:

• Loss from continuing operations for the quarter ended March 31, 2020 of $223.0 million, including a non-cash goodwill impairment charge of $250.0 million in our Water Solutions segment as a result of the current macroeconomic environment, and a loss from continuing operations of $180.5 million for the full fiscal year
• Adjusted EBITDA from continuing operations for the fourth quarter of Fiscal 2020 of $161.8 million; Record Fiscal Year 2020 Adjusted EBITDA from continuing operations totaled $589.5 million
• Sale of our refined products marketing business in the mid-continent region (“Mid-Con”) and our gas blending business in the southeastern and eastern regions (“Gas Blending”) of the United States
• Fiscal Year 2021 Adjusted EBITDA guidance target of $600 million remains unchanged

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
		March 31, 2020								March 31, 2019
		Operating Income (Loss)				Adjusted EBITDA				Operating Income (Loss)				Adjusted EBITDA
		(in thousands)
Crude Oil Logistics		$	16,750			$	56,938			$	29,315			$	51,249
Liquids and Refined Products (1)		29,204				47,424				(30,141		)		30,303
Water Solutions		(207,444		)		72,140				113,049				40,084
Corporate and Other		(15,872		)		(14,740		)		(16,530		)		(6,921		)
Total		$	(177,362	)		$	161,762			$	95,693			$	114,715

(1)

The remaining business within the former Refined Products and Renewables reportable segment were aggregated with the prior Liquids reportable segment and formed the current Liquids and Refined Products reportable segment.

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

Operating income for the fourth quarter of Fiscal 2020 decreased compared to the same quarter in Fiscal 2019 primarily related to lower volumes, lower prices and a non-cash charge to reduce our inventory to the lower of cost or its net realizable value. These declines were due to the volatility in the crude oil market during the month of March 2020 caused by the COVID-19 pandemic and the fight for market share between Saudi Arabia and Russia. Adjusted EBITDA for the fourth quarter of Fiscal 2020 increased compared to the same quarter in Fiscal 2019 due to increased revenue from the Grand Mesa Pipeline. During the three months ended March 31, 2020, financial volumes on the Grand Mesa Pipeline averaged approximately 131,000 barrels per day, which was an increase compared to the prior year period.

Liquids and Refined Products

Propane volumes increased by approximately 48.4 million gallons, or 10.6%, during the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019. Butane volumes increased by approximately 61.2 million gallons, or 37.2%, during the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019. Butane volumes were augmented by steady volumes at the Chesapeake, Virginia export terminal. Refined product sold during the quarter ended March 31, 2020 totaled approximately 292.1 million gallons, which was lower than the same period in the prior year as demand declined for refined products due to the COVID-19 pandemic. Other product volumes decreased by 23.9% during the quarter ended March 31, 2020, compared to the quarter ended March 31, 2019, as the Partnership wound down its ethanol business. Total product margins also increased compared to the prior year period, primarily the result of higher butane and other product margins, driven by strong demand for these products.

Water Solutions

The Partnership processed approximately 1.7 million barrels of water per day during the quarter ended March 31, 2020, a 97.4% increase when compared to approximately 860,000 barrels of water per day processed during the quarter ended March 31, 2019. Water Solutions revenue increased to $127.4 million for the quarter ended March 31, 2020, an 81.2% increase over the comparable prior year quarter as a result of the increase in volume, which was primarily driven by the acquisitions of Mesquite Disposals Unlimited, LLC (“Mesquite”) and Hillstone Environmental Partners, LLC (“Hillstone”). These increases were partially offset by the sale of the South Pecos water disposal business during the quarter ended March 31, 2019.

Revenues from recovered crude oil, including the impact from realized skim oil hedges, totaled $17.5 million for the quarter ended March 31, 2020, a decrease of $0.7 million from the prior year period. 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 producers to keep the skim oil recovered from produced water.

We recorded a goodwill impairment charge of $250.0 million during the three months ended March 31, 2020 due to a triggering event caused by the current macroeconomic conditions, the collapse of oil prices driven by both the decrease in demand caused by the COVID-19 pandemic and excess supply, as well as changing market conditions and expected lower crude oil production in certain regions, which resulted in expected decreases in future cash flows for certain of the Partnership’s assets primarily located in the Eagle Ford Basin and the Pinedale Anticline.

Corporate and Other

Operating loss in the Corporate and Other segment decreased from the comparable prior year period due to a decrease in equity-based compensation, offset by higher legal expenses. Cash expenses increased due to higher overall compensation expense, which was driven by the Mesquite and Hillstone acquisitions and out-performance of certain business units.

Capitalization and Liquidity

Total debt outstanding was $3.15 billion at March 31, 2020 compared to $2.16 billion at March 31, 2019, an increase of $989 million due primarily to the Mesquite and Hillstone acquisitions and the funding of certain capital expenditures, which was partially offset by a reduction in working capital borrowings using proceeds from the sale of TransMontaigne Product Services, LLC (“TPSL”) and the Gas Blending and Mid-Con businesses.

The Partnership’s Total Leverage Indebtedness Ratio (as defined in our Credit Agreement) was approximately 4.86x at March 31, 2020. Total liquidity (cash plus available capacity on our revolving credit facility) was approximately $401.9 million as of March 31, 2020.

On April 27, 2020, we amended our credit agreement to reallocate availability between the two revolving credit facilities. We reduced the capacity of the Working Capital Facility to $350.0 million and increased the Expansion Capital Facility to $1.565 billion. This change was due to reduced working capital borrowing needs going forward as a result of the sale of the TPSL, Mid-Con and Gas Blending refined products businesses.

Fourth Quarter Conference Call Information

A conference call to discuss NGL’s results of operations is scheduled for 5:00 pm Central Time on Monday, June 1, 2020. Analysts, investors, and other interested parties may access the conference call by dialing [phone] and providing access code 1256577. An archived audio replay of the conference call will be available for 7 days beginning at 1:00 pm Central Time on June 2, 2020, which can be accessed by dialing [phone] and providing access code 1256577.

Filing of the 10-K

NGL filed its Annual Report on Form 10-K for the year ended March 31, 2020 with the Securities and Exchange Commission after market on June 1, 2020. A copy of the Form 10-K can be found on the Partnership’s website at www.nglenergypartners.com. Unitholders may also request, free of charge, a hard copy of our Form 10-K and our complete audited financial statements.

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 the TPSL, Mid-Con, and Gas Blending businesses, 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 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 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 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 is a Delaware limited partnership. NGL owns and operates a vertically integrated energy business with three primary businesses: Crude Oil Logistics, Water Solutions, and Liquids and Refined Products. NGL completed its initial public offering in May 2011. For further information, visit the Partnership’s website at www.nglenergypartners.com.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
(in Thousands, except unit amounts)
	March 31,
	2020				2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	22,704			$	18,572
Accounts receivable-trade, net of allowance for doubtful accounts of $4,540 and $4,016, respectively	566,834				998,203
Accounts receivable-affiliates	12,934				12,867
Inventories	69,634				136,128
Prepaid expenses and other current assets	101,981				65,918
Assets held for sale	—				580,985
Total current assets	774,087				1,812,673
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $529,068 and $417,457, respectively	2,851,555				1,828,940
GOODWILL	993,587				1,110,456
INTANGIBLE ASSETS, net of accumulated amortization of $631,449 and $503,117, respectively	1,612,480				800,889
INVESTMENTS IN UNCONSOLIDATED ENTITIES	23,182				1,127
OPERATING LEASE RIGHT-OF-USE ASSETS	180,708				—
OTHER NONCURRENT ASSETS	63,137				113,857
ASSETS HELD FOR SALE	—				234,551
Total assets	$	6,498,736			$	5,902,493
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade	$	515,049			$	879,063
Accounts payable-affiliates	17,717				28,469
Accrued expenses and other payables	232,062				107,759
Advance payments received from customers	19,536				8,461
Current maturities of long-term debt	4,683				648
Operating lease obligations	56,776				—
Liabilities held for sale	—				226,753
Total current liabilities	845,823				1,251,153
LONG-TERM DEBT, net of debt issuance costs of $19,795 and $12,008, respectively, and current maturities	3,144,848				2,160,133
OPERATING LEASE OBLIGATIONS	121,013				—
OTHER NONCURRENT LIABILITIES	114,079				63,542
NONCURRENT LIABILITIES HELD FOR SALE	—				33
CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 0 and 19,942,169 preferred units issued and outstanding, respectively	—				149,814
CLASS D 9.00% PREFERRED UNITS, 600,000 and 0 preferred units issued and outstanding, respectively	537,283				—
EQUITY:
General partner, representing a 0.1% interest, 128,901 and 124,633 notional units, respectively	(51,390		)		(50,603		)
Limited partners, representing a 99.9% interest, 128,771,715 and 124,508,497 common units issued and outstanding, respectively	1,366,152				2,067,197
Class B preferred limited partners, 12,585,642 and 8,400,000 preferred units issued and outstanding, respectively	305,468				202,731
Class C preferred limited partners, 1,800,000 and 0 preferred units issued and outstanding, respectively	42,891				—
Accumulated other comprehensive loss	(385		)		(255		)
Noncontrolling interests	72,954				58,748
Total equity	1,735,690				2,277,818
Total liabilities and equity	$	6,498,736			$	5,902,493

NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(in Thousands, except unit and per unit amounts)
		Three Months Ended March 31,								Year Ended March 31,
		2020				2019				2020				2019
REVENUES:
Crude Oil Logistics		$	501,466			$	741,571			$	2,549,767			$	3,136,635
Water Solutions		127,420				70,319				422,059				301,686
Liquids and Refined Products		1,052,119				1,310,968				4,611,136				5,249,474
Other		239				296				1,038				1,362
Total Revenues		1,681,244				2,123,154				7,584,000				8,689,157
COST OF SALES:
Crude Oil Logistics		446,571				676,259				2,293,953				2,902,656
Water Solutions		(38,571		)		6,522				(33,870		)		(10,787		)
Liquids and Refined Products		981,341				1,253,159				4,342,526				5,089,263
Other		437				448				1,774				1,929
Total Cost of Sales		1,389,778				1,936,388				6,604,383				7,983,061
OPERATING COSTS AND EXPENSES:
Operating		102,383				58,846				332,993				231,065
General and administrative		20,264				20,979				113,664				107,407
Depreciation and amortization		74,719				54,202				265,312				211,973
Loss (gain) on disposal or impairment of assets, net		272,268				(36,781		)		261,786				34,296
Revaluation of liabilities		(806		)		(6,173		)		9,194				(5,373		)
Operating (Loss) Income		(177,362		)		95,693				(3,332		)		126,728
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated entities		1,014				158				1,291				2,533
Interest expense		(49,370		)		(37,949		)		(181,184		)		(164,725		)
Gain (loss) on early extinguishment of liabilities, net		1,341				(2,120		)		1,341				(12,340		)
Other income (expense), net		717				997				1,684				(30,418		)
(Loss) Income From Continuing Operations Before Income Taxes		(223,660		)		56,779				(180,200		)		(78,222		)
INCOME TAX BENEFIT (EXPENSE)		651				1,089				(345		)		(1,233		)
(Loss) Income From Continuing Operations		(223,009		)		57,868				(180,545		)		(79,455		)
(Loss) Income From Discontinued Operations, net of Tax		(25,435		)		(14,651		)		(218,235		)		418,850
Net (Loss) Income		(248,444		)		43,217				(398,780		)		339,395
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,210				19,036				1,773				20,206
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS		—				—				—				446
NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP		$	(247,234	)		$	62,253			$	(397,007	)		$	360,047
NET (LOSS) INCOME FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS		$	(243,454	)		$	38,775			$	(367,246	)		$	(171,153	)
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS		$	(25,410	)		$	(14,636	)		$	(218,017	)		$	418,877
NET (LOSS) INCOME ALLOCATED TO COMMON UNITHOLDERS		$	(268,864	)		$	24,139			$	(585,263	)		$	247,724
BASIC (LOSS) INCOME PER COMMON UNIT
(Loss) Income From Continuing Operations		$	(1.89	)		$	0.31			$	(2.88	)		$	(1.39	)
(Loss) Income From Discontinued Operations, net of Tax		$	(0.20	)		$	(0.11	)		$	(1.71	)		$	3.41
Net (Loss) Income		$	(2.09	)		$	0.20			$	(4.59	)		$	2.01
DILUTED (LOSS) INCOME PER COMMON UNIT
(Loss) Income From Continuing Operations		$	(1.89	)		$	0.31			$	(2.88	)		$	(1.39	)
(Loss) Income From Discontinued Operations, net of Tax		$	(0.20	)		$	(0.12	)		$	(1.71	)		$	3.41
Net (Loss) Income		$	(2.09	)		$	0.19			$	(4.59	)		$	2.01
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING		128,576,572				124,262,014				127,411,908				123,017,064
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING		128,576,572				126,926,589				127,411,908				123,017,064

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 March 31,								Year Ended March 31,
		2020				2019				2020				2019
		(in thousands)
Net (loss) income		$	(248,444	)		$	43,217			$	(398,780	)		$	339,395
Less: Net loss attributable to noncontrolling interests		1,210				19,036				1,773				20,206
Less: Net loss attributable to redeemable noncontrolling interests		—				—				—				446
Net (loss) income attributable to NGL Energy Partners LP		(247,234		)		62,253				(397,007		)		360,047
Interest expense		49,388				37,949				181,357				164,879
Income tax expense		(650		)		(232		)		365				2,222
Depreciation and amortization		74,098				55,312				265,147				224,547
EBITDA		(124,398		)		155,282				49,862				751,695
Net unrealized (gains) losses on derivatives		(46,408		)		13,553				(38,557		)		(17,296		)
Inventory valuation adjustment (1)		(4,121		)		55,294				(29,676		)		(5,203		)
Lower of cost or net realizable value adjustments		33,667				(45,090		)		31,202				2,695
Loss (gain) on disposal or impairment of assets, net		292,726				(55,629		)		464,483				(393,554		)
(Gain) loss on early extinguishment of liabilities, net		(1,341		)		2,120				(1,341		)		12,340
Equity-based compensation expense (2)		(699		)		8,792				26,510				41,367
Acquisition expense (3)		1,127				510				19,722				9,780
Revaluation of liabilities (4)		(806		)		(6,173		)		9,194				(5,373		)
Gavilon legal matter settlement (5)		—				—				—				34,788
Other (6)		5,107				3,509				15,788				9,203
Adjusted EBITDA		$	154,854			$	132,168			$	547,187			$	440,442
Adjusted EBITDA - Discontinued Operations (7)		$	(6,908	)		$	17,453			$	(42,270	)		$	21,292
Adjusted EBITDA - Continuing Operations		$	161,762			$	114,715			$	589,457			$	419,150
Less: Cash interest expense (8)		45,848				35,836				170,254				155,480
Less: Income tax (benefit) expense		(650		)		(1,089		)		345				1,233
Less: Maintenance capital expenditures		10,999				11,967				61,353				45,424
Less: Preferred unit distributions		14,237				11,174				45,721				44,696
Less: Other (9)		16				—				658				546
Distributable Cash Flow - Continuing Operations		$	91,312			$	56,827			$	311,126			$	171,771

(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. See “Non-GAAP Financial Measures” 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 consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended March 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 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 Mesquite and Hillstone, along with amounts accrued related to the LCT Capital, LLC legal matter (as discussed in the footnotes to our consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2020), partially offset by reimbursement for certain legal costs incurred in prior periods.
(4)		Amount for the year ended March 31, 2020 represents the non-cash valuation adjustment of our contingent consideration liability issued by us as part of our acquisition of Mesquite (as discussed in the footnotes to our consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2020), partially offset by the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment. Amounts for the three months ended March 31, 2020 and three months and year ended March 31, 2019 represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.
(5)		Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (as discussed in the footnotes to our consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2020). We have excluded this amount from Adjusted EBITDA as it relates to transactions that occurred prior to our acquisition of Gavilon LLC in December 2013.
(6)		Amounts for the three months and years ended March 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.
(7)		Amounts include the operations of TPSL, Gas Blending, Mid-Con and our former Retail Propane segment.
(8)		Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.
(9)		Amounts represents cash paid to settle asset retirement obligations.

ADJUSTED EBITDA RECONCILIATION BY SEGMENT
(Unaudited)
	Three Months Ended March 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 income (loss)	$	16,750			$	(207,444	)		$	29,204			$	(15,872	)		$	(177,362	)		$	—			$	(177,362	)
Depreciation and amortization	17,531				49,522				6,896				770				74,719				—				74,719
Amortization recorded to cost of sales	—				—				87				—				87				—				87
Net unrealized (gains) losses on derivatives	(11,391		)		(35,748		)		731				—				(46,408		)		—				(46,408		)
Inventory valuation adjustment	—				—				(1,886		)		—				(1,886		)		—				(1,886		)
Lower of cost or net realizable value adjustments	29,469				—				4,213				—				33,682				—				33,682
Loss on disposal or impairment of assets, net	284				264,306				7,678				—				272,268				—				272,268
Equity-based compensation expense	—				—				—				(699		)		(699		)		—				(699		)
Acquisition expense	—				92				—				1,035				1,127				—				1,127
Other income (expense), net	614				4				(20		)		119				717				—				717
Adjusted EBITDA attributable to unconsolidated entities	—				1,467				29				(93		)		1,403				—				1,403
Adjusted EBITDA attributable to noncontrolling interest	—				(613		)		(546		)		—				(1,159		)		—				(1,159		)
Revaluation of liabilities	—				(806		)		—				—				(806		)		—				(806		)
Intersegment transactions (1)	—				—				974				—				974				—				974
Other	3,681				1,360				64				—				5,105				—				5,105
Discontinued operations	—				—				—				—				—				(6,908		)		(6,908		)
Adjusted EBITDA	$	56,938			$	72,140			$	47,424			$	(14,740	)		$	161,762			$	(6,908	)		$	154,854

	Three Months Ended March 31, 2019
																					Discontinued Operations
	Crude Oil Logistics				Water Solutions				Liquids and Refined Products				Corporate and Other				Continuing Operations				TPSL, Mid- Con, Gas Blending				Retail Propane				Consolidated
	(in thousands)
Operating income (loss)	$	29,315			$	113,049			$	(30,141	)		$	(16,530	)		$	95,693			$	—			$	—			$	95,693
Depreciation and amortization	17,679				28,950				6,785				788				54,202				—				—				54,202
Amortization recorded to cost of sales	—				—				101				—				101				—				—				101
Net unrealized losses (gains) on derivatives	10,170				7,695				(4,312		)		—				13,553				—				—				13,553
Inventory valuation adjustment	—				—				1,808				—				1,808				—				—				1,808
Lower of cost or net realizable value adjustments	(11,446		)		—				197				—				(11,249		)		—				—				(11,249		)
Loss (gain) on disposal or impairment of assets, net	2,238				(105,238		)		66,219				—				(36,781		)		—				—				(36,781		)
Equity-based compensation expense	—				—				—				8,792				8,792				—				—				8,792
Acquisition expense	—				31				—				480				511				—				—				511
Other (expense) income, net	(5		)		1,503				(50		)		(451		)		997				—				—				997
Adjusted EBITDA attributable to unconsolidated entities	—				182				5				—				187				—				—				187
Adjusted EBITDA attributable to noncontrolling interest	—				(47		)		(536		)		—				(583		)		—				—				(583		)
Revaluation of liabilities	—				(6,173		)		—				—				(6,173		)		—				—				(6,173		)
Intersegment transactions (1)	—				—				(9,852		)		—				(9,852		)		—				—				(9,852		)
Other	3,298				132				79				—				3,509				—				—				3,509
Discontinued operations	—				—				—				—				—				17,855				(402		)		17,453
Adjusted EBITDA	$	51,249			$	40,084			$	30,303			$	(6,921	)		$	114,715			$	17,855			$	(402	)		$	132,168

	Year Ended March 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 income (loss)	$	117,768			$	(173,064	)		$	142,411			$	(90,447	)		$	(3,332	)		$	—			$	(3,332	)
Depreciation and amortization	70,759				163,588				27,930				3,035				265,312				—				265,312
Amortization recorded to cost of sales	—				—				349				—				349				—				349
Net unrealized (gains) losses on derivatives	(11,315		)		(29,861		)		2,619				—				(38,557		)		—				(38,557		)
Inventory valuation adjustment	—				—				(2,150		)		—				(2,150		)		—				(2,150		)
Lower of cost or net realizable value adjustments	29,469				—				2,724				—				32,193				—				32,193
(Gain) loss on disposal or impairment of assets, net	(1,144		)		255,285				7,645				—				261,786				—				261,786
Equity-based compensation expense	—				—				—				26,510				26,510				—				26,510
Acquisition expense	—				4,079				—				15,643				19,722				—				19,722
Other income (expense), net	717				(448		)		21				1,394				1,684				—				1,684
Adjusted EBITDA attributable to unconsolidated entities	—				2,152				24				(263		)		1,913				—				1,913
Adjusted EBITDA attributable to noncontrolling interest	—				(1,210		)		(1,842		)		—				(3,052		)		—				(3,052		)
Revaluation of liabilities	—				9,194				—				—				9,194				—				9,194
Intersegment transactions (1)	—				—				2,099				—				2,099				—				2,099
Other	12,965				2,607				214				—				15,786				—				15,786
Discontinued operations	—				—				—				—				—				(42,270		)		(42,270		)
Adjusted EBITDA	$	219,219			$	232,322			$	182,044			$	(44,128	)		$	589,457			$	(42,270	)		$	547,187

	Year Ended March 31, 2019
																					Discontinued Operations
	Crude Oil Logistics				Water Solutions				Liquids and Refined Products				Corporate and Other				Continuing Operations				TPSL, Mid- Con, Gas Blending				Retail Propane				Consolidated
	(in thousands)
Operating (loss) income	$	(7,379	)		$	210,525			$	9,288			$	(85,706	)		$	126,728			$	—			$	—			$	126,728
Depreciation and amortization	74,165				108,162				26,628				3,018				211,973				—				—				211,973
Amortization recorded to cost of sales	80				—				406				—				486				—				—				486
Net unrealized gains on derivatives	(1,725		)		(15,521		)		(129		)		—				(17,375		)		—				—				(17,375		)
Inventory valuation adjustment	—				—				(784		)		—				(784		)		—				—				(784		)
Lower of cost or net realizable value adjustments	—				—				1,276				—				1,276				—				—				1,276
Loss (gain) on disposal or impairment of assets, net	107,424				(138,204		)		64,187				889				34,296				—				—				34,296
Equity-based compensation expense	—				—				—				41,367				41,367				—				—				41,367
Acquisition expense	—				3,490				161				6,176				9,827				—				—				9,827
Other income (expense), net	21				(1		)		(330		)		(30,108		)		(30,418		)		—				—				(30,418		)
Adjusted EBITDA attributable to unconsolidated entities	—				2,396				481				—				2,877				—				—				2,877
Adjusted EBITDA attributable to noncontrolling interest	—				(166		)		(1,481		)		—				(1,647		)		—				—				(1,647		)
Revaluation of liabilities	—				(5,373		)		—				—				(5,373		)		—				—				(5,373		)
Gavilon legal matter settlement	—				—				—				34,788				34,788				—				—				34,788
Intersegment transactions (1)	—				—				1,926				—				1,926				—				—				1,926
Other	8,274				436				493				—				9,203				—				—				9,203
Discontinued operations	—				—				—				—				—				16,827				4,465				21,292
Adjusted EBITDA	$	180,860			$	165,744			$	102,122			$	(29,576	)		$	419,150			$	16,827			$	4,465			$	440,442

(1)

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

OPERATIONAL DATA
(Unaudited)
	Three Months Ended						Year Ended
	March 31,						March 31,
	2020			2019			2020			2019
	(in thousands, except per day amounts)
Crude Oil Logistics:
Crude oil sold (barrels)	9,870			12,917			42,799			48,366
Crude oil transported on owned pipelines (barrels)	10,971			11,179			45,884			42,564
Crude oil storage capacity - owned and leased (barrels) (1)							5,362			5,232
Crude oil inventory (barrels) (1)							1,111			827
Water Solutions:
Produced water processed (barrels per day)
Northern Delaware Basin (2)	1,024,975			43,448			901,884			21,802
Permian Basin	307,907			392,114			318,766			439,654
Eagle Ford Basin	197,587			250,735			246,784			270,849
DJ Basin	158,159			164,159			164,936			161,010
Other Basins	9,462			9,767			10,599			53,799
Total	1,698,090			860,223			1,642,969			947,114
Solids processed (barrels per day)	5,449			7,654			5,697			6,957
Skim oil sold (barrels per day)	3,539			3,723			3,397			3,567
Liquids and Refined Products:
Refined products sold (gallons)	292,140			312,186			1,272,546			1,243,494
Propane sold (gallons)	502,977			454,585			1,478,759			1,383,986
Butane sold (gallons)	225,834			164,628			814,528			610,968
Other products sold (gallons)	127,286			167,293			602,872			647,599
Liquids and Refined Products storage capacity - owned and leased (gallons) (1)							400,301			400,409
Refined products inventory (gallons) (1)							2,391			4,536
Propane inventory (gallons) (1)							57,221			44,757
Butane inventory (gallons) (1)							24,808			21,677
Other products inventory (gallons) (1)							26,126			52,082

(1)		Information is presented as of March 31, 2020 and March 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.

 

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