Equibles

10-Q

NGL Energy Partners LP (NGL)

10-Q 2020-08-10 For: 2020-06-30
View Original
Added on April 04, 2026

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-35172

NGL Energy Partners LP

(Exact Name of Registrant as Specified in Its Charter)

Delaware 27-3427920
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
6120 South Yale Avenue, Suite 805
Tulsa, Oklahoma 74136
(Address of Principal Executive Offices) (Zip Code)

(918)

481-1119

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o
Non-accelerated filer o Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐   No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbols Name of Each Exchange on Which Registered
Common units representing Limited Partner Interests NGL New York Stock Exchange
Fixed-to-floating rate cumulative redeemable perpetual preferred units NGL-PB New York Stock Exchange
Fixed-to-floating rate cumulative redeemable perpetual preferred units NGL-PC New York Stock Exchange

At August 5, 2020, there were

128,771,715

common units issued and outstanding.

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TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Condensed Consolidated Balance Sheets at June 30, 2020 and March 31, 2020 3
Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2020 and 2019 4
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended June 30, 2020 and 2019 5
Unaudited Condensed Consolidated Statements of Changes in Equity for the three months ended June 30, 2020 and 2019 6
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2020 and 2019 8
Notes to Unaudited Condensed Consolidated Financial Statements 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37
Item 3. Quantitative and Qualitative Disclosures About Market Risk 56
Item 4. Controls and Procedures 58
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 59
Item 1A. Risk Factors 59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 59
Item 3. Defaults Upon Senior Securities 59
Item 4. Mine Safety Disclosures 59
Item 5. Other Information 59
Item 6. Exhibits 60
SIGNATURES 61

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Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains various forward-looking statements and information that are based on our beliefs and those of our general partner, as well as assumptions made by and information currently available to us. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Certain words in this Quarterly Report such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “will,” and similar expressions and statements regarding our plans and objectives for future operations, identify forward-looking statements. Although we and our general partner believe such forward-looking statements are reasonable, neither we nor our general partner can assure they will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected. Among the key risk factors that may affect our consolidated financial position and results of operations are:

• changes in general economic conditions, including market and macroeconomic disruptions resulting from the novel strain of coronavirus (“COVID-19”) pandemic and related governmental responses;
• the prices of crude oil, natural gas liquids, gasoline, diesel, and biodiesel;
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• energy prices generally;
--- ---
• the general level of crude oil, natural gas, and natural gas liquids production;
--- ---
• the general level of demand, and the availability of supply, for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;
--- ---
• the level of crude oil and natural gas drilling and production in areas where we have water treatment and disposal facilities;
--- ---
• the ability to obtain adequate supplies of products if an interruption in supply or transportation occurs and the availability of capacity to transport products to market areas;
--- ---
• actions taken by foreign oil and gas producing nations;
--- ---
• the political and economic stability of foreign oil and gas producing nations;
--- ---
• the effect of weather conditions on supply and demand for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;
--- ---
• the effect of natural disasters, lightning strikes, or other significant weather events;
--- ---
• the availability of local, intrastate, and interstate transportation infrastructure with respect to our truck, railcar, and barge transportation services;
--- ---
• the availability, price, and marketing of competing fuels;
--- ---
• the effect of energy conservation efforts on product demand;
--- ---
• energy efficiencies and technological trends;
--- ---
• changes in applicable laws and regulations, including tax, environmental, transportation, and employment regulations, or new interpretations by regulatory agencies concerning such laws and regulations and the effect of such laws and regulations (now existing or in the future) on our business operations;
--- ---
• the effect of legislative and regulatory actions on hydraulic fracturing, water disposal and transportation, and the treatment of flowback and produced water;
--- ---
• hazards or operating risks related to transporting and distributing petroleum products that may not be fully covered by insurance;
--- ---
• the maturity of the crude oil, natural gas liquids, and refined products industries and competition from other markets;
--- ---
• loss of key personnel;
--- ---
• the ability to renew contracts with key customers;
--- ---
• the ability to maintain or increase the margins we realize for our terminal, barging, trucking, water disposal, recycling, and discharge services;
--- ---
• the ability to renew leases for our leased equipment and storage facilities;
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• the nonpayment, nonperformance or bankruptcy by our counterparties;
• the availability and cost of capital and our ability to access certain capital sources;
--- ---
• a deterioration of the credit and capital markets;
--- ---
• the ability to successfully identify and complete accretive acquisitions, and integrate acquired assets and businesses;
--- ---
• changes in the volume of crude oil recovered during the water treatment process;
--- ---
• changes in the financial condition and results of operations of entities in which we own noncontrolling equity interests;
--- ---
• the costs and effects of legal and administrative proceedings;
--- ---
• political pressure and influence of environmental groups upon policies and decisions related to the production, gathering, refining, processing, fractionation, transportation and marketing of crude oil, refined products, natural gas, natural gas liquids, gasoline, diesel or biodiesel; and
--- ---
• changes in the jurisdictional characteristics of, or the applicable regulatory policies with respect to, our pipeline assets.
--- ---

You should not put undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this Quarterly Report. Except as may be required by state and federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements as a result of new information, future events, or otherwise. When considering forward-looking statements, please review the risks discussed under Part I, Item 1A–“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

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PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)

June 30, 2020 March 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,400 $ 22,704
Accounts receivable-trade, net of allowance for expected credit losses of $3,674 and $4,540, respectively 424,814 566,834
Accounts receivable-affiliates 14,814 12,934
Inventories 135,918 69,634
Prepaid expenses and other current assets 75,433 101,981
Total current assets 677,379 774,087
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $570,806 and $529,068, respectively 2,833,002 2,851,555
GOODWILL 993,114 993,587
INTANGIBLE ASSETS, net of accumulated amortization of $670,382 and $631,449, respectively 1,574,216 1,612,480
INVESTMENTS IN UNCONSOLIDATED ENTITIES 22,626 23,182
OPERATING LEASE RIGHT-OF-USE ASSETS 177,010 180,708
OTHER NONCURRENT ASSETS 48,739 63,137
Total assets $ 6,326,086 $ 6,498,736
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $ 367,463 $ 515,049
Accounts payable-affiliates 22,864 17,717
Accrued expenses and other payables 142,836 232,062
Advance payments received from customers 25,326 19,536
Current maturities of long-term debt 4,521 4,683
Operating lease obligations 53,720 56,776
Total current liabilities 616,730 845,823
LONG-TERM DEBT, net of debt issuance costs of $24,022 and $19,795, respectively, and current maturities 3,281,402 3,144,848
OPERATING LEASE OBLIGATIONS 120,986 121,013
OTHER NONCURRENT LIABILITIES 112,034 114,079
COMMITMENTS AND CONTINGENCIES (NOTE 9)
CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively 544,151 537,283
EQUITY:
General partner, representing a 0.1% interest, 128,901 and 128,901 notional units, respectively (51,474 ) (51,390 )
Limited partners, representing a 99.9% interest, 128,771,715 and 128,771,715 common units issued and outstanding, respectively 1,283,491 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 (341 ) (385 )
Noncontrolling interests 70,748 72,954
Total equity 1,650,783 1,735,690
Total liabilities and equity $ 6,326,086 $ 6,498,736

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)

Three Months Ended June 30,
2020 2019
REVENUES:
Crude Oil Logistics $ 276,039 $ 716,160
Water Solutions 88,065 71,783
Liquids and Refined Products 479,998 1,083,693
Other 313 255
Total Revenues 844,415 1,871,891
COST OF SALES:
Crude Oil Logistics 217,557 649,240
Water Solutions 4,700 (2,807 )
Liquids and Refined Products 454,336 1,043,032
Other 454 465
Total Cost of Sales 677,047 1,689,930
OPERATING COSTS AND EXPENSES:
Operating 64,987 61,312
General and administrative 17,158 20,342
Depreciation and amortization 83,986 53,754
Loss (gain) on disposal or impairment of assets, net 12,022 (967 )
Operating (Loss) Income (10,785 ) 47,520
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated entities 289 8
Interest expense (43,961 ) (39,877 )
Gain on early extinguishment of liabilities, net 19,355 —
Other income, net 1,035 1,010
(Loss) Income From Continuing Operations Before Income Taxes (34,067 ) 8,661
INCOME TAX BENEFIT 301 321
(Loss) Income From Continuing Operations (33,766 ) 8,982
Loss From Discontinued Operations, net of Tax (1,486 ) (943 )
Net (Loss) Income (35,252 ) 8,039
LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (51 ) 268
NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP $ (35,303 ) $ 8,307
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3) $ (55,815 ) $ (120,126 )
NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3) $ (1,485 ) $ (942 )
NET LOSS ALLOCATED TO COMMON UNITHOLDERS $ (57,300 ) $ (121,068 )
BASIC LOSS PER COMMON UNIT
Loss From Continuing Operations $ (0.43 ) $ (0.95 )
Loss From Discontinued Operations, net of Tax $ (0.01 ) $ (0.01 )
Net Loss $ (0.44 ) $ (0.96 )
DILUTED LOSS PER COMMON UNIT
Loss From Continuing Operations $ (0.43 ) $ (0.95 )
Loss From Discontinued Operations, net of Tax $ (0.01 ) $ (0.01 )
Net Loss $ (0.44 ) $ (0.96 )
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 128,771,715 125,886,738
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING 128,771,715 125,886,738

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income

(in Thousands)

Three Months Ended June 30,
2020 2019
Net (loss) income $ (35,252 ) $ 8,039
Other comprehensive income 44 37
Comprehensive (loss) income $ (35,208 ) $ 8,076

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Three Months Ended June 30, 2020

(in Thousands, except unit amounts)

Limited Partners
Preferred Common Accumulated<br>Other
General<br>Partner Units Amount Units Amount Comprehensive<br>Income (Loss) Noncontrolling<br>Interests Total<br>Equity
BALANCES AT MARCH 31, 2020 $ (51,390 ) 14,385,642 $ 348,359 128,771,715 $ 1,366,152 $ (385 ) $ 72,954 $ 1,735,690
Distributions to general and common unit partners and preferred unitholders (Note 10) (26 ) — — — (47,652 ) — — (47,678 )
Distributions to noncontrolling interest owners — — — — — — (2,257 ) (2,257 )
Equity issued pursuant to incentive compensation plan (Note 10) — — — — 1,349 — — 1,349
Net (loss) income (57 ) — — — (35,246 ) — 51 (35,252 )
Other comprehensive income — — — — — 44 — 44
Cumulative effect adjustment for adoption of ASU 2016-13 (Note 16) (1 ) — — — (1,112 ) — — (1,113 )
BALANCES AT JUNE 30, 2020 $ (51,474 ) 14,385,642 $ 348,359 128,771,715 $ 1,283,491 $ (341 ) $ 70,748 $ 1,650,783

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Equity

Three Months Ended June 30, 2019

(in Thousands, except unit amounts)

Limited Partners
Preferred Common Accumulated<br>Other
General<br>Partner Units Amount Units Amount Comprehensive<br>Income (Loss) Noncontrolling<br>Interests Total<br>Equity
BALANCES AT MARCH 31, 2019 $ (50,603 ) 8,400,000 $ 202,731 124,508,497 $ 2,067,197 $ (255 ) $ 58,748 $ 2,277,818
Distributions to general and common unit partners and preferred unitholders (85 ) — — — (63,274 ) — — (63,359 )
Issuance of Class C preferred units, net of offering costs — 1,800,000 42,638 — — — — 42,638
Equity issued pursuant to incentive compensation plan — — — — 2,752 — — 2,752
Warrants exercised — — — 1,458,371 15 — — 15
Accretion of beneficial conversion feature of 10.75% Class A convertible preferred units — — — — (36,517 ) — — (36,517 )
10.75% Class A convertible preferred units redemption - amount paid in excess of carrying value — — — — (78,797 ) — — (78,797 )
Investment in NGL Energy Holdings LLC — — — — (2,361 ) — — (2,361 )
Net (loss) income (85 ) — — — 8,392 — (268 ) 8,039
Other comprehensive income — — — — — 37 — 37
BALANCES AT JUNE 30, 2019 $ (50,773 ) 10,200,000 $ 245,369 125,966,868 $ 1,897,407 $ (218 ) $ 58,480 $ 2,150,265

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in Thousands)

Three Months Ended June 30,
2020 2019
OPERATING ACTIVITIES:
Net (loss) income $ (35,252 ) $ 8,039
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Loss from discontinued operations, net of tax 1,486 943
Depreciation and amortization, including amortization of debt issuance costs 87,680 56,117
Gain on early extinguishment of liabilities, net (19,355 ) —
Non-cash equity-based compensation expense 2,302 3,701
Loss (gain) on disposal or impairment of assets, net 12,022 (967 )
Provision for expected credit losses (27 ) 280
Net adjustments to fair value of commodity derivatives 27,402 (5,559 )
Equity in earnings of unconsolidated entities (289 ) (8 )
Distributions of earnings from unconsolidated entities 742 —
Lower of cost or net realizable value adjustments 1,950 155
Other 1,223 (1,061 )
Changes in operating assets and liabilities, exclusive of acquisitions:
Accounts receivable-trade and affiliates 139,734 208,572
Inventories (68,281 ) (26,954 )
Other current and noncurrent assets 30,606 (34,761 )
Accounts payable-trade and affiliates (142,439 ) (148,413 )
Other current and noncurrent liabilities 42,348 32,554
Net cash provided by operating activities-continuing operations 81,852 92,638
Net cash used in operating activities-discontinued operations (1,439 ) (22,744 )
Net cash provided by operating activities 80,413 69,894
INVESTING ACTIVITIES:
Capital expenditures (97,815 ) (155,391 )
Acquisitions, net of cash acquired — (54,548 )
Net settlements of commodity derivatives (26,653 ) 2,072
Proceeds from sales of assets 150 1,673
Investments in unconsolidated entities — (889 )
Distributions of capital from unconsolidated entities 103 439
Repayments on loan for natural gas liquids facility — 3,022
Net cash used in investing activities-continuing operations (124,215 ) (203,622 )
Net cash provided by investing activities-discontinued operations — 4,375
Net cash used in investing activities (124,215 ) (199,247 )
FINANCING ACTIVITIES:
Proceeds from borrowings under Revolving Credit Facility 442,500 1,139,000
Payments on Revolving Credit Facility (254,500 ) (1,155,000 )
Issuance of senior unsecured notes and term credit agreement 250,000 450,000
Repayment of bridge term credit agreement (250,000 ) —
Repurchase of senior unsecured notes (25,040 ) —
Payments on other long-term debt (163 ) (163 )
Debt issuance costs (9,479 ) (7,873 )
Distributions to general and common unit partners and preferred unitholders (40,810 ) (62,288 )
Distributions to noncontrolling interest owners (2,257 ) —
Proceeds from sale of preferred units, net of offering costs — 42,638
Payments for redemption of preferred units — (265,128 )
Payments for settlement and early extinguishment of liabilities (62,753 ) (543 )
Investment in NGL Energy Holdings LLC — (2,361 )
Net cash provided by financing activities 47,498 138,282
Net increase in cash and cash equivalents 3,696 8,929
Cash and cash equivalents, beginning of period 22,704 18,572
Cash and cash equivalents, end of period $ 26,400 $ 27,501
Supplemental cash flow information:
Cash interest paid $ 56,096 $ 36,538
Income taxes paid (net of income tax refunds) $ 590 $ 2,537
Supplemental non-cash investing and financing activities:
Distributions declared but not paid to Class B, Class C and Class D preferred unitholders $ 15,030 $ 5,796
Accrued capital expenditures $ 21,042 $ 32,926

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1—Organization and Operations

NGL Energy Partners LP (“we,” “us,” “our,” or the “Partnership”) is a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner. At June 30, 2020, our operations included three segments:

• Our Crude Oil Logistics segment purchases crude oil from producers and marketers and transports it to refineries or for resale at pipeline injection stations, storage terminals, barge loading facilities, rail facilities, refineries, and other trade hubs, and provides storage, terminaling, and transportation services through its owned assets. Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our pipelines.
• Our Water Solutions segment transports, treats, recycles and disposes of produced and flowback water generated from crude oil and natural gas production. We also dispose of solids such as tank bottoms, drilling fluids and drilling muds and perform other ancillary services such as truck and frac tank washouts. As part of processing water, we are able to aggregate recovered crude oil, also known as skim oil, that was contained in the water and sell the crude oil. We also sell brackish non-potable water to our producer customers to be used in their crude oil exploration and production activities. Our activities in this segment are underpinned by long-term, fixed fee contracts and acreage dedications, some of which contain minimum volume commitments, with leading oil and gas companies including large, investment grade producer customers.
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• Our Liquids and Refined Products segment conducts marketing operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada. These operations are conducted through our company-owned terminals, other third party storage and terminal facilities, common carrier pipelines and our extensive fleet of leased railcars. We also provide natural gas liquids and refined product terminaling and storage services at our salt dome storage facility joint venture in Utah and marine exports through our facility located in Chesapeake, Virginia. We employ a number of contractual and hedging strategies to minimize commodity exposure and maximize earnings stability of this segment.
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Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include our accounts and those of our controlled subsidiaries. Intercompany transactions and account balances have been eliminated in consolidation. Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting. We also own an undivided interest in a crude oil pipeline, and include our proportionate share of assets, liabilities, and expenses related to this pipeline in our unaudited condensed consolidated financial statements.

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim consolidated financial information in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the unaudited condensed consolidated financial statements exclude certain information and notes required by GAAP for complete annual consolidated financial statements. However, we believe that the disclosures made are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements include all adjustments that we consider necessary for a fair presentation of our consolidated financial position, results of operations and cash flows for the interim periods presented. Such adjustments consist only of normal recurring items, unless otherwise disclosed in this Quarterly Report. The unaudited condensed consolidated balance sheet at March 31, 2020 was derived from our audited consolidated financial statements for the fiscal year ended March 31, 2020 included in our Annual Report on Form 10-K (“Annual Report”) filed with the SEC on June 1, 2020.

These interim unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report. Due to the seasonal nature of certain of our operations and other factors, the results of operations for interim periods are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2021.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amount of assets and liabilities reported at the date of the consolidated financial statements and the amount of revenues and expenses reported during the periods presented.

Critical estimates we make in the preparation of our unaudited condensed consolidated financial statements include, among others, determining the fair value of assets and liabilities acquired in acquisitions, the fair value of derivative instruments, the collectibility of accounts and notes receivable, the recoverability of inventories, useful lives and recoverability of property, plant and equipment and amortizable intangible assets, the impairment of long-lived assets and goodwill, the fair value of asset retirement obligations, the value of equity-based compensation, accruals for environmental matters and estimating certain revenues. Although we believe these estimates are reasonable, actual results could differ from those estimates.

Significant Accounting Policies

Our significant accounting policies are consistent with those disclosed in Note 2 of our audited consolidated financial statements included in our Annual Report.

Income Taxes

We qualify as a partnership for income tax purposes. As such, we generally do not pay United States federal income tax. Rather, each owner reports his or her share of our income or loss on his or her individual tax return. The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined, as we do not have access to information regarding each partner’s basis in the Partnership.

We have a deferred tax liability of $55.6 million and $56.4 million at June 30, 2020 and March 31, 2020, respectively, as a result of acquiring corporations in connection with certain of our acquisitions, which is included within other noncurrent liabilities in our unaudited condensed consolidated balance sheet. The deferred tax liability is the tax effected cumulative temporary difference between the GAAP basis and tax basis of the acquired assets within the corporation. For GAAP purposes, certain of the acquired assets will be depreciated and amortized over time which will lower the GAAP basis. The deferred tax benefit recorded during the three months ended June 30, 2020 was $0.8 million with an effective tax rate of

23.5%

. The deferred tax benefit recorded during the three months ended June 30, 2019 was $1.0 million with an effective tax rate of

24.6%

.

We evaluate uncertain tax positions for recognition and measurement in the unaudited condensed consolidated financial statements. To recognize a tax position, we determine whether it is more likely than not that the tax position will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the unaudited condensed consolidated financial statements. We had no material uncertain tax positions that required recognition in our unaudited condensed consolidated financial statements at June 30, 2020 or March 31, 2020.

Inventories

Our inventories are valued at the lower of cost or net realizable value, with cost determined using either the weighted-average cost or the first in, first out (FIFO) methods, including the cost of transportation and storage, and with net realizable value defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In performing this analysis, we consider fixed-price forward commitments.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Inventories consist of the following at the dates indicated:

June 30, 2020 March 31, 2020
(in thousands)
Crude oil $ 44,246 $ 18,201
Propane 39,329 25,163
Butane 32,714 9,619
Biodiesel 8,247 8,195
Ethanol 5,525 1,834
Diesel 2,239 2,414
Other 3,618 4,208
Total $ 135,918 $ 69,634

Investments in Unconsolidated Entities

Investments we do not control, but can exercise significant influence over, are accounted for using the equity method of accounting. Investments in partnerships and limited liability companies, unless our investment is considered to be minor, and investments in unincorporated joint ventures are also accounted for using the equity method of accounting.

Our investments in unconsolidated entities consist of the following at the dates indicated:

Entity Segment Ownership<br>Interest (1) Date Acquired June 30, 2020 March 31, 2020
(in thousands)
Water services and land company (2) Water Solutions 50% November 2019 $ 16,623 $ 16,607
Water services and land company (3) Water Solutions 50% November 2019 1,976 2,092
Water services and land company (4) Water Solutions 10% November 2019 3,103 3,384
Aircraft company (5) Corporate and Other 50% June 2019 286 447
Water services company (6) Water Solutions 50% August 2018 443 449
Natural gas liquids terminal company (7) Liquids and Refined Products 50% March 2019 195 203
Total $ 22,626 $ 23,182
(1) Ownership interest percentages are at June 30, 2020.
--- ---
(2) This is an investment that we acquired as part of an acquisition in November 2019, and represents certain membership interests in a limited liability company and are related to specific land operations.
--- ---
(3) This is an investment that we acquired as part of an acquisition in November 2019, and represents certain membership interests in a limited liability company and are related to specific land operations.
--- ---
(4) This is an investment that we acquired as part of an acquisition in November 2019, and represents certain membership interests in a limited liability company and are related to specific water services operations.
--- ---
(5) This is an investment with a related party.
--- ---
(6) This is an investment that we acquired as part of an acquisition in August 2018.
--- ---
(7) This is an investment that we acquired as part of an acquisition in March 2019.
--- ---

11

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Other Noncurrent Assets

Other noncurrent assets consist of the following at the dates indicated:

June 30, 2020 March 31, 2020
(in thousands)
Loan receivable (1) $ 2,830 $ 5,374
Line fill (2) 23,039 25,763
Minimum shipping fees - pipeline commitments (3) 16,374 17,443
Other 6,496 14,557
Total $ 48,739 $ 63,137
(1) Amounts at June 30, 2020 and March 31, 2020 represent the noncurrent portion of a loan receivable, net of an allowance for an expected credit loss, with Victory Propane, LLC. In addition, the amount at March 31, 2020 represents the noncurrent portion of a loan receivable associated with our interest in the construction of a natural gas liquids loading/unloading facility (the “Facility”) that is utilized by a third party. The third party filed for Chapter 11 bankruptcy in July 2019. For a further discussion, see Note 17.
--- ---
(2) Represents minimum volumes of product we are required to leave on certain third-party owned pipelines under long-term shipment commitments. At June 30, 2020, line fill consisted of 335,069 barrels of crude oil. At March 31, 2020, line fill consisted of 335,069 barrels of crude oil and 262,000 barrels of propane. Line fill held in pipelines we own is included within property, plant and equipment (see Note 5).
--- ---
(3) Represents the noncurrent portion of minimum shipping fees paid in excess of volumes shipped, or deficiency credits, for one contract with a crude oil pipeline operator. This amount can be recovered when volumes shipped exceed the minimum monthly volume commitment (see Note 9). As of June 30, 2020, the deficiency credit was $21.1 million, of which $4.7 million is recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet.
--- ---

Accrued Expenses and Other Payables

Accrued expenses and other payables consist of the following at the dates indicated:

June 30, 2020 March 31, 2020
(in thousands)
Accrued compensation and benefits $ 26,646 $ 29,990
Excise and other tax liabilities 9,549 9,941
Derivative liabilities 3,469 17,777
Accrued interest 24,106 39,803
Product exchange liabilities 2,749 1,687
Contingent consideration liability (1) 36,169 102,419
Other 40,148 30,445
Total $ 142,836 $ 232,062
(1) Decrease is due to the monthly installment payments made during the three months ended June 30, 2020 related to our acquisition of certain assets of Mesquite Disposals Unlimited, LLC (“Mesquite”). We have made two monthly payments subsequent to June 30, 2020, and per the agreement, we currently have four remaining monthly payments.
--- ---

Reclassifications

We have reclassified certain prior period financial statement information to be consistent with the classification methods used in the current fiscal year. These reclassifications did not impact previously reported amounts of assets, liabilities, equity, net income, or cash flows.

Recent Accounting Pronouncements

In March 2020, the SEC issued “Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities”, which amends the disclosure requirements for guarantors

12

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

and issuers of guaranteed securities registered or being registered in Rule 3-10 of Regulation S-X. The amendment simplifies the disclosure requirements and permits the amended disclosures to be provided outside the footnotes in audited annual or unaudited interim consolidated financial statements in all filings. The guidance is effective for the Partnership for fiscal periods ending after January 4, 2021, although early adoption is permitted. We adopted this guidance effective April 1, 2020 and elected to include the required summarized financial information in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity, Sources of Capital and Capital Resource Activities–Guarantor Summarized Financial Information.”

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments-Credit Losses.” The ASU requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected, which would include trade accounts receivable. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. We adopted ASU No. 2016-13 on April 1, 2020, using the modified retrospective approach with a cumulative effect adjustment of $1.1 million to opening equity at the beginning of the period of adoption. See Note 16 for a further discussion of the impact of the adoption of this ASU on our unaudited condensed consolidated financial statements.

Note 3—Loss Per Common Unit

The following table presents our calculation of basic and diluted weighted average common units outstanding for the periods indicated:

Three Months Ended June 30,
2020 2019
Weighted average common units outstanding during the period:
Common units - Basic 128,771,715 125,886,738
Common units - Diluted 128,771,715 125,886,738

For the three months ended June 30, 2020 and 2019, all potential common units or convertible securities were considered antidilutive.

13

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Our loss per common unit is as follows for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands, except unit and per unit amounts)
(Loss) income from continuing operations $ (33,766 ) $ 8,982
Less: Continuing operations (income) loss attributable to noncontrolling interests (51 ) 268
Net (loss) income from continuing operations attributable to NGL Energy Partners LP (33,817 ) 9,250
Less: Distributions to preferred unitholders (1) (22,054 ) (129,460 )
Less: Continuing operations net loss allocated to general partner (2) 56 84
Net loss from continuing operations allocated to common unitholders $ (55,815 ) $ (120,126 )
Loss from discontinued operations, net of tax $ (1,486 ) $ (943 )
Less: Discontinued operations loss allocated to general partner (2) 1 1
Net loss from discontinued operations allocated to common unitholders $ (1,485 ) $ (942 )
Net loss allocated to common unitholders $ (57,300 ) $ (121,068 )
Basic loss per common unit
Loss from continuing operations $ (0.43 ) $ (0.95 )
Loss from discontinued operations, net of tax $ (0.01 ) $ (0.01 )
Net loss $ (0.44 ) $ (0.96 )
Diluted loss per common unit
Loss from continuing operations $ (0.43 ) $ (0.95 )
Loss from discontinued operations, net of tax $ (0.01 ) $ (0.01 )
Net loss $ (0.44 ) $ (0.96 )
Basic weighted average common units outstanding 128,771,715 125,886,738
Diluted weighted average common units outstanding 128,771,715 125,886,738
(1) This amount includes distributions to preferred unitholders. The final accretion for the beneficial conversion of the 10.75% Class A Convertible Preferred Units and the excess of the 10.75% Class A Convertible Preferred Units repurchase price over the carrying value of the units are included in the three months ended June 30, 2019.
--- ---
(2) Net loss allocated to the general partner includes distributions to which it is entitled as the holder of incentive distribution rights.
--- ---

Note 4—Acquisitions

The following summarizes the status of the preliminary purchase price allocation of acquisitions completed prior to April 1, 2020:

Hillstone Environmental Partners, LLC (“Hillstone”) Acquisition

During the three months ended June 30, 2020, we received additional information and recorded an increase of less than $0.1 million to current assets and a decrease of $0.5 million to current liabilities with the offset to goodwill. There were no other adjustments to the fair value of assets acquired and liabilities assumed during the three months ended June 30, 2020. As of June 30, 2020, the allocation of the purchase price is considered preliminary as we are continuing to gather additional information to (i) finalize the calculation of the deferred tax liability and (ii) finalize working capital items.

14

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 5—Property, Plant and Equipment

Our property, plant and equipment consists of the following at the dates indicated:

Description Estimated<br>Useful Lives June 30, 2020 March 31, 2020
(in years) (in thousands)
Natural gas liquids terminal and storage assets 2 - 30 $ 316,327 $ 314,694
Pipeline and related facilities 30 - 40 244,937 244,751
Vehicles and railcars 3 - 25 126,199 123,937
Water treatment facilities and equipment 3 - 30 1,743,555 1,525,859
Crude oil tanks and related equipment 2 - 30 233,402 234,143
Barges and towboats 5 - 30 125,169 125,162
Information technology equipment 3 - 7 37,686 34,261
Buildings and leasehold improvements 3 - 40 154,054 151,690
Land 96,645 91,446
Tank bottoms and line fill (1) 20,346 20,346
Other 3 - 20 14,996 14,627
Construction in progress 290,492 499,707
3,403,808 3,380,623
Accumulated depreciation (570,806 ) (529,068 )
Net property, plant and equipment $ 2,833,002 $ 2,851,555
(1) Tank bottoms, which are product volumes required for the operation of storage tanks, are recorded at historical cost. We recover tank bottoms when the storage tanks are removed from service. Line fill, which represents our portion of the product volume required for the operation of the proportionate share of a pipeline we own, is recorded at historical cost.
--- ---

The following table summarizes depreciation expense and capitalized interest expense for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Depreciation expense $ 46,723 $ 25,456
Capitalized interest expense $ 1,668 $ —

Amounts in the table above for the three months ended June 30, 2019 do not include depreciation expense and capitalized interest expense related to TPSL (as defined herein), as these amounts have been classified as discontinued operations within our unaudited condensed consolidated statement of operations (see Note 18).

We record (gains) losses from the sales of property, plant and equipment and any write-downs in value due to impairment within loss (gain) on disposal or impairment of assets, net in our unaudited condensed consolidated statements of operations. The following table summarizes (gains) losses on the disposal or impairment of property, plant and equipment by segment for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Crude Oil Logistics $ 1,844 $ (533 )
Water Solutions 326 48
Liquids and Refined Products 4 (3 )
Total $ 2,174 $ (488 )

15

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 6—Goodwill

The following table summarizes changes in goodwill by segment during the three months ended June 30, 2020:

Crude Oil<br>Logistics Water<br>Solutions Liquids and<br>Refined Products Total
(in thousands)
Balances at March 31, 2020 $ 579,846 $ 294,658 $ 119,083 $ 993,587
Revisions to acquisition accounting (Note 4) — (473 ) — (473 )
Balances at June 30, 2020 $ 579,846 $ 294,185 $ 119,083 $ 993,114

Note 7—Intangible Assets

Our intangible assets consist of the following at the dates indicated:

June 30, 2020 March 31, 2020
Description Amortizable Lives Gross Carrying<br>Amount Accumulated<br>Amortization Net Gross Carrying<br>Amount Accumulated<br>Amortization Net
(in years) (in thousands)
Amortizable:
Customer relationships 3 - 30 $ 1,435,573 $ (469,398 ) $ 966,175 $ 1,435,573 $ (445,250 ) $ 990,323
Customer commitments 10 - 25 502,000 (121,347 ) 380,653 502,000 (111,677 ) 390,323
Pipeline capacity rights 30 7,799 (1,712 ) 6,087 7,799 (1,647 ) 6,152
Rights-of-way and easements 1 - 45 89,709 (7,194 ) 82,515 89,476 (6,506 ) 82,970
Water rights 13 - 30 100,937 (9,972 ) 90,965 100,937 (8,441 ) 92,496
Executory contracts and other agreements 5 - 30 48,601 (18,990 ) 29,611 48,570 (18,210 ) 30,360
Non-compete agreements 2 - 24 12,723 (5,255 ) 7,468 12,723 (4,735 ) 7,988
Debt issuance costs (1) 3 - 5 44,457 (36,515 ) 7,942 44,051 (34,983 ) 9,068
Total amortizable 2,241,799 (670,383 ) 1,571,416 2,241,129 (631,449 ) 1,609,680
Non-amortizable:
Trade names 2,800 — 2,800 2,800 — 2,800
Total $ 2,244,599 $ (670,383 ) $ 1,574,216 $ 2,243,929 $ (631,449 ) $ 1,612,480
(1) Includes debt issuance costs related to the Revolving Credit Facility (as defined herein) and the Sawtooth credit agreement. Debt issuance costs related to the fixed-rate notes, Bridge Term Credit Agreement (as defined herein) and Term Credit Agreement (as defined herein) are reported as a reduction of the carrying amount of long-term debt.
--- ---

The weighted-average remaining amortization period for intangible assets is approximately 18.7 years.

Amortization expense is as follows for the periods indicated:

Three Months Ended June 30,
Recorded In 2020 2019
(in thousands)
Depreciation and amortization $ 37,263 $ 28,298
Cost of sales 77 87
Interest expense 1,532 1,276
Operating expenses 62 151
Total $ 38,934 $ 29,812

16

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Amounts in the table above for the three months ended June 30, 2019 do not include amortization expense related to TPSL, as these amounts have been classified as discontinued operations within our unaudited condensed consolidated statement of operations (see Note 18).

Expected amortization of our intangible assets is as follows (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 105,660
2022 131,329
2023 122,766
2024 116,563
2025 100,334
Thereafter 994,764
Total $ 1,571,416

Note 8—Long-Term Debt

Our long-term debt consists of the following at the dates indicated:

June 30, 2020 March 31, 2020
Face<br>Amount Unamortized<br>Debt Issuance<br>Costs (1) Book<br>Value Face<br>Amount Unamortized<br>Debt Issuance<br>Costs (1) Book<br>Value
(in thousands)
Revolving credit facility:
Expansion capital borrowings $ 1,400,000 $ — $ 1,400,000 $ 1,120,000 $ — $ 1,120,000
Working capital borrowings 258,000 — 258,000 350,000 — 350,000
Senior unsecured notes:
7.500% Notes due 2023 ("2023 Notes") 592,323 (4,904 ) 587,419 607,323 (5,405 ) 601,918
6.125% Notes due 2025 ("2025 Notes") 380,020 (3,927 ) 376,093 387,320 (4,217 ) 383,103
7.500% Notes due 2026 ("2026 Notes") 425,081 (6,316 ) 418,765 450,000 (6,975 ) 443,025
Bridge term credit agreement — — — 250,000 (3,198 ) 246,802
Term credit agreement 250,000 (8,875 ) 241,125 — — —
Other long-term debt 4,521 — 4,521 4,683 — 4,683
3,309,945 (24,022 ) 3,285,923 3,169,326 (19,795 ) 3,149,531
Less: Current maturities 4,521 — 4,521 4,683 — 4,683
Long-term debt $ 3,305,424 $ (24,022 ) $ 3,281,402 $ 3,164,643 $ (19,795 ) $ 3,144,848
(1) Debt issuance costs related to the Revolving Credit Facility and the Sawtooth credit agreement are reported within intangible assets, rather than as a reduction of the carrying amount of long-term debt.
--- ---

Amortization expense for debt issuance costs related to long-term debt in the table above was $2.0 million and $0.8 million during the three months ended June 30, 2020 and 2019, respectively.

17

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Expected amortization of debt issuance costs is as follows (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 4,852
2022 6,429
2023 6,421
2024 3,322
2025 1,864
Thereafter 1,134
Total $ 24,022

Credit Agreement

We are party to a credit agreement (“Credit Agreement”) with a syndicate of banks. The Credit Agreement provides up to $1.915 billion in aggregate commitments and consists of a revolving credit facility to fund working capital needs (“Working Capital Facility”), and another to fund acquisitions and expansion projects (“Expansion Capital Facility”). 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 (the “Expansion Capital Facility,” and together with the Working Capital Facility, the “Revolving Credit Facility”). We had letters of credit of $85.2 million on the Working Capital Facility at June 30, 2020. The capacity under the Working Capital Facility may be limited by a “borrowing base” (as defined in the Credit Agreement) which is calculated based on the value of certain working capital items at any point in time. The commitments under the Credit Agreement expire on October 5, 2021.

At June 30, 2020, the borrowings under the Credit Agreement had a weighted average interest rate of

2.74%

, calculated as the weighted average LIBOR rate of

0.19%

plus a margin of

2.50%

for LIBOR borrowings and the prime rate of

3.25%

plus a margin of

1.50%

on alternate base rate borrowings. At June 30, 2020, the interest rate in effect on letters of credit was

2.50%

. Commitment fees are charged at a rate ranging from

0.375%

to

0.50%

on any unused capacity.

The Credit Agreement specifies that our senior secured leverage ratio cannot be more than

3.50

to 1, that our interest coverage ratio cannot be less than

2.50

to 1 and the total leverage indebtedness ratio cannot be more than

5.50

to 1 at any quarter end. At June 30, 2020, our senior secured leverage ratio was approximately

3.06

to 1, our interest coverage ratio was approximately

3.47

to 1, and our total leverage indebtedness ratio was approximately

5.36

to 1.

We were in compliance with the covenants under the Credit Agreement at June 30, 2020.

Senior Unsecured Notes

The senior unsecured notes include the 2023 Notes, 2025 Notes and 2026 Notes (collectively, the “Senior Unsecured Notes”).

18

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Repurchases

The following table summarizes repurchases of Senior Unsecured Notes for the period indicated:

Three Months Ended
June 30,
2020
(in thousands)
2023 Notes
Notes repurchased $ 15,000
Cash paid (excluding payments of accrued interest) $ 8,421
Gain on early extinguishment of debt (1) $ 6,449
2025 Notes
Notes repurchased $ 7,300
Cash paid (excluding payments of accrued interest) $ 3,647
Gain on early extinguishment of debt (2) $ 3,575
2026 Notes
Notes repurchased $ 24,919
Cash paid (excluding payments of accrued interest) $ 12,972
Gain on early extinguishment of debt (3) $ 11,567
(1) Gain on early extinguishment of debt for the 2023 Notes is inclusive of the write-off of debt issuance costs of $0.1 million. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statement of operations.
--- ---
(2) Gain on early extinguishment of debt for the 2025 Notes is inclusive of the write-off of debt issuance costs of $0.1 million. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statement of operations.
--- ---
(3) Gain on early extinguishment of debt for the 2026 Notes is inclusive of the write-off of debt issuance costs of $0.4 million. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statement of operations.
--- ---

Compliance

At June 30, 2020, we were in compliance with the covenants under the indentures for all of the Senior Unsecured Notes.

Term Credit Agreement

On June 3, 2020, we entered into a new $250.0 million term credit agreement (the “Term Credit Agreement”) with certain funds and accounts managed by affiliates of Apollo Global Management, Inc. to refinance the existing Bridge Term Credit Agreement (as defined herein).

The commitments under the Term Credit Agreement expire on June 3, 2023 and are callable by us after two years at par. We are subject to prepayments of principal if we enter into certain transactions to sell assets, issue equity or obtain new borrowings.

The obligations under the Term Credit Agreement are guaranteed by the Partnership and certain of NGL Energy Operating LLC’s (“Borrower”) wholly-owned subsidiaries, and are secured by substantially all of the assets of the Borrower, the Partnership and the other subsidiary guarantors subject to certain customary exclusions.

All borrowings under the Term Credit Agreement bear interest at LIBOR (based on the higher of one-month or three-month LIBOR), subject to a

1.50%

LIBOR floor, plus

8.00%

. At June 30, 2020, the borrowings under the Term Credit Agreement had an interest rate of

9.50%

(as of June 30, 2020 the reference LIBOR rate was below the LIBOR floor of

1.50%

).

19

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The Term Credit Agreement contains various customary representations, warranties and covenants by the Partnership and its subsidiaries, including, without limitation, (i) financial covenants limiting leverage, including senior secured leverage and total leverage, and requiring a minimum interest coverage, (ii) negative covenants limiting indebtedness, liens, investments, equity distributions, dispositions and fundamental changes and involving the Partnership or its subsidiaries and (iii) affirmative covenants requiring, among other things, reporting of financial information and material events and covenants to maintain existence and pay taxes, in each case substantially consistent with the Borrower’s existing Revolving Credit Facility.

The Term Credit Agreement specifies that our senior secured leverage ratio cannot be more than

3.50

to 1, that our interest coverage ratio cannot be less than

2.50

to 1 and the total leverage indebtedness ratio cannot be more than

5.75

to 1 for the four fiscal quarters of the fiscal year ending March 31, 2021. As of June 30, 2021 and through June 3, 2023, the maximum total leverage indebtedness ratio will be

5.50

to 1. At June 30, 2020, our senior secured leverage ratio was approximately

3.06

to 1, our interest coverage ratio was approximately

3.47

to 1, and our total leverage indebtedness ratio was approximately

5.36

to 1.

At June 30, 2020, we were in compliance with the covenants under the Term Credit Agreement.

Bridge Term Credit Agreement

On July 2, 2019, we entered into a bridge term credit agreement (the “Bridge Term Credit Agreement”) with Toronto Dominion (Texas) LLC for a $250.0 million term loan facility. Toronto Dominion (Texas) LLC and certain of its affiliates are also lenders under our Credit Agreement. On June 3, 2020, we used the proceeds from the Term Credit Agreement to pay off the outstanding balance of the Bridge Term Credit Agreement. We wrote off $2.2 million of debt issuance costs to gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statement of operations.

Sawtooth Credit Agreement

On November 27, 2019, Sawtooth Caverns LLC (“Sawtooth”), a joint venture in which we own approximately a

71.5%

interest, entered into a credit agreement with Zions Bancorporation (doing business as “Amegy Bank”). The Sawtooth credit agreement has a capacity of $20.0 million. The commitments under the Sawtooth credit agreement expire on November 27, 2022. At June 30, 2020, no amounts had been borrowed under the Sawtooth credit agreement. Commitment fees are charged at a rate of

0.50%

on any unused capacity.

Other Long-Term Debt

We have other notes payable related to equipment financing. The interest rates on these instruments range from

4.13%

to

7.10%

per year and have an aggregate principal balance of $4.5 million at June 30, 2020.

Debt Maturity Schedule

The scheduled maturities of our long-term debt are as follows at June 30, 2020:

Fiscal Year Ending March 31, Revolving<br>Credit<br>Facility Senior<br>Unsecured<br>Notes Term Credit<br>Agreement Other<br>Long-Term<br>Debt Total
(in thousands)
2021 (nine months) $ — $ — $ — $ 4,521 $ 4,521
2022 1,658,000 — — — 1,658,000
2023 — — — — —
2024 — 592,323 250,000 — 842,323
2025 — 380,020 — — 380,020
Thereafter — 425,081 — — 425,081
Total $ 1,658,000 $ 1,397,424 $ 250,000 $ 4,521 $ 3,309,945

20

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 9—Commitments and Contingencies

Legal Contingencies

In August 2015, LCT Capital, LLC (“LCT”) filed a lawsuit against NGL Energy Holdings LLC (the “GP”) and the Partnership seeking payment for investment banking services relating to the purchase of TransMontaigne Inc. and related assets in July 2014. After pre-trial rulings, LCT was limited to pursuing claims of (i) quantum meruit (the value of the services rendered by LCT) and (ii) fraudulent misrepresentation against the defendants. Following a jury trial conducted in Delaware state court from July 23, 2018 through August 1, 2018, the jury returned a verdict consisting of an award of $4.0 million for quantum meruit and $29.0 million for fraudulent misrepresentation, subject to statutory interest. The GP and the Partnership contend that the jury verdict, at least in respect of fraudulent misrepresentation, is not supportable by either controlling law or the evidentiary record. On December 5, 2019, in response to the defendants’ post-trial motion, the Court issued an Order overturning the jury’s damages award and ordering the case to be set for a damages-only trial. Both parties filed applications with the trial court asking the trial court to certify the December 5th Order for interlocutory, immediate review by the Appellate Court. On December 23, 2019, the trial court issued an Order certifying for immediate review by the appellate court the issue of whether the types of damages awarded by the jury are legally supportable since it was also determined by the Court that there was no contract between the parties. On January 7, 2020, the Supreme Court of Delaware entered an Order expanding the issues to be reviewed on appeal to include the additional issues raised by the NGL parties’ application - namely, whether the December 5th Order correctly set aside the jury’s $4.0 million quantum meruit award, whether certain jury instructions were correct and whether the evidence presented at trial supported the claims asserted by LCT. The Supreme Court consolidated the appeal proceedings for judicial efficiency and set a briefing cycle for the parties whereby the appeal-related briefs and materials were fully submitted by both parties on August 10, 2020. It is our position that the awards, even if they each stand, are not cumulative. Any allocation of the ultimate verdict award between the GP and the Partnership will be made by the board of directors of our general partner once all information is available to it and after the post-trial and any appellate process has concluded and the verdict is final as a matter of law. Because the Partnership is a named defendant in the lawsuit, and any judgment ultimately awarded would be joint and several with the GP, we have determined that it is probable that the Partnership could be liable for a portion of this judgment. At this time, we believe the amount that could be allocated to the Partnership would not be material as it is estimated to be less than $4.0 million. As of June 30, 2020, we have accrued $2.5 million related to this matter.

We are party to various other claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of our management, the ultimate resolution of these claims, legal actions, and complaints, after consideration of amounts accrued, insurance coverage, and other arrangements, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, the outcome of such matters is inherently uncertain, and estimates of our liabilities may change materially as circumstances develop.

Environmental Matters

At June 30, 2020, we have an environmental liability, measured on an undiscounted basis, of $1.9 million, which is recorded within accrued expenses and other payables in our unaudited condensed consolidated balance sheet. Our operations are subject to extensive federal, state, and local environmental laws and regulations. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in our business, and there can be no assurance that we will not incur significant costs. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs. Accordingly, we have adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials designed to prevent material environmental or other damage, and to limit the financial liability that could result from such events. However, some risk of environmental or other damage is inherent in our business.

Asset Retirement Obligations

We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement, or removal activities when the assets are retired. Our liability for asset retirement obligations is discounted to present value. To calculate the liability, we make estimates and assumptions about the retirement cost and the timing of retirement. Changes in our assumptions and estimates may occur as a result of the passage of time and the occurrence of future

21

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

events. The following table summarizes changes in our asset retirement obligation, which is reported within other noncurrent liabilities in our unaudited condensed consolidated balance sheets (in thousands):

Balance at March 31, 2020 $ 18,416
Liabilities incurred 830
Accretion expense 354
Balance at June 30, 2020 $ 19,600

In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets. However, the fair value of the asset retirement obligation cannot currently be reasonably estimated because the settlement dates are indeterminable. We will record an asset retirement obligation for these assets in the periods in which settlement dates are reasonably determinable.

Other Commitments

We have noncancelable agreements for product storage, railcar spurs and real estate. The following table summarizes future minimum payments under these agreements at June 30, 2020 (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 12,455
2022 11,838
2023 4,497
2024 197
2025 172
Thereafter 526
Total $ 29,685

As part of the acquisition of Hillstone, discussed in Note 4, we assumed an obligation to pay a quarterly subsidy payment in the event that specified volumetric thresholds are not exceeded at a third-party facility. This agreement expires on December 31, 2022. For the three months ended June 30, 2020, we recorded $0.7 million within operating expense in our unaudited condensed consolidated statement of operations. At June 30, 2020, the range of potential payments we could be obligated to make pursuant to the subsidy agreement could be from $0.0 million to $8.1 million.

Pipeline Capacity Agreements

We have noncancelable agreements with crude oil pipeline operators, which guarantee us minimum monthly shipping capacity on the pipelines. As a result, we are required to pay the minimum shipping fees if actual shipments are less than our allotted capacity. Under certain agreements we have the ability to recover minimum shipping fees previously paid if our shipping volumes exceed the minimum monthly shipping commitment during each month remaining under the agreement, with some contracts containing provisions that allow us to continue shipping up to six months after the maturity date of the contract in order to recapture previously paid minimum shipping delinquency fees. We currently have an asset recorded in prepaid expenses and other current assets and in other noncurrent assets in our unaudited condensed consolidated balance sheet for minimum shipping fees paid in both the current and previous periods that are expected to be recovered in future periods by exceeding the minimum monthly volumes (see Note 2).

22

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes future minimum throughput payments under these agreements at June 30, 2020 (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 26,509
2022 35,314
2023 35,314
2024 35,410
2025 30,897
Total $ 163,444

Construction Commitments

At June 30, 2020, we had construction commitments of $2.5 million.

Sales and Purchase Contracts

We have entered into product sales and purchase contracts for which we expect the parties to physically settle and deliver the inventory in future periods.

At June 30, 2020, we had the following commodity purchase commitments (in thousands):

Crude Oil (1) Natural Gas Liquids
Value Volume<br>(in barrels) Value Volume<br>(in gallons)
Fixed-Price Commodity Purchase Commitments:
2021 (nine months) $ 48,972 1,347 $ 11,545 25,416
2022 — — 2,495 5,766
Total $ 48,972 1,347 $ 14,040 31,182
Index-Price Commodity Purchase Commitments:
2021 (nine months) $ 787,180 22,005 $ 456,844 937,433
2022 707,480 18,484 17,601 37,069
2023 643,062 15,702 — —
2024 602,350 14,359 — —
2025 436,785 10,220 — —
Thereafter 17,426 390 — —
Total $ 3,194,283 81,160 $ 474,445 974,502
(1) Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (presented below) due primarily to our long-term purchase commitments for crude oil that we purchase and ship on the Grand Mesa Pipeline. As these purchase commitments are deliver-or-pay contracts, whereby our counterparty is required to pay us for any volumes not delivered, we have not entered into corresponding long-term sales contracts for volumes we may not receive.
--- ---

23

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

At June 30, 2020, we had the following commodity sale commitments (in thousands):

Crude Oil Natural Gas Liquids
Value Volume<br>(in barrels) Value Volume<br>(in gallons)
Fixed-Price Commodity Sale Commitments:
2021 (nine months) $ 49,667 1,347 $ 89,105 142,845
2022 — — 5,522 10,010
2023 — — 28 35
Total $ 49,667 1,347 $ 94,655 152,890
Index-Price Commodity Sale Commitments:
2021 (nine months) $ 545,789 13,865 $ 582,198 871,580
2022 193,108 4,745 11,309 18,682
2023 198,301 4,745 — —
2024 204,146 4,758 — —
2025 208,894 4,745 — —
Thereafter 17,426 390 — —
Total $ 1,367,664 33,248 $ 593,507 890,262

We account for the contracts shown in the tables above using the normal purchase and normal sale election. Under this accounting policy election, we do not record the physical contracts at fair value at each balance sheet date; instead, we record the purchase or sale at the contracted value once the delivery occurs. Contracts in the tables above may have offsetting derivative contracts (described in Note 11) or inventory positions (described in Note 2).

Certain other forward purchase and sale contracts do not qualify for the normal purchase and normal sale election. These contracts are recorded at fair value in our unaudited condensed consolidated balance sheet and are not included in the tables above. These contracts are included in the derivative disclosures in Note 11, and represent $3.5 million of our prepaid expenses and other current assets and $2.7 million of our accrued expenses and other payables at June 30, 2020.

Note 10—Equity

Partnership Equity

The Partnership’s equity consists of a

0.1%

general partner interest and a

99.9%

limited partner interest, which consists of common units. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its

0.1%

general partner interest. Our general partner is not required to guarantee or pay any of our debts and obligations. As of June 30, 2020, we owned

8.69%

of our general partner.

Common Unit Repurchase Program

On August 30, 2019, the board of directors of our general partner authorized a common unit repurchase program, under which we may repurchase up to $150.0 million of our outstanding common units through September 30, 2021 from time to time in the open market or in other privately negotiated transactions. We did not repurchase any units under this plan during the three months ended June 30, 2020.

24

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Our Distributions

The following table summarizes distributions declared on our common units during the last two quarters:

Date Declared Record Date Payment Date Amount Per Unit Amount Paid/Payable<br>to Limited Partners Amount Paid/Payable<br>to General Partner
(in thousands) (in thousands)
April 27, 2020 May 7, 2020 May 15, 2020 $ 0.2000 $ 25,754 $ 26
July 23, 2020 August 6, 2020 August 14, 2020 $ 0.2000 $ 25,754 $ 26

Class B Preferred Units

On June 13, 2017, we issued

8,400,000

of our

9.00%

Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) representing limited partner interests at a price of

$25.00

per unit for net proceeds of $202.7 million (net of the underwriters’ discount of $6.6 million and offering costs of $0.7 million).

On July 2, 2019, we issued

4,185,642

Class B Preferred Units to fund a portion of the purchase price for the Mesquite acquisition.

The current distribution rate for the Class B Preferred Units is 9.00% per year of the $25.00 liquidation preference per unit (equal to $2.25 per unit per year). The following table summarizes distributions declared on our Class B Preferred Units during the last two quarters:

Amount Paid to Class B
Date Declared Record Date Payment Date Amount Per Unit Preferred Unitholders
(in thousands)
March 16, 2020 March 31, 2020 April 15, 2020 $ 0.5625 $ 7,079
June 15, 2020 June 30, 2020 July 15, 2020 $ 0.5625 $ 7,079

The distribution amount paid on July 15, 2020 is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at June 30, 2020.

Class C Preferred Units

On April 2, 2019, we issued

1,800,000

of our

9.625%

Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) representing limited partner interests at a price of

$25.00

per unit for net proceeds of $42.9 million (net of the underwriters’ discount of $1.4 million and offering costs of $0.7 million).

The current distribution rate for the Class C Preferred Units is 9.625% per year of the $25.00 liquidation preference per unit (equal to $2.41 per unit per year). The following table summarizes distributions declared on our Class C Preferred Units during the last two quarters:

Amount Paid to Class C
Date Declared Record Date Payment Date Amount Per Unit Preferred Unitholders
(in thousands)
March 16, 2020 March 31, 2020 April 15, 2020 $ 0.6016 $ 1,083
June 15, 2020 June 30, 2020 July 15, 2020 $ 0.6016 $ 1,083

The distribution amount paid on July 15, 2020 is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at June 30, 2020.

25

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Class D Preferred Units

On July 2, 2019, we completed a private placement of an aggregate of

400,000

preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of

17,000,000

common units for net proceeds of $385.4 million. On October 31, 2019, we completed a private placement of an aggregate of

200,000

Class D Preferred Units and warrants exercisable to purchase an aggregate of

8,500,000

common units for net proceeds of $194.7 million. As of June 30, 2020, all warrants are still outstanding.

The current distribution rate for the Class D Preferred Units is 9.00% per year per unit (equal to $90.00 per every $1,000 in unit value per year). The following table summarizes distributions declared on our Class D Preferred Units during the last two quarters:

Amount Paid to Class D
Date Declared Record Date Payment Date Amount Per Unit Preferred Unitholders
(in thousands)
April 27, 2020 May 7, 2020 May 15, 2020 $ 11.25 $ 6,868
July 23, 2020 August 6, 2020 August 14, 2020 $ 11.25 $ 6,946

The distributions paid in cash for the three months ended June 30, 2020 of $6.9 million represented

50%

of the Class D Preferred Units distribution amount. In accordance with the terms of our Partnership Agreement, the value of each Class D Preferred Unit shall automatically increase by the non-cash accretion, which is approximately $6.9 million in the aggregate with respect to the distributions for the three months ended June 30, 2020.

Equity-Based Incentive Compensation

Our general partner has adopted a long-term incentive plan (“LTIP”), which allows for the issuance of equity-based compensation. Our general partner has granted certain restricted units to employees and directors, which vest in tranches, subject to the continued service of the recipients through the vesting date (the “Service Awards”). The awards may also vest upon a change of control, at the discretion of the board of directors of our general partner. No distributions accrue to or are paid on the Service Awards during the vesting period.

The following table summarizes the Service Award activity during the three months ended June 30, 2020:

Unvested Service Award units at March 31, 2020 1,371,425
Units granted 3,000
Units forfeited (10,500 )
Unvested Service Award units at June 30, 2020 1,363,925

The following table summarizes the scheduled vesting of our unvested Service Award units at June 30, 2020:

Fiscal Year Ending March 31,
2021 (nine months) 907,700
2022 456,225
Total 1,363,925

Service Awards are valued at the average of the high/low sales price as of the grant date less the present value of the expected distribution stream over the vesting period using a risk-free interest rate. The weighted-average grant price for June 30, 2020 was

$4.54

. We record the expense for each Service Award on a straight-line basis over the requisite period for the entire award (that is, over the requisite service period of the last separately vesting portion of the award), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant-date value of the award that is vested at that date.

During the three months ended June 30, 2020 and 2019, we recorded compensation expense related to Service Award units of $1.3 million and $2.8 million, respectively.

26

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes the estimated future expense we expect to record on the unvested Service Award units at June 30, 2020 (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 3,602
2022 1,706
Total $ 5,308

As of June 30, 2020, there are approximately 2.9 million common units remaining available for issuance under the LTIP.

Note 11—Fair Value of Financial Instruments

Our cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities (excluding derivative instruments) are carried at amounts which reasonably approximate their fair values due to their short-term nature.

Commodity Derivatives

The following table summarizes the estimated fair values of our commodity derivative assets and liabilities reported in our unaudited condensed consolidated balance sheet at the dates indicated:

June 30, 2020 March 31, 2020
Derivative<br>Assets Derivative<br>Liabilities Derivative<br>Assets Derivative<br>Liabilities
(in thousands)
Level 1 measurements $ 23,080 $ (8,509 ) $ 64,037 $ (2,235 )
Level 2 measurements 3,486 (3,584 ) 25,217 (17,635 )
26,566 (12,093 ) 89,254 (19,870 )
Netting of counterparty contracts (1) (8,530 ) 8,530 (2,282 ) 2,282
Net cash collateral provided (held) 3,688 — (50,104 ) (370 )
Commodity derivatives $ 21,724 $ (3,563 ) $ 36,868 $ (17,958 )
(1) Relates to commodity derivative assets and liabilities that are expected to be net settled on an exchange or through a netting arrangement with the counterparty. Our physical contracts that do not qualify as normal purchase normal sale transactions are not subject to such netting arrangements.
--- ---

The following table summarizes the accounts that include our commodity derivative assets and liabilities in our unaudited condensed consolidated balance sheets at the dates indicated:

June 30, 2020 March 31, 2020
(in thousands)
Prepaid expenses and other current assets $ 21,724 $ 36,868
Accrued expenses and other payables (3,469 ) (17,777 )
Other noncurrent liabilities (94 ) (181 )
Net commodity derivative asset $ 18,161 $ 18,910

27

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes our open commodity derivative contract positions at the dates indicated. We do not account for these derivatives as hedges.

Contracts Settlement Period Net Long<br>(Short)<br>Notional Units<br>(in barrels) Fair Value<br>of<br>Net Assets<br>(Liabilities)
(in thousands)
At June 30, 2020:
Crude oil fixed-price (1) July 2020–December 2021 (2,565 ) $ 13,408
Propane fixed-price (1) July 2020–December 2021 1,209 3,024
Refined products fixed-price (1) July 2020–March 2021 (193 ) (727 )
Other July 2020–March 2022 (1,232 )
14,473
Net cash collateral provided 3,688
Net commodity derivative asset $ 18,161
At March 31, 2020:
Crude oil fixed-price (1) April 2020–December 2021 (2,252 ) $ 41,721
Propane fixed-price (1) April 2020–December 2021 415 (738 )
Refined products fixed-price (1) April 2020–January 2021 (26 ) 27,401
Other April 2020–March 2022 1,000
69,384
Net cash collateral held (50,474 )
Net commodity derivative asset $ 18,910
(1) We may have fixed price physical purchases, including inventory, offset by floating price physical sales or floating price physical purchases offset by fixed price physical sales. These contracts are derivatives we have entered into as an economic hedge against the risk of mismatches between fixed and floating price physical obligations.
--- ---

During the three months ended June 30, 2020 and 2019, we recorded a net loss of $27.4 million and a net gain of $5.6 million, respectively, from our commodity derivatives to revenues and cost of sales in our unaudited condensed consolidated statements of operations. The amounts for the three months ended June 30, 2020 and 2019 do not include net gains and losses related to Mid-Con (as defined herein), Gas Blending (as defined herein) and TPSL, as these amounts have been classified as discontinued operations within our unaudited condensed consolidated statement of operations (see Note 18).

Credit Risk

We have credit policies that we believe minimize our overall credit risk, including an evaluation of potential counterparties’ financial condition (including credit ratings), collateral requirements under certain circumstances, and the use of industry standard master netting agreements, which allow for offsetting counterparty receivable and payable balances for certain transactions. At June 30, 2020, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers. This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, as the counterparties may be similarly affected by changes in economic, regulatory or other conditions. If a counterparty does not perform on a contract, we may not realize amounts that have been recorded in our unaudited condensed consolidated balance sheets and recognized in our net income.

Interest Rate Risk

The Revolving Credit Facility is variable-rate debt with interest rates that are generally indexed to bank prime or LIBOR interest rates. At June 30, 2020, we had $1.7 billion of outstanding borrowings under the Revolving Credit Facility at a weighted average interest rate of

2.74%

.

28

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The Term Credit Agreement is variable-rate debt with interest rates that are generally indexed to LIBOR interest rates. At June 30, 2020, we had $250.0 million of outstanding borrowings under the Term Credit Agreement at an interest rate of

9.50%

.

Fair Value of Fixed-Rate Notes

The following table provides fair value estimates of our fixed-rate notes at June 30, 2020 (in thousands):

Senior Unsecured Notes:
2023 Notes $ 497,551
2025 Notes $ 292,972
2026 Notes $ 324,788

For the Senior Unsecured Notes, the fair value estimates were developed based on publicly traded quotes and would be classified as Level 2 in the fair value hierarchy.

Note 12—Segments

As a result of the sale of a large part of the assets that constituted the former Refined Products and Renewables reportable segment, the Chief Operating Decision Maker (CODM) decided during the fourth quarter of fiscal year 2020 that the remaining business within the former Refined Products and Renewables reportable segment would be aggregated with the former Liquids reportable segment and form the current Liquids and Refined Products reportable segment. Operating results for the reportable segments have been recast for the three months ended June 30, 2019 to reflect these changes. Our Crude Oil Logistics and Water Solutions reportable segments remain unchanged from what has been previously reported.

The following table summarizes revenues related to our segments. Transactions between segments are recorded based on prices negotiated between the segments. The “Corporate and Other” category in the table below includes certain corporate expenses that are not allocated to the reportable segments.

29

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Three Months Ended June 30,
2020 2019
(in thousands)
Revenues:
Crude Oil Logistics:
Topic 606 revenues
Crude oil sales $ 230,728 $ 682,069
Crude oil transportation and other 42,641 39,997
Non-Topic 606 revenues 3,169 3,621
Elimination of intersegment sales (499 ) (9,527 )
Total Crude Oil Logistics revenues 276,039 716,160
Water Solutions:
Topic 606 revenues
Disposal service fees 81,378 51,140
Sale of recovered crude oil 1,368 14,335
Sale of brackish non-potable water 1,833 2,096
Other service revenues 3,486 4,212
Total Water Solutions revenues 88,065 71,783
Liquids and Refined Products:
Topic 606 revenues
Refined products sales 210,547 674,713
Propane sales 121,528 139,374
Butane sales 55,197 82,225
Other product sales 48,335 114,605
Service revenues 6,342 8,787
Non-Topic 606 revenues 38,717 65,178
Elimination of intersegment sales (668 ) (1,189 )
Total Liquids and Refined Products revenues 479,998 1,083,693
Corporate and Other:
Non-Topic 606 revenues 313 255
Total Corporate and Other revenues 313 255
Total revenues $ 844,415 $ 1,871,891

30

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following tables summarize depreciation and amortization expense (including amortization expense recorded within interest expense, cost of sales and operating expenses in Note 7 and Note 8) and operating income (loss) by segment for the periods indicated.

Three Months Ended June 30,
2020 2019
(in thousands)
Depreciation and Amortization:
Crude Oil Logistics $ 16,795 $ 17,585
Water Solutions 58,195 28,223
Liquids and Refined Products 8,233 7,441
Corporate and Other 4,457 2,868
Total depreciation and amortization $ 87,680 $ 56,117
Operating Income (Loss):
Crude Oil Logistics $ 23,320 $ 33,802
Water Solutions (16,047 ) 13,689
Liquids and Refined Products 4,562 15,371
Corporate and Other (22,620 ) (15,342 )
Total operating (loss) income $ (10,785 ) $ 47,520

The following table summarizes additions to property, plant and equipment and intangible assets by segment for the periods indicated. This information has been prepared on the accrual basis, and includes property, plant and equipment and intangible assets acquired in acquisitions. The information below does not include goodwill by segment.

Three Months Ended June 30,
2020 2019
(in thousands)
Crude Oil Logistics $ 5,672 $ 14,805
Water Solutions 20,702 203,900
Liquids and Refined Products 1,532 5,553
Corporate and Other 2,032 739
Total $ 29,938 $ 224,997

All of the tables above do not include amounts for the three months ended June 30, 2019 related to Mid-Con, Gas Blending and TPSL, as these amounts have been classified as discontinued operations within our unaudited condensed consolidated statement of operations (see Note 18).

The following tables summarize long-lived assets (consisting of property, plant and equipment, intangible assets, operating lease right-of-use assets and goodwill) and total assets by segment at the dates indicated:

June 30, 2020 March 31, 2020
(in thousands)
Long-lived assets, net:
Crude Oil Logistics $ 1,553,137 $ 1,567,503
Water Solutions 3,344,740 3,382,727
Liquids and Refined Products (1) 639,063 654,530
Corporate and Other 40,402 33,570
Total $ 5,577,342 $ 5,638,330
(1) Includes $23.9 million and $25.9 million of non-US long-lived assets at June 30, 2020 and March 31, 2020, respectively.
--- ---

31

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

June 30, 2020 March 31, 2020
(in thousands)
Total assets:
Crude Oil Logistics $ 1,896,491 $ 1,886,211
Water Solutions 3,472,566 3,539,328
Liquids and Refined Products (1) 896,997 972,684
Corporate and Other 60,032 100,513
Total $ 6,326,086 $ 6,498,736
(1) Includes $44.9 million and $37.8 million of non-US total assets at June 30, 2020 and March 31, 2020, respectively.
--- ---

Note 13—Transactions with Affiliates

A member of the board of directors of our general partner is an executive officer of WPX Energy, Inc. (“WPX”). We purchase crude oil from and sell crude oil to WPX (certain of the purchases and sales that were entered into in contemplation of each other are recorded on a net basis within revenues in our unaudited condensed consolidated statement of operations). We also treat and dispose of produced water and solids received from WPX.

The following table summarizes these related party transactions for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Sales to WPX $ 9,756 $ 8,436
Purchases from WPX (1) $ 33,773 $ 80,771
Sales to entities affiliated with management $ 880 $ 1,021
Purchases from entities affiliated with management $ 67 $ 1,156
Purchases from equity method investees $ 453 $ —
(1) Amount primarily relates to purchases of crude oil under the definitive agreement we signed with WPX.
--- ---

Accounts receivable from affiliates consist of the following at the dates indicated:

June 30, 2020 March 31, 2020
(in thousands)
Receivables from NGL Energy Holdings LLC $ 7,940 $ 7,781
Receivables from WPX 4,784 3,563
Receivables from entities affiliated with management 104 151
Receivables from equity method investees 1,986 1,439
Total $ 14,814 $ 12,934

Accounts payable to affiliates consist of the following at the dates indicated:

June 30, 2020 March 31, 2020
(in thousands)
Payables to WPX $ 22,365 $ 17,039
Payables to entities affiliated with management 1 149
Payables to equity method investees 498 529
Total $ 22,864 $ 17,717

32

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 14—Revenue from Contracts with Customers

Effective April 1, 2018, we recognize revenue for services and products under revenue contracts as our obligations to either perform services or deliver or sell products under the contracts are satisfied. Our revenue contracts in scope under ASC 606 primarily have a single performance obligation and we do not receive material amounts of non-cash consideration. Our costs to obtain or fulfill our revenue contracts were not material as of June 30, 2020.

The majority of our revenue agreements are within scope under ASC 606 and the remainder of our revenue comes from contracts that are accounted for as derivatives under ASC 815 or that contain nonmonetary exchanges or leases and are in scope under Topics 845 and 842, respectively. See Note 12 for a detail of disaggregated revenue. Revenue from contracts accounted for as derivatives under ASC 815 within our Liquids and Refined Products segment includes $1.0 million of net gains related to changes in the mark-to-market value of these arrangements recorded during the three months ended June 30, 2020.

Remaining Performance Obligations

Most of our service contracts are such that we have the right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date. Therefore, we are utilizing the practical expedient in ASC 606-10-55-18 under which we recognize revenue in the amount to which we have the right to invoice. Applying this practical expedient, we are not required to disclose the transaction price allocated to remaining performance obligations under these agreements. The following table summarizes the amount and timing of revenue recognition for such contracts at June 30, 2020 (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 181,644
2022 210,387
2023 204,131
2024 173,712
2025 147,638
Thereafter 164,437
Total (1) $ 1,081,949
(1) Amount includes revenue from a counterparty that filed for Chapter 11 bankruptcy in June 2020. See Note 17 for a further discussion.
--- ---

Contract Assets and Liabilities

The following tables summarize the balances of our contract assets and liabilities at the dates indicated:

Balance at
March 31, 2020 June 30, 2020
(in thousands)
Accounts receivable from contracts with customers $ 372,930 $ 324,290
Contract liabilities balance at March 31, 2020 $ 19,536
--- --- --- ---
Payment received and deferred 12,711
Payment recognized in revenue (6,921 )
Contract liabilities balance at June 30, 2020 $ 25,326

Note 15—Leases

Lessee Accounting

Our leasing activity primarily consists of product storage, office space, real estate, railcars, and equipment.

33

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes the components of our lease expense for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Operating lease expense $ 18,277 $ 29,398
Variable lease expense 4,879 1,808
Short-term lease expense 396 126
Total lease expense $ 23,552 $ 31,332

Amounts in the table above for the three months ended June 30, 2019 do not include lease expense related to TPSL and Gas Blending, as these amounts have been classified as discontinued operations within our unaudited condensed consolidated statement of operations (see Note 18).

The following table summarizes maturities of our operating lease obligations at June 30, 2020 (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 61,077
2022 44,199
2023 30,703
2024 19,332
2025 10,252
Thereafter 59,762
Total lease payments 225,325
Less imputed interest (50,619 )
Total operating lease obligations $ 174,706

The following table summarizes supplemental cash flow and non-cash information related to our operating leases for the periods indicated:

Three Months Ended June 30,
2020 2019 (1)
(in thousands)
Cash paid for amounts included in the measurement of operating lease obligations $ 17,678 $ 29,108
Operating lease right-of-use assets obtained in exchange for operating lease obligations $ 12,642 $ 552,527
(1) Amounts in the table for the three months ended June 30, 2019 include the leases and activity for the TPSL and Gas Blending businesses which were sold during the fiscal year ended March 31, 2020 (see Note 18).
--- ---

Lessor Accounting and Subleases

Our lessor arrangements include storage and railcar contracts. We also, from time to time, sublease certain of our storage capacity and railcars to third parties. Fixed rental revenue is recognized on a straight-line basis over the lease term. During the three months ended June 30, 2020, fixed rental revenue was $4.3 million, which includes $0.7 million of sublease revenue. During the three months ended June 30, 2019, fixed rental revenue was $5.4 million, which includes $1.4 million of sublease revenue.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes future minimum lease payments receivable under various noncancelable operating lease agreements at June 30, 2020 (in thousands):

Fiscal Year Ending March 31,
2021 (nine months) $ 12,666
2022 8,112
2023 5,605
2024 3,001
2025 2,165
Thereafter 11,275
Total $ 42,824

Note 16—Allowance for Current Expected Credit Loss (CECL)

ASU 2016-13 requires that an allowance for expected credit losses be recognized for certain financial assets that reflects the current expected credit loss over the financial asset’s contractual life. The valuation allowance considers the risk of loss, even if remote, and considers past events, current conditions and reasonable and supportable forecasts.

We are exposed to credit losses primarily through sale of products and services and notes receivable from third-parties. A counterparty’s ability to pay is assessed through a credit process that considers the payment terms, the counterparty’s established credit rating or our assessment of the counterparty’s credit worthiness and other risks. We can require prepayment or collateral to mitigate credit risks.

We group our financial assets into pools of counterparties with similar risk characteristics for the purpose of determining the allowance for expected credit losses. Each reporting period, we assess whether a significant change in the risk of expected credit loss has occurred. Among the quantitative and qualitative factors considered in calculating our allowance for expected credit losses are historical financial data, including write-offs and allowances, current conditions, industry risk and current credit ratings. Financial assets will be written off in whole, or in part, when practical recovery efforts have been exhausted and no reasonable expectation of recovery exists. Subsequent recoveries of amounts previously written off are recorded as an increase to the allowance. We manage receivable pools using past due balances as a key credit quality indicator.

The following table summarizes changes in our allowance for expected credit losses:

Accounts Receivable - Trade Notes Receivable and Other
(in thousands)
Balance at March 31, 2020 $ 4,540 $ —
Cumulative effect adjustment 433 680
Current period provision for expected credit losses (27 ) —
Write-offs charged against the allowance (1,272 ) (222 )
Balance at June 30, 2020 $ 3,674 $ 458

Note 17—Other Matters

Third-party Loan Receivable

As discussed previously in Note 2, we had an outstanding loan receivable of $26.7 million, including accrued interest, associated with our interest in the Facility that is utilized by a third party. Our loan receivable was secured by title to and a lien interest on the Facility. The third party filed a petition for bankruptcy under Chapter 11 of the bankruptcy code in July 2019, at which time we filed our Proof of Claim within the bankruptcy case. The Chapter 11 plan, as supplemented, was approved by the bankruptcy court in February 2020, pursuant to which we were expected to be paid a $26.7 million secured claim as an unimpaired creditor. After the approval of the supplemental plan, the third party attempted to negotiate with us to accept an amount less than the full amount of our claim or to take back the Facility in kind. In May 2020, we filed a motion with the bankruptcy court to compel the third party to pay us the full amount of the claim in accordance with the approved plan. The bankruptcy court ruled in May 2020 that the third party would need to either pay us the full amount of the claim or deliver the Facility to us at a destination of our reasonable choosing. On June 26, 2020, we settled our claim with the third party and

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

agreed to receive $16.3 million, for which we released any and all claims and/or liens with respect to the Facility and transferred title of the Facility to the third party. For the remaining $10.4 million of the loan receivable, we have filed an unsecured claim within the bankruptcy. As of June 30, 2020, we wrote-off approximately $9.4 million, the portion of the unsecured claimed we have deemed uncollectible, and this amount was recorded as a loss within loss (gain) on disposal or impairment of assets, net in our unaudited condensed consolidated statement of operations. As of June 30, 2020, the remaining balance of $0.6 million, net of an allowance for an expected credit loss, is recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet.

Third-party Bankruptcy

During the three months ended June 30, 2020, a third-party, who is a significant shipper on our crude oil pipeline, filed a petition for bankruptcy under Chapter 11 of the bankruptcy code. This third-party has transportation contracts pursuant to which it has committed to ship crude oil on our pipeline through October 2026. As part of the bankruptcy filing, the third-party has requested that the court authorize it to reject these transportation contracts, effective June 14, 2020. We dispute the third party’s ability to reject the transportation contracts and have, among other things, filed an objection within the bankruptcy and, currently, a hearing on this matter is set to take place on September 3, 2020. The third-party also has a water disposal contract with our Water Solutions segment whereby we dispose of its produced water for a fee. For this contract, because we are secured by statutory liens, we have requested that they pay us for those prepetition services under authority granted to them by the bankruptcy court. Pending receipt of that payment, we will be filing a secured claim in the bankruptcy case. On August 10, 2020, the third-party filed a motion with the bankruptcy court to also reject our water disposal contract and we have 14 days from the date of their filing in which to respond with our objection. Since the filing of the bankruptcy petition, the third-party has continued to utilize the services under both the transportation contracts and the water disposal contract and the third-party is current on all of its post filing date receivables.

Note 18—Discontinued Operations

As previously disclosed, on September 30, 2019, we completed the sale of TransMontaigne Product Services, LLC (“TPSL”) to Trajectory Acquisition Company, LLC. On January 3, 2020, we completed the sale of our refined products business in the mid-continent region of the United States (“Mid-Con”) to a third-party. On March 30, 2020, we completed the sale of our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”) to another third-party. As the sale of each of these businesses represented strategic shifts, the results of operations and cash flows related to these businesses are classified as discontinued operations for all periods presented, and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows.

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NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes the results of operations from discontinued operations for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Revenues $ 16,198 $ 4,766,000
Cost of sales 16,311 4,763,537
Operating expenses 208 2,955
General and administrative expense — 21
Depreciation and amortization — 454
Loss on disposal or impairment of assets, net (1) 1,065 —
Operating loss from discontinued operations (1,386 ) (967 )
Interest expense (100 ) (31 )
Other income, net — 65
Loss from discontinued operations before taxes (1,486 ) (933 )
Income tax expense — (10 )
Loss from discontinued operations, net of tax $ (1,486 ) $ (943 )
(1) Amount for the three months ended June 30, 2020 includes a loss of $1.0 million on the sale of Gas Blending and $0.1 million on the sale of TPSL.
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Continuing Involvement

As of June 30, 2020, we have commitments to sell up to 56.8 million gallons of propane, valued at $37.4 million (based on the contract price), to Superior Plus Corp. and DCC LPG, the purchasers of our former Retail Propane segment, through May 2021. During the three months ended June 30, 2020, we received $0.6 million from DCC LPG for propane sold to them during the period.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of NGL Energy Partners LP’s (“we,” “us,” “our,” or the “Partnership”) financial condition and results of operations as of and for the three months ended June 30, 2020. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (“Quarterly Report”), as well as Part II, Item 7–“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 (“Annual Report”) filed with the Securities and Exchange Commission on June 1, 2020.

Overview

We are a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner. At June 30, 2020, our operations included three segments: Crude Oil Logistics, Water Solutions and Liquids and Refined Products. See Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of these businesses.

As a result of the sale of a large part of the assets that constituted the former Refined Products and Renewables reportable segment (see “Acquisitions and Dispositions” below and Note 18 to our unaudited condensed consolidated financial statements included in this Quarterly Report), the Chief Operating Decision Maker (CODM) decided during the fourth quarter of fiscal year 2020 that the remaining business within the former Refined Products and Renewables reportable segment would be aggregated with the former Liquids reportable segment and form the current Liquids and Refined Products reportable segment. Operating results for the reportable segments have been recast for the three months ended June 30, 2019 to reflect these changes. Our Crude Oil Logistics and Water Solutions reportable segments remain unchanged from what has been previously reported.

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Consolidated Results of Operations

The following table summarizes our unaudited condensed consolidated statements of operations for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Total revenues $ 844,415 $ 1,871,891
Total cost of sales 677,047 1,689,930
Operating expenses 64,987 61,312
General and administrative expense 17,158 20,342
Depreciation and amortization 83,986 53,754
Loss (gain) on disposal or impairment of assets, net 12,022 (967 )
Operating (loss) income (10,785 ) 47,520
Equity in earnings of unconsolidated entities 289 8
Interest expense (43,961 ) (39,877 )
Gain on early extinguishment of liabilities, net 19,355 —
Other income, net 1,035 1,010
(Loss) income from continuing operations before income taxes (34,067 ) 8,661
Income tax benefit 301 321
(Loss) income from continuing operations (33,766 ) 8,982
Loss from discontinued operations, net of tax (1,486 ) (943 )
Net (loss) income (35,252 ) 8,039
Less: Net (income) loss attributable to noncontrolling interests (51 ) 268
Net (loss) income attributable to NGL Energy Partners LP $ (35,303 ) $ 8,307

Items Impacting the Comparability of Our Financial Results

Our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to business combinations, disposals and other transactions. Our results of operations for the three months ended June 30, 2020 are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2021.

Recent Developments

Late in the fourth quarter of our 2020 fiscal year, the energy industry experienced historic events that led to a simultaneous demand and supply shock. Saudi Arabia and Russia increased production of crude oil as the two countries competed for market share. As a result, the global supply of crude oil significantly exceeded demand and led to a collapse in global crude oil prices.

In addition, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide, which contributed to a massive economic slowdown and decreased demand for crude oil. This period of unprecedented restrictions on travel and economic activity significantly reduced demand for refined products. The reduction in refined products demand, lower crude oil prices and limited storage capacity combined to put significant downward pressure on domestic crude oil and natural gas producers as they assess their future drilling and production plans. All three of our segments were negatively impacted by the lower commodity price environment and reduced demand.

Also, commodity price declines have had an adverse impact on many participants in the energy markets, and the inherent risk of customer or counterparty nonperformance is higher when commodity prices are low or decline. In June 2020, a significant shipper on our crude oil pipeline filed a petition under Chapter 11 bankruptcy and in their filing requested that the court authorize it to reject this transportation contract. We have filed an objection and are currently awaiting a hearing on this matter. Approval of the rejection of this contract by the court could have a significant impact on our results of operations. The same third-party also has a water disposal contract with our Water Solutions segment in which we dispose of their produced

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water for a fee. See Note 17 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

While some global and regional economies are beginning to reopen, the potential future limitations and impact of COVID-19 on our business are still unknown at this time. Crude oil prices have increased but are still relatively low, and future drilling and production plans are continually being assessed. Given the uncertain timing of a return of refined product demand to historical levels and of a recovery in commodity prices, the extent of the impact these events will continue to have on our results of operations is unclear but could be material.

Acquisitions and Dispositions

We completed numerous acquisitions and dispositions during the fiscal year ended March 31, 2020. These transactions impact the comparability of our results of operations between our current and prior fiscal years. We have not completed any acquisitions or dispositions during the three months ended June 30, 2020.

During the fiscal year ended March 31, 2020, we completed the following acquisitions:

• On July 2, 2019, we acquired all of the assets of Mesquite Disposals Unlimited, LLC (“Mesquite”) (including 34 saltwater disposal wells and approximately 175 miles of pipelines);
• On October 31, 2019, we acquired all of the equity interests of Hillstone Environmental Partners, LLC (“Hillstone”) (including 19 saltwater disposal wells);
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• On November 7, 2019, we acquired the exclusive rights to use certain land in Lea County, New Mexico for produced and treated water operations from one entity, certain membership interests in another entity and other assets;
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• During the fiscal year ended March 31, 2020, we acquired one saltwater disposal facility (including three saltwater disposal wells) in Eddy County, New Mexico; and
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• During the fiscal year ended March 31, 2020, we acquired land and two saltwater disposal wells in Pecos County, Texas.
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During the fiscal year ended March 31, 2020, we completed the following dispositions:

• On September 30, 2019, we completed the sale of TransMontaigne Product Services, LLC (“TPSL”) to Trajectory Acquisition Company, LLC;
• On January 3, 2020, we completed the sale of our refined products business in the mid-continent region of the United States (“Mid-Con”) to a third-party; and
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• On March 30, 2020, we completed the sale of our gas blending business in the southeastern and eastern regions of the United States (“Gas Blending”) to another third-party.
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As the sale of each of these businesses represented strategic shifts, the results of operations and cash flows related to these businesses are classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flows. See Note 18 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of these transactions.

Term Credit Agreement

On June 3, 2020, we entered into a new $250.0 million term credit agreement (the “Term Credit Agreement”) with certain funds and accounts managed by affiliates of Apollo Global Management, Inc. to refinance the existing bridge term credit agreement (the “Bridge Term Credit Agreement”). The commitments under the Term Credit Agreement expire on June 3, 2023 and are callable by us after two years at par. See Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Repurchases of Senior Unsecured Notes

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During the three months ended June 30, 2020, we repurchased $15.0 million of the 7.50% senior unsecured notes due 2023 (“2023 Notes”), $7.3 million of the 6.125% senior unsecured notes due 2025 (“2025 Notes”) and $24.9 million of the 7.50% senior unsecured notes due 2026 (“2026 Notes”).

Segment Operating Results for the Three Months Ended June 30, 2020 and 2019

Crude Oil Logistics

The following table summarizes the operating results of our Crude Oil Logistics segment for the periods indicated:

Three Months Ended June 30,
2020 2019 Change
(in thousands, except per barrel amounts)
Revenues:
Crude oil sales $ 230,728 $ 682,069 $ (451,341 )
Crude oil transportation and other 45,810 43,618 2,192
Total revenues (1) 276,538 725,687 (449,149 )
Expenses:
Cost of sales-excluding impact of derivatives 193,592 662,038 (468,446 )
Derivative loss (gain) 24,464 (3,271 ) 27,735
Operating expenses 14,826 14,378 448
General and administrative expenses 2,091 1,771 320
Depreciation and amortization expense 16,795 17,585 (790 )
Loss (gain) on disposal or impairment of assets, net 1,450 (616 ) 2,066
Total expenses 253,218 691,885 (438,667 )
Segment operating income $ 23,320 $ 33,802 $ (10,482 )
Crude oil sold (barrels) 9,292 11,291 (1,999 )
Crude oil transported on owned pipelines (barrels) 10,476 11,789 (1,313 )
Crude oil storage capacity - owned and leased (barrels) (2) 5,239 5,232 7
Crude oil storage capacity leased to third parties (barrels) (2) 2,062 2,563 (501 )
Crude oil inventory (barrels) (2) 1,622 1,125 497
Crude oil sold ($/barrel) $ 24.831 $ 60.408 $ (35.577 )
Cost per crude oil sold ($/barrel) $ 23.467 $ 58.344 $ (34.877 )
Crude oil product margin ($/barrel) $ 1.364 $ 2.064 $ (0.700 )
(1) Revenues include $0.5 million and $9.5 million of intersegment sales during the three months ended June 30, 2020 and 2019, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
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(2) Information is presented as of June 30, 2020 and June 30, 2019, respectively.
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Crude Oil Sales Revenues. The decrease was due primarily to a decrease in crude oil prices and sales volumes during the three months ended June 30, 2020, compared to the three months ended June 30, 2019.

Crude Oil Transportation and Other Revenues. The increase was partially due to our Grand Mesa Pipeline, which increased revenues by $1.3 million during the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily due to a tariff increase in July 2019. During the three months ended June 30, 2020, financial volumes on the Grand Mesa Pipeline averaged approximately 119,000 barrels per day (volume amounts are from both internal and external parties). Net realized margins on certain volumes purchased and shipped on the pipeline were negatively impacted by the extreme crude oil price volatility during the three months ended June 30, 2020. Also, there was an increase of $1.3 million due to the new barges and towing equipment we received during the fiscal year ended March 31, 2020.

Cost of Sales-Excluding Impact of Derivatives. The decrease was due primarily to a decrease in crude oil prices during the three months ended June 30, 2020, compared to the three months ended June 30, 2019.

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Derivative Loss (Gain). Our cost of sales during the three months ended June 30, 2020 included $9.8 million of net realized losses on derivatives and $14.6 million of net unrealized losses on derivatives. Our cost of sales during the three months ended June 30, 2019 included $1.4 million of net realized gains on derivatives and $1.9 million of net unrealized gains on derivatives.

Operating and General and Administrative Expenses. Operating and general and administrative expenses were consistent with the prior year.

Depreciation and Amortization Expense. The decrease was due to asset retirements.

Loss (Gain) on Disposal or Impairment of Assets, Net. During the three months ended June 30, 2020, we recorded a net loss of $1.5 million related to the disposal of certain assets. During the three months ended June 30, 2019, we recorded a net gain of $0.6 million related to the disposal of certain assets.

Water Solutions

The following table summarizes the operating results of our Water Solutions segment for the periods indicated:

Three Months Ended June 30,
2020 2019 Change
(in thousands, except per barrel and per day amounts)
Revenues:
Water disposal service fees $ 78,317 $ 45,927 $ 32,390
Sale of recovered crude oil 1,368 14,335 (12,967 )
Other service revenues 8,380 11,521 (3,141 )
Total revenues 88,065 71,783 16,282
Expenses:
Cost of sales-excluding impact of derivatives 115 248 (133 )
Derivative loss (gain) 4,585 (3,055 ) 7,640
Operating expenses 39,299 32,456 6,843
General and administrative expenses 1,651 963 688
Depreciation and amortization expense 58,133 28,071 30,062
Loss (gain) on disposal or impairment of assets, net 329 (589 ) 918
Total expenses 104,112 58,094 46,018
Segment operating (loss) income $ (16,047 ) $ 13,689 $ (29,736 )
Produced water processed (barrels per day)
Northern Delaware Basin 915,188 88,089 827,099
Permian Basin 214,340 311,540 (97,200 )
Eagle Ford Basin 95,375 267,244 (171,869 )
DJ Basin 132,365 169,620 (37,255 )
Other Basins 9,151 12,394 (3,243 )
Total 1,366,419 848,887 517,532
Solids processed (barrels per day) 1,899 5,442 (3,543 )
Skim oil sold (barrels per day) (1) 687 2,860 (2,173 )
Service fees for produced water processed ($/barrel) (2) $ 0.63 $ 0.59 $ 0.04
Recovered crude oil for produced water processed ($/barrel) (2) $ 0.01 $ 0.19 $ (0.18 )
Operating expenses for produced water processed ($/barrel) (2) $ 0.32 $ 0.42 $ (0.10 )
(1) During the three months ended June 30, 2020, approximately 1,054 barrels per day of skim oil were not sold due to crude oil prices but rather were stored for sale at a later date.
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(2) Total produced water barrels processed during the three months ended June 30, 2020 and 2019 were 124,344,088 and 77,248,629, respectively.
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Water Disposal Service Fee Revenues. The increase was due primarily to an increase in the price we receive to dispose of a barrel of water and an increase in the volume of produced water processed at acquired (primarily Mesquite and Hillstone) and newly developed facilities.

Recovered Crude Oil Revenues. The decrease was due primarily to approximately 1,054 barrels per day of skim oil that were stored rather than sold during the three months ended June 30, 2020 due to low crude oil prices. We expect to sell the stored crude oil during the three months ended September 30, 2020.

Other Service Revenues. Other service revenues primarily include solids disposal revenues, water pipeline revenues, land surface use revenues and brackish non-potable water revenues. The decrease was due primarily to lower solids disposal revenues, water pipeline revenues and land surface use revenues due to reduced customer drilling activity resulting from the decline in crude oil prices. These decreases were partially offset by the sale of water to customers for use in their operations.

Cost of Sales-Excluding Impact of Derivatives. The decrease was due primarily to lower disposal volumes as a result of the decline in customer drilling activity due to lower crude oil prices.

Derivative Loss (Gain). We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the crude oil we expect to recover when processing the produced water and selling the skim oil. Our cost of sales during the three months ended June 30, 2020 included $13.3 million of net unrealized losses on derivatives and $8.7 million of net realized gains on derivatives. Our cost of sales during the three months ended June 30, 2019 included $2.9 million of net realized gains on derivatives and $0.2 million of net unrealized gains on derivatives. In June 2019, we settled derivative contracts that had scheduled settlement dates from April 2020 through December 2020 and recorded a gain of $1.9 million on those derivatives.

Operating and General and Administrative Expenses. The increase was due primarily to the increase in the number of water disposal facilities and wells that we own and operate, both through acquisitions and development of new facilities.

Depreciation and Amortization Expense. The increase was due primarily to acquisitions and newly developed facilities.

Loss (Gain) on Disposal or Impairment of Assets, Net. During the three months ended June 30, 2020, we recorded a net loss of $0.3 million on the disposals of certain assets. During the three months ended June 30, 2019, we recorded a gain of $1.0 million for cash received related to a loan receivable written off in a prior period. In addition, during the three months ended June 30, 2019, we recorded a net loss of $0.4 million on the disposals of certain assets.

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Liquids and Refined Products

The following table summarizes the operating results of our Liquids and Refined Products segment for the periods indicated:

Three Months Ended June 30,
2020 2019 Change
(in thousands, except per gallon amounts)
Refined products sales:
Revenues-excluding impact of derivatives (1)(2) $ 210,642 $ 668,558 $ (457,916 )
Cost of sales-excluding impact of derivatives (3) 207,612 659,679 (452,067 )
Derivative loss (gain) 445 (427 ) 872
Product margin 2,585 9,306 (6,721 )
Propane sales:
Revenues (1) 122,323 140,159 (17,836 )
Cost of sales-excluding impact of derivatives 114,622 135,199 (20,577 )
Derivative (gain) loss (4,334 ) 2,810 (7,144 )
Product margin 12,035 2,150 9,885
Butane sales:
Revenues (1) 55,429 82,312 (26,883 )
Cost of sales-excluding impact of derivatives 51,655 75,541 (23,886 )
Derivative loss (gain) 1,013 (6,105 ) 7,118
Product margin 2,761 12,876 (10,115 )
Other product sales:
Revenues-excluding impact of derivatives (1) 84,166 195,956 (111,790 )
Cost of sales-excluding impact of derivatives 81,725 182,269 (100,544 )
Derivative loss 1,230 4,490 (3,260 )
Product margin 1,211 9,197 (7,986 )
Service revenues:
Revenues (1) 9,056 11,115 (2,059 )
Cost of sales 1,986 3,983 (1,997 )
Product margin 7,070 7,132 (62 )
Expenses:
Operating expenses 10,862 14,173 (3,311 )
General and administrative expenses 2,078 3,765 (1,687 )
Depreciation and amortization expense 8,156 7,355 801
Loss (gain) on disposal or impairment of assets, net 4 (3 ) 7
Total expenses 21,100 25,290 (4,190 )
Segment operating income $ 4,562 $ 15,371 $ (10,809 )

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Three Months Ended June 30,
2020 2019 Change
(in thousands, except per gallon amounts)
Liquids and Refined Products storage capacity - owned and leased (gallons) (4) 399,251 400,409 (1,158 )
Refined products sold (gallons) 211,974 321,634 (109,660 )
Refined products sold ($/gallon) $ 0.994 $ 2.102 $ (1.108 )
Cost per refined products sold ($/gallon) $ 0.979 $ 2.077 $ (1.098 )
Refined products product margin ($/gallon) $ 0.015 $ 0.025 $ (0.010 )
Refined products inventory (gallons) (4) 2,656 4,420 (1,764 )
Propane sold (gallons) 252,289 245,267 7,022
Propane sold ($/gallon) $ 0.485 $ 0.571 $ (0.086 )
Cost per propane sold ($/gallon) $ 0.437 $ 0.563 $ (0.126 )
Propane product margin ($/gallon) $ 0.048 $ 0.008 $ 0.040
Propane inventory (gallons) (4) 77,968 76,012 1,956
Propane storage capacity leased to third parties (gallons) (4) 46,066 45,436 630
Butane sold (gallons) 119,566 142,479 (22,913 )
Butane sold ($/gallon) $ 0.464 $ 0.578 $ (0.114 )
Cost per butane sold ($/gallon) $ 0.440 $ 0.487 $ (0.047 )
Butane product margin ($/gallon) $ 0.024 $ 0.091 $ (0.067 )
Butane inventory (gallons) (4) 73,291 53,219 20,072
Butane storage capacity leased to third parties (gallons) (4) 33,894 33,894 —
Other products sold (gallons) 114,222 154,592 (40,370 )
Other products sold ($/gallon) $ 0.737 $ 1.268 $ (0.531 )
Cost per other products sold ($/gallon) $ 0.726 $ 1.208 $ (0.482 )
Other products product margin ($/gallon) $ 0.011 $ 0.060 $ (0.049 )
Other products inventory (gallons) (4) 31,583 52,071 (20,488 )
(1) Revenues include $0.7 million and $1.2 million of intersegment sales during the three months ended June 30, 2020 and 2019, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.
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(2) Revenues included $7.5 million of intersegment sales during the three months ended June 30, 2019 between certain businesses within the Liquids and Refined Products segment and TPSL, Mid-Con and Gas Blending that are eliminated in our unaudited condensed consolidated statement of operations.
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(3) Cost of sales included $8.8 million of intersegment cost of sales during the three months ended June 30, 2019 between certain businesses within the Liquids and Refined Products segment and TPSL, Mid-Con and Gas Blending that are eliminated in our unaudited condensed consolidated statement of operations.
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(4) Information is presented as of June 30, 2020 and June 30, 2019, respectively.
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Refined Products Revenues and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues and cost of sales, excluding the impact of derivatives, were due to a decrease in refined products prices and volumes. The decrease in overall prices was due to the sizable reduction in demand for both gasoline and diesel products due to COVID-19. There was also a large decrease in volumes due to the elimination of our sales in the Northeast and Southeast due to our non-compete clause with the purchaser of our TPSL business.

Refined Products Derivative Loss (Gain). Our refined products margin during the three months ended June 30, 2020 included a loss of $0.4 million from our risk management activities due primarily to unrealized losses on our open forward physical positions. Our refined products margin during the three months ended June 30, 2019 included a gain of $0.4 million from our risk management activities due primarily to unrealized gains on our open forward physical positions.

Propane Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues and cost of sales, excluding the impact of derivatives, were due primarily to lower commodity prices.

Propane Derivative (Gain) Loss. Our cost of wholesale propane sales included $3.9 million of net unrealized gains on derivatives and $0.4 million of net realized gains on derivatives during the three months ended June 30, 2020. During the three

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months ended June 30, 2019, our cost of wholesale propane sales included $3.2 million of net unrealized losses on derivatives and $0.4 million of net realized gains on derivatives.

Propane product margins, excluding the impact of derivatives, increased as inventory values aligned with reduced commodity prices.

Butane Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues and cost of sales, excluding the impact of derivatives, were due to lower commodity prices and volumes as a result of lower demand.

Butane Derivative Loss (Gain). Our cost of butane sales during the three months ended June 30, 2020 included $2.9 million of net unrealized losses on derivatives and $1.9 million of net realized gains on derivatives. Our cost of butane sales included $4.8 million of net unrealized gains on derivatives and $1.3 million of net realized gains on derivatives during the three months ended June 30, 2019.

Butane product margins, excluding the impact of derivatives, decreased compared to the prior year quarter due to higher supply costs and weaker demand.

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues and cost of sales, excluding the impact of derivatives, were due to lower commodity prices.

Other Products Derivative Loss. Our cost of sales of other products included $0.3 million of net unrealized gains on derivatives and less than $1.5 million of net realized losses on derivatives during the three months ended June 30, 2020. Our cost of sales of other products during the three months ended June 30, 2019 included $4.5 million of net realized losses on derivatives and less than $0.1 million of net unrealized gains on derivatives.

Other product sales product margins during the three months ended June 30, 2020 were impacted by decreasing commodity prices.

Service Revenues. This revenue includes storage, terminaling and transportation services income. Revenue for the current quarter decreased due to lower commodity prices and lower volumes.

Operating and General and Administrative Expenses. Expenses for the current quarter were lower primarily due to lower incentive compensation and various other cost reductions and efficiency gains.

Depreciation and Amortization Expense. The increase was due to the write-down of an asset.

Loss (Gain) on Disposal or Impairment of Assets, Net. During the three months ended June 30, 2020 and 2019, we recorded a net loss of less than $0.1 million and a net gain of less than $0.1 million, respectively, related to the sale/retirement of assets.

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Corporate and Other

The operating loss within “Corporate and Other” includes the following components for the periods indicated:

Three Months Ended June 30,
2020 2019 Change
(in thousands)
Other revenues
Revenues $ 313 $ 255 $ 58
Cost of sales 454 465 (11 )
Loss (141 ) (210 ) 69
Expenses:
Operating expenses — 305 (305 )
General and administrative expenses 11,338 13,843 (2,505 )
Depreciation and amortization expense 902 743 159
Loss on disposal or impairment of assets, net 10,239 241 9,998
Total expenses 22,479 15,132 7,347
Operating loss $ (22,620 ) $ (15,342 ) $ (7,278 )

General and Administrative Expenses. The decrease during the three months ended June 30, 2020 was due primarily to a decrease in acquisition expense. During the three months ended June 30, 2020 acquisition expense was approximately $0.1 million, as compared to $2.1 million for the three months ended June 30, 2019, which included approximately $1.5 million of expenses incurred in connection with our acquisition of Mesquite. Also, share-based compensation expense decreased by approximately $1.4 million during the three months ended June 30, 2020, compared to the three months ended June 30, 2019. These decreases were partially offset by an increase in legal expenses of approximately $0.9 million.

Loss on Disposal or Impairment of Assets, Net. The increase during the three months ended June 30, 2020 was due primarily to the write-off of a loan receivable related to the construction of a facility (See Note 17 to our unaudited condensed consolidated financial statements included in this Quarterly Report for further discussion). Also contributing to the loss was a write-off of installment payments made in connection with an option agreement to invest in a third-party. This option agreement was terminated during the three months ended June 30, 2020.

Equity in Earnings of Unconsolidated Entities

The increase of $0.3 million during the three months ended June 30, 2020 was due primarily to earnings from certain membership interests acquired in November 2019 related to specific land and water services operations, partially offset by a loss from our interest in an aircraft company during the three months ended June 30, 2020.

Interest Expense

Interest expense includes interest charged on the revolving credit facilities, term loan credit facility, bridge term loan facility and senior unsecured notes, as well as amortization of debt issuance costs, letter of credit fees, interest on equipment financing notes, and accretion of interest on non-interest bearing debt obligations. The increase of $4.1 million during the three months ended June 30, 2020 was due to our entering into the Bridge Term Credit Agreement, which was entered into in connection with the Mesquite acquisition on July 2, 2019, and was replaced by the Term Credit Agreement, higher average outstanding balances on our Revolving Credit Facility (as defined herein) and increased debt issuance costs amortization. See Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Gain on Early Extinguishment of Liabilities, Net

During the three months ended June 30, 2020, the net gain (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding senior unsecured notes. See Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

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Other Income, Net

Other income, net for the three months ended June 30, 2020 was consistent with the three months ended June 30, 2019.

Income Tax Benefit

Income tax benefit was $0.3 million during the three months ended June 30, 2020, compared to an income tax benefit of $0.3 million during the three months ended June 30, 2019. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Noncontrolling Interests

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties. The decrease in the noncontrolling interest loss of $0.3 million during the three months ended June 30, 2020 was due primarily to income from operations of Mesquite that we acquired in July 2019 and a smaller loss from operations of the Sawtooth joint venture.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we have provided the non-GAAP financial measures of EBITDA and Adjusted EBITDA. These non-GAAP financial measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other entities, even when similar terms are used to identify such measures.

We define EBITDA as net income (loss) attributable to NGL Energy Partners LP, plus interest expense, income tax expense (benefit), and depreciation and amortization expense. We define 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. We also include 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 our 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. We believe that EBITDA provides additional information to investors for evaluating our ability to make quarterly distributions to our unitholders and is presented solely as a supplemental measure. We believe that Adjusted EBITDA provides additional information to investors for evaluating our financial performance without regard to our financing methods, capital structure and historical cost basis. Further, EBITDA and Adjusted EBITDA, as we define 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 our Liquids and Refined Products segment, for purposes of our Adjusted EBITDA calculation, we make a distinction between realized and unrealized gains and losses on derivatives. During the period when a derivative contract is open, we record changes in the fair value of the derivative as an unrealized gain or loss. When a derivative contract matures or is settled, we reverse the previously recorded unrealized gain or loss and record a realized gain or loss. We do 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 our 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. We include 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.

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The following table reconciles net (loss) income to EBITDA and Adjusted EBITDA:

Three Months Ended June 30,
2020 2019
(in thousands)
Net (loss) income $ (35,252 ) $ 8,039
Less: Net (income) loss attributable to noncontrolling interests (51 ) 268
Net (loss) income attributable to NGL Energy Partners LP (35,303 ) 8,307
Interest expense 44,066 39,910
Income tax benefit (301 ) (311 )
Depreciation and amortization 83,202 54,844
EBITDA 91,664 102,750
Net unrealized losses (gains) on derivatives 26,671 (3,474 )
Inventory valuation adjustment (1) 3,820 (19,746 )
Lower of cost or net realizable value adjustments (32,003 ) (918 )
Loss (gain) on disposal or impairment of assets, net 13,084 (967 )
Gain on early extinguishment of liabilities, net (19,355 ) —
Equity-based compensation expense (2) 2,302 3,701
Acquisition expense (3) 157 2,091
Other (4) 4,348 3,323
Adjusted EBITDA $ 90,688 $ 86,760
Adjusted EBITDA - Discontinued Operations (5) $ (294 ) $ (16,958 )
Adjusted EBITDA - Continuing Operations $ 90,982 $ 103,718
(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.
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(2) Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in Note 10 to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.
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(3) Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions.
--- ---
(4) Amounts for the three months ended June 30, 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.
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(5) Amounts include the operations of TPSL, Gas Blending and Mid-Con.
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The following tables reconcile depreciation and amortization amounts per the EBITDA table above to depreciation and amortization amounts reported in our unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Reconciliation to unaudited condensed consolidated statements of operations:
Depreciation and amortization per EBITDA table $ 83,202 $ 54,844
Intangible asset amortization recorded to cost of sales (77 ) (87 )
Depreciation and amortization of unconsolidated entities (93 ) (6 )
Depreciation and amortization attributable to noncontrolling interests 954 741
Depreciation and amortization attributable to discontinued operations — (1,738 )
Depreciation and amortization per unaudited condensed consolidated statements of operations $ 83,986 $ 53,754 Three Months Ended June 30,
--- --- --- --- --- --- ---
2020 2019
(in thousands)
Reconciliation to unaudited condensed consolidated statements of cash flows:
Depreciation and amortization per EBITDA table $ 83,202 $ 54,844
Amortization of debt issuance costs recorded to interest expense 3,555 2,125
Amortization of royalty expense recorded to operating expense 62 151
Depreciation and amortization of unconsolidated entities (93 ) (6 )
Depreciation and amortization attributable to noncontrolling interests 954 741
Depreciation and amortization attributable to discontinued operations — (1,738 )
Depreciation and amortization per unaudited condensed consolidated statements of cash flows $ 87,680 $ 56,117

The following table reconciles interest expense per the EBITDA table above to interest expense reported in our unaudited condensed consolidated statements of operations for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Interest expense per EBITDA table $ 44,066 $ 39,910
Interest expense attributable to noncontrolling interests 13 —
Interest expense attributable to unconsolidated entities (18 ) (2 )
Interest expense attributable to discontinued operations (100 ) (31 )
Interest expense per unaudited condensed consolidated statements of operations $ 43,961 $ 39,877

The following table summarizes additional amounts attributable to discontinued operations in the EBITDA table above for the periods indicated:

Three Months Ended June 30,
2020 2019
(in thousands)
Income tax expense $ — $ 10
Inventory valuation adjustment $ (20 ) $ (19,780 )
Lower of cost or net realizable value adjustments $ 20 $ 705
Loss on disposal or impairment of assets, net $ 1,065 $ —

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The following tables reconcile operating income (loss) to Adjusted EBITDA by segment for the periods indicated.

Three Months Ended June 30, 2020
Crude Oil<br>Logistics Water<br>Solutions Liquids and<br>Refined Products Corporate<br>and Other Continuing<br>Operations Discontinued Operations<br>(TPSL, Mid-Con, Gas Blending) Consolidated
(in thousands)
Operating income (loss) $ 23,320 $ (16,047 ) $ 4,562 $ (22,620 ) $ (10,785 ) $ — $ (10,785 )
Depreciation and amortization 16,795 58,133 8,156 902 83,986 — 83,986
Amortization recorded to cost of sales — — 77 — 77 — 77
Net unrealized losses (gains) on derivatives 14,638 13,312 (1,279 ) — 26,671 — 26,671
Inventory valuation adjustment — — 3,840 — 3,840 — 3,840
Lower of cost or net realizable value adjustments (29,060 ) — (2,963 ) — (32,023 ) — (32,023 )
Loss on disposal or impairment of assets, net 1,450 329 4 10,239 12,022 — 12,022
Equity-based compensation expense — — — 2,302 2,302 — 2,302
Acquisition expense — 12 — 145 157 — 157
Other income, net 338 256 377 64 1,035 — 1,035
Adjusted EBITDA attributable to unconsolidated entities — 465 (1 ) (62 ) 402 — 402
Adjusted EBITDA attributable to noncontrolling interest — (487 ) (536 ) — (1,023 ) — (1,023 )
Intersegment transactions (1) — — (27 ) — (27 ) — (27 )
Other 3,373 953 22 — 4,348 — 4,348
Discontinued operations — — — — — (294 ) (294 )
Adjusted EBITDA $ 30,854 $ 56,926 $ 12,232 $ (9,030 ) $ 90,982 $ (294 ) $ 90,688

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Three Months Ended June 30, 2019
Crude Oil<br>Logistics Water<br>Solutions Liquids and<br>Refined Products Corporate<br>and Other Continuing<br>Operations Discontinued Operations<br>(TPSL, Mid-Con, Gas Blending) Consolidated
(in thousands)
Operating income (loss) $ 33,802 $ 13,689 $ 15,371 $ (15,342 ) $ 47,520 $ — $ 47,520
Depreciation and amortization 17,585 28,071 7,355 743 53,754 — 53,754
Amortization recorded to cost of sales — — 87 — 87 — 87
Net unrealized gains on derivatives (1,858 ) (167 ) (1,449 ) — (3,474 ) — (3,474 )
Inventory valuation adjustment — — 34 — 34 — 34
Lower of cost or net realizable value adjustments — — (1,623 ) — (1,623 ) — (1,623 )
(Gain) loss on disposal or impairment of assets, net (616 ) (589 ) (3 ) 241 (967 ) — (967 )
Equity-based compensation expense — — — 3,701 3,701 — 3,701
Acquisition expense — 20 — 2,071 2,091 — 2,091
Other (expense) income, net (4 ) — 20 994 1,010 — 1,010
Adjusted EBITDA attributable to unconsolidated entities — — 4 11 15 — 15
Adjusted EBITDA attributable to noncontrolling interest — (75 ) (397 ) — (472 ) — (472 )
Intersegment transactions (1) — — (1,281 ) — (1,281 ) — (1,281 )
Other 3,165 140 18 — 3,323 — 3,323
Discontinued operations — — — — — (16,958 ) (16,958 )
Adjusted EBITDA $ 52,074 $ 41,089 $ 18,136 $ (7,581 ) $ 103,718 $ (16,958 ) $ 86,760
(1) Amount reflects the transactions with TPSL, Mid-Con and Gas Blending that are eliminated in consolidation.
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Liquidity, Sources of Capital and Capital Resource Activities

General

Our principal sources of liquidity and capital resource requirements are the cash flows from our operations, borrowings under our Revolving Credit Facility, debt issuances and the issuance of common and preferred units. We expect our primary cash outflows to be related to capital expenditures, interest and repayment of debt maturities and distributions paid to both preferred and common unitholders. On April 27, 2020, we announced a decrease in our quarterly distributions paid to our common unitholders from $0.39 per common unit to $0.20 per common unit. This approximately $100 million reduction, on an annualized basis, is expected to increase liquidity and de-lever the balance sheet. We also announced a reduction in expected capital spending for growth and maintenance expenditures for the fiscal year 2021.

We believe that our anticipated cash flows from operations and the borrowing capacity under our Revolving Credit Facility will be sufficient to meet our liquidity needs. Our borrowing needs vary during the year due in part to the seasonal nature of certain businesses within our Liquids and Refined Products segment. Our greatest working capital borrowing needs generally occur during the period of June through December, when we are building our natural gas liquids inventories in anticipation of the butane blending and heating seasons. Our working capital borrowing needs generally decline during the period of January through March, when the cash inflows from our Liquids and Refined Products segment are the greatest.

Cash Management

We manage cash by utilizing a centralized cash management program that concentrates the cash assets of our operating subsidiaries in joint accounts for the purposes of providing financial flexibility and lowering the cost of borrowing, transaction costs and bank fees. Our centralized cash management program provides that funds in excess of the daily needs of our operating subsidiaries are concentrated, consolidated or otherwise made available for use by other entities within our

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consolidated group. All of our wholly-owned operating subsidiaries participate in this program. Under the cash management program, depending on whether a participating subsidiary has short-term cash surpluses or cash requirements, we provide cash to the subsidiary or the subsidiary provides cash to us.

Short-Term Liquidity

Our principal sources of short-term liquidity consist of cash generated from operating activities and borrowings under our $1.915 billion credit agreement (“Credit Agreement”), which consists of a revolving credit facility to fund working capital needs (“Working Capital Facility”), and another to fund acquisitions and expansion projects (“Expansion Capital Facility”, and together with the Working Capital Facility, the “Revolving Credit Facility”). 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 due to the sale of the TPSL, Mid-Con and Gas Blending refined products businesses. The commitments under the Credit Agreement expire on October 5, 2021.

As of June 30, 2020, we were, and expect to remain in compliance with all covenants of our Credit Agreement.

As of June 30, 2020, our current assets exceeded our current liabilities by approximately $60.6 million.

For additional information related to our Credit Agreement, see Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Long-Term Financing

In addition to our principal sources of short-term liquidity discussed above, we expect to fund our longer-term financing requirements by issuing long-term notes, common units and/or preferred units, loans from financial institutions, asset securitizations or the sale of assets.

Senior Unsecured Notes

The senior unsecured notes include the 2023 Notes, 2025 Notes and 2026 Notes (collectively, the “Senior Unsecured Notes”).

Debt Repurchases

During the three months ended June 30, 2020, we repurchased $15.0 million of our 2023 Notes, $7.3 million of our 2025 Notes and $24.9 million of our 2026 Notes.

Term Credit Agreement

On June 3, 2020, we entered into a new $250.0 million Term Credit Agreement with certain funds and accounts managed by affiliates of Apollo Global Management, Inc. to refinance the existing Bridge Term Credit Agreement. The commitments under the Term Credit Agreement expire on June 3, 2023 and are callable by us after two years at par.

Bridge Term Credit Agreement

On June 3, 2020, we used the proceeds from the Term Credit Agreement to pay off the outstanding balance of the Bridge Term Credit Agreement.

For a further discussion of the Revolving Credit Facility, Senior Unsecured Notes, Term Credit Agreement and Bridge Term Credit Agreement, see Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

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Capital Expenditures, Acquisitions and Other Investments

The following table summarizes expansion and maintenance capital expenditures (which excludes additions for tank bottoms and line fill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated. There are no capital expenditures, acquisitions and other investments related to TPSL, Mid-Con and Gas Blending included in the table below.

Capital Expenditures Other
Expansion (1) Maintenance Acquisitions Investments (2)
(in thousands)
Three Months Ended June 30,
2020 $ 20,770 $ 9,168 $ — $ —
2019 $ 159,265 $ 16,929 $ 54,548 $ 889
(1) Amount for the three months ended June 30, 2019 includes $13.0 million of transactions classified as acquisitions of assets. There were no acquisitions of assets during the three months ended June 30, 2020.
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(2) Amount for the three months ended June 30, 2019 related to contributions made to unconsolidated entities. There were no other investments for the three months ended June 30, 2020.
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Capital expenditures are expected to continue to decrease throughout the remainder of the current fiscal year with full year expectations of $100 million for both growth and maintenance capital expenditures combined.

Distributions Declared

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement) to unitholders as of the record date. See further discussion of our cash distribution policy in Part II, Item 5–“Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities” included in our Annual Report.

On June 15, 2020, the board of directors of our general partner declared a distribution on the 9.00% Class B Fixed-to Floating Rate Cumulative Redeemable Perpetual Preferred Units and the 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) for the three months ended June 30, 2020 of $7.1 million and $1.1 million, respectively. The distributions were paid July 15, 2020.

On July 23, 2020, the board of directors of our general partner declared a distribution on the common units and the Class D Preferred Units of $25.8 million and $6.9 million, respectively, for the holders of record on August 6, 2020. The distributions are to be paid on August 14, 2020.

For a further discussion of our distributions, see Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Cash Flows

The following table summarizes the sources (uses) of our cash flows from continuing operations for the periods indicated:

Three Months Ended June 30,
Cash Flows Provided by (Used in): 2020 2019
(in thousands)
Operating activities, before changes in operating assets and liabilities $ 79,884 $ 61,640
Changes in operating assets and liabilities 1,968 30,998
Operating activities-continuing operations $ 81,852 $ 92,638
Investing activities-continuing operations $ (124,215 ) $ (203,622 )
Financing activities-continuing operations $ 47,498 $ 138,282

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Operating Activities-Continuing Operations. The seasonality of our Liquids and Refined Products business has a significant effect on our cash flows from operating activities. Increases in natural gas liquids prices typically reduce our operating cash flows due to higher cash requirements to fund increases in inventories, and decreases in natural gas liquids prices typically increase our operating cash flows due to lower cash requirements to fund increases in inventories. In our Liquids and Refined Products business, we typically experience operating losses or lower operating income during our first and second quarters, or the six months ending September 30, as a result of lower volumes of natural gas liquids sales and when we are building our inventory levels for the upcoming butane blending and heating seasons, which generally begin in late fall, under normal demand conditions, and run through February or March. We borrow under the Revolving Credit Facility to supplement our operating cash flows during the periods in which we are building inventory. Our operations, and as a result our cash flows, are also impacted by positive and negative movements in commodity prices, which cause fluctuations in the value of inventory, accounts receivable and payables, due to increases and decreases in revenues and cost of sales. The decrease in net cash provided by operating activities during the three months ended June 30, 2020 was due primarily to fluctuations in the value of accounts receivable, inventory and other current and noncurrent assets during the three months ended June 30, 2020.

Investing Activities-Continuing Operations. Net cash used in investing activities was $124.2 million during the three months ended June 30, 2020, compared to net cash used in investing activities of $203.6 million during the three months ended June 30, 2019. The decrease in net cash used in investing activities was due primarily to:

• a decrease in capital expenditures from $155.4 million (includes payment of amounts accrued as of March 31, 2019) during the three months ended June 30, 2019 to $97.8 million (includes payment of amounts accrued as of March 31, 2020) during the three months ended June 30, 2020 due primarily to expansion projects in our Water Solutions segment during the three months ended June 30, 2019; and
• $55.4 million in cash paid for acquisitions and investments in unconsolidated entities during the three months ended June 30, 2019.
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These decreases in net cash used in investing activities was partially offset by a $28.7 million increase in payments to settle derivatives.

Financing Activities-Continuing Operations. Net cash provided by financing activities was $47.5 million during the three months ended June 30, 2020, compared to net cash provided by financing activities of $138.3 million during the three months ended June 30, 2019. The decrease in net cash provided by financing activities was due primarily to:

• $450.0 million in proceeds from the issuance of the 2026 Notes during the three months ended June 30, 2019;
• $62.8 million in contingent consideration payments as part of the Mesquite acquisition during the three months ended June 30, 2020;
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• $42.6 million in net proceeds from the issuance of the Class C Preferred Units during the three months ended June 30, 2019; and
--- ---
• repurchases of $25.0 million of our senior unsecured notes during the three months ended June 30, 2020.
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These decreases in net cash provided by financing activities were partially offset by:

• $265.1 million in payments for the redemption of the 10.75% Class A Convertible Preferred Units during the three months ended June 30, 2019;
• an increase of $204.0 million in borrowings on the Revolving Credit Facility (net of repayments) during the three months ended June 30, 2020; and
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• a decrease of $19.2 million in distributions paid to our general partners and common unitholders, preferred unitholders and noncontrolling interest owners during the three months ended June 30, 2020 due primarily to the reduction in the quarterly common unit distribution rate.
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Guarantor Summarized Financial Information

NGL Energy Partners LP (parent) and NGL Energy Finance Corp. are co-issuers of the Senior Unsecured Notes (see Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report). Certain of our wholly owned subsidiaries (“Guarantor Subsidiaries”) have, jointly and severally, fully and unconditionally guaranteed the Senior Unsecured Notes.

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The guarantees are senior unsecured obligations of each Guarantor Subsidiary and rank equally in right of payment with other existing and future senior indebtedness of such Guarantor Subsidiary, and senior in right of payment to all existing and future subordinated indebtedness of such Guarantor Subsidiary. The guarantee of our Senior Unsecured Notes by each Guarantor Subsidiary is subject to certain automatic customary releases, including in connection with the sale, disposition or transfer of all of the capital stock, or of all or substantially all of the assets, of such Guarantor Subsidiary to one or more persons that are not us or a restricted subsidiary, the exercise of legal defeasance or covenant defeasance options, the satisfaction and discharge of the indentures governing our Senior Unsecured Notes, the designation of such Guarantor Subsidiary as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the indentures governing our Senior Unsecured Notes, the release of such Guarantor Subsidiary from its guarantee under our Revolving Credit Facility, the liquidation or dissolution of such Guarantor Subsidiary or upon the consolidation, merger or transfer of all assets of the Guarantor Subsidiary to us or another Guarantor Subsidiary in which the Guarantor Subsidiary dissolves or ceases to exist (collectively, the “Releases”). The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law. We are not restricted from making investments in the Guarantor Subsidiaries and there are no significant restrictions on the ability of the Guarantor Subsidiaries to make distributions to NGL Energy Partners LP (parent). None of the assets of the Guarantor Subsidiaries (other than the investments in non-guarantor subsidiaries) are restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended.

The rights of holders of our Senior Unsecured Notes against the Guarantor Subsidiaries may be limited under the U.S. Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law.

The following is the summarized financial information for NGL Energy Partners LP (parent) and the Guarantor Subsidiaries on a combined basis after elimination of intercompany transactions, which includes related receivable and payable balances, and the investment in and equity earnings from the non-guarantor subsidiaries.

Balance sheet information:

NGL Energy Partners LP (Parent) and Guarantor Subsidiaries
June 30, 2020 March 31, 2020
(in thousands)
ASSETS:
Current assets $ 662,845 $ 766,026
Noncurrent assets (1)(2) $ 5,437,214 $ 5,454,609
LIABILITIES AND EQUITY (3):
Current liabilities $ 607,035 $ 837,577
Noncurrent liabilities $ 3,501,072 $ 3,374,143
Class D Preferred Units $ 544,151 $ 537,283
(1) Excludes $1.7 million of net intercompany payables and $70.0 million of net intercompany receivables due from/to NGL Energy Partners LP (parent) and the Guarantor Subsidiaries to/from the non-guarantor subsidiaries at June 30, 2020 and March 31, 2020, respectively.
--- ---
(2) Includes $2.5 billion and $2.5 billion of goodwill and intangible assets at June 30, 2020 and March 31, 2020, respectively.
--- ---
(3) There are no noncontrolling interests held at the co-issuers or Guarantor Subsidiaries for either period presented.
--- ---

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Statement of operations information:

NGL Energy Partners LP (Parent) and Guarantor Subsidiaries
Three Months Ended<br>June 30, 2020 Twelve Months Ended<br>March 31, 2020
(in thousands)
Revenues $ 841,719 $ 7,548,659
Operating loss $ (9,765 ) $ (16,210 )
Loss from continuing operations $ (32,690 ) $ (193,375 )
Net loss (1) $ (34,176 ) $ (411,610 )
Loss from continuing operations allocated to common unitholders $ (54,739 ) $ (380,076 )
(1) There are no noncontrolling interests held at the co-issuers or Guarantor Subsidiaries for either period presented.
--- ---

Contractual Obligations

For a discussion of contractual obligations, see Note 8, Note 9 and Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than the letters of credit discussed in Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report and the short-term leases discussed in Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Environmental Legislation

See our Annual Report for a discussion of proposed environmental legislation and regulations that, if enacted, could result in increased compliance and operating costs. However, at this time we cannot predict the structure or outcome of any future legislation or regulations or the eventual cost we could incur in compliance.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements that are applicable to us, see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires the selection and application of appropriate accounting principles to the relevant facts and circumstances of our operations and the use of estimates made by management. We have identified certain accounting policies that are most important to the portrayal of our consolidated financial position and results of operations. The application of these accounting policies, which requires subjective or complex judgments regarding estimates and projected outcomes of future events, and changes in these accounting policies, could have a material effect on our consolidated financial statements. There have been no material changes in the critical accounting policies previously disclosed in our Annual Report.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

A significant portion of our long-term debt is variable-rate debt. Changes in interest rates impact the interest payments of our variable-rate debt but generally do not impact the fair value of the liability. Conversely, changes in interest rates impact the fair value of our fixed-rate debt but do not impact its cash flows.

The Revolving Credit Facility is variable-rate debt with interest rates that are generally indexed to bank prime or LIBOR interest rates. At June 30, 2020, we had $1.7 billion of outstanding borrowings under the Revolving Credit Facility at a

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weighted average interest rate of 2.74%. A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $2.1 million, based on borrowings outstanding at June 30, 2020.

The Term Credit Agreement is variable-rate debt with interest rates that are generally indexed to LIBOR interest rates. At June 30, 2020, we had $250.0 million of outstanding borrowings under the Term Credit Agreement at an interest rate of 9.50%. As interest under this agreement bears interest at LIBOR, subject to a 1.50% floor, a change in LIBOR rates of 0.125% would not result in an increase or decrease of our annual interest expense, based on borrowings outstanding at June 30, 2020.

Commodity Price and Credit Risk

Our operations are subject to certain business risks, including commodity price risk and credit risk. Commodity price risk is the risk that the market value of crude oil, natural gas liquids, or refined and renewables products will change, either favorably or unfavorably, in response to changing market conditions. Credit risk is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract.

Procedures and limits for managing commodity price risks and credit risks are specified in our market risk policy and credit policy, respectively. Open commodity positions and market price changes are monitored daily and are reported to senior management and to marketing operations personnel. Credit risk is monitored daily and exposure is minimized through customer deposits, restrictions on product liftings, letters of credit, and entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions. At June 30, 2020, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers.

The crude oil, natural gas liquids, and refined and renewables products industries are “margin-based” and “cost-plus” businesses in which gross profits depend on the differential of sales prices over supply costs. We have no control over market conditions. As a result, our profitability may be impacted by sudden and significant changes in the price of crude oil, natural gas liquids, and refined and renewables products.

We engage in various types of forward contracts and financial derivative transactions to reduce the effect of price volatility on our product costs, to protect the value of our inventory positions, and to help ensure the availability of product during periods of short supply. We attempt to balance our contractual portfolio by purchasing volumes when we have a matching purchase commitment from our wholesale and retail customers. We may experience net unbalanced positions from time to time. In addition to our ongoing policy to maintain a balanced position, for accounting purposes we are required, on an ongoing basis, to track and report the market value of our derivative portfolio.

Although we use financial derivative instruments to reduce the market price risk associated with forecasted transactions, we do not account for financial derivative transactions as hedges. All changes in the fair value of our physical contracts that do not qualify as normal purchases and normal sales and settlements (whether cash transactions or non-cash mark-to-market adjustments) are reported either within revenue (for sales contracts) or cost of sales (for purchase contracts) in our unaudited condensed consolidated statements of operations, regardless of whether the contract is physically or financially settled.

The following table summarizes the hypothetical impact on the June 30, 2020 fair value of our commodity derivatives of an increase of 10% in the value of the underlying commodity (in thousands):

Increase<br><br>(Decrease)<br><br>To Fair Value
Crude oil (Crude Oil Logistics segment) $ (6,705 )
Crude oil (Water Solutions segment) $ (2,492 )
Propane (Liquids and Refined Products segment) $ 2,359
Butane (Liquids and Refined Products segment) $ (1,079 )
Refined Products (Liquids and Refined Products segment) $ (613 )
Other Products (Liquids and Refined Products segment) $ (179 )
Canadian dollars (Liquids and Refined Products segment) $ 287

Changes in commodity prices may also impact the volumes that we are able to transport, dispose, store and market, which also impact our cash flows.

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Fair Value

We use observable market values for determining the fair value of our derivative instruments. In cases where actively quoted prices are not available, other external sources are used which incorporate information about commodity prices in actively quoted markets, quoted prices in less active markets and other market fundamental analysis.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed in our filings and submissions under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer of our general partner, as appropriate, to allow timely decisions regarding required disclosure.

We completed an evaluation under the supervision and with participation of our management, including the principal executive officer and principal financial officer of our general partner, of the effectiveness of the design and operation of our disclosure controls and procedures at June 30, 2020. Based on this evaluation, the principal executive officer and principal financial officer of our general partner have concluded that as of June 30, 2020, such disclosure controls and procedures were effective to provide the reasonable assurance described above.

There have been no changes in our internal controls over financial reporting (as defined in Rule 13(a)-15(f) of the Exchange Act) during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

We are involved from time to time in various legal proceedings and claims arising in the ordinary course of business. For information related to legal proceedings, see the discussion under the captions “Legal Contingencies” in Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report, which is incorporated by reference into this Item 1.

Item 1A.    Risk Factors

There have been no material changes in the risk factors previously disclosed in Part I, Item 1A–“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.    Defaults Upon Senior Securities

Not applicable.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

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Item 6.    Exhibits

Exhibit Number Exhibit
4.1* Sixth Supplemental Indenture, dated as of June 30, 2020, among NGL Energy Partners LP, NGL Energy Finance Corp., the Guaranteeing Subsidiaries party thereto, the Guarantors party thereto and U.S. Bank National Association, as Trustee
4.2* Fifth Supplemental Indenture, dated as of June 30, 2020, among NGL Energy Partners LP, NGL Energy Finance Corp., the Guaranteeing Subsidiaries party thereto, the Guarantors party thereto and U.S. Bank National Association, as Trustee
4.3* Third Supplemental Indenture, dated as of June 30, 2020, among NGL Energy Partners LP, NGL Energy Finance Corp., the Guaranteeing Subsidiaries party thereto, the Guarantors party thereto and U.S. Bank National Association, as Trustee
10.1 Amendment No. 10 to Credit Agreement, dated April 27, 2020, by and among the NGL Energy Partners LP, NGL Energy Operating LLC, the other subsidiary borrowers party thereto, Deutsche Bank AG, New York Branch, Deutsche Bank Trust Company Americas, and the other financial institutions party thereto (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K (File No. 001-35172) for the fiscal year ended March 31, 2020 filed with the SEC on June 1, 2020)
10.2 Term Credit Agreement, dated June 3, 2020, by and among NGL Energy Operating LLC, as Borrower, NGL Energy Partner LP, the lenders thereto and Wilmington Trust, National Association, as the administrative agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on June 5, 2020)
22.1* List of Issuers and Guarantor Subsidiaries
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS** XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH** Inline XBRL Schema Document
101.CAL** Inline XBRL Calculation Linkbase Document
101.DEF** Inline XBRL Definition Linkbase Document
101.LAB** Inline XBRL Label Linkbase Document
101.PRE** Inline XBRL Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Exhibits filed with this report.
--- ---
** The following documents are formatted in Inline XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets at June 30, 2020 and March 31, 2020, (ii) Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2020 and 2019, (iii) Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended June 30, 2020 and 2019, (iv) Unaudited Condensed Consolidated Statements of Changes in Equity for the three months ended June 30, 2020 and 2019, (v) Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2020 and 2019, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.
--- ---

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NGL ENERGY PARTNERS LP
By: NGL Energy Holdings LLC, its general partner
Date: August 10, 2020 By: /s/ H. Michael Krimbill
H. Michael Krimbill
Chief Executive Officer
Date: August 10, 2020 By: /s/ Robert W. Karlovich III
Robert W. Karlovich III
Chief Financial Officer

61

		Exhibit

Exhibit 4.1

SIXTH SUPPLEMENTAL INDENTURE

SIXTH SUPPLEMENTAL INDENTURE, dated as of June 30, 2020 (this “Supplemental Indenture”), among NGL Energy Partners LP, a Delaware limited partnership (the “Company”), NGL Energy Finance Corp., a Delaware corporation (“Finance Corp.,” and, together with the Company, the “Issuers”), each of the Persons listed on Exhibit A to this Supplemental Indenture (each a “Guaranteeing Subsidiary” and collectively, the “Guaranteeing Subsidiaries”), the other Guarantors (as defined in the Indenture referred to below), and U.S. Bank National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee an indenture, dated as of October 24, 2016 (the “Original Indenture”), providing for the issuance by the Issuers of 7.5% Senior Notes due 2023 (the “Notes”);

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the First Supplemental Indenture, dated as of February 21, 2017 (the “First Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Second Supplemental Indenture, dated as of July 18, 2018 (the “Second Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Third Supplemental Indenture, dated as of January 25, 2019 (the “Third Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Fourth Supplemental Indenture, dated as of October 31, 2019 (the “Fourth Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Fifth Supplemental Indenture, dated as of December 27, 2019 (the “Fifth Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Original Indenture as amended and supplemented by the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture and the Fifth Supplemental Indenture is referred to herein as the “Indenture”;

WHEREAS, the Indenture provides that under certain circumstances, each Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which such Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuers’ Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, each Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 10 thereof.
--- ---
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.
4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, partner, employee, incorporator, organizer, manager, unitholder or other owner of Capital Stock (as defined in the Indenture) of a Guaranteeing Subsidiary or agent thereof, as such, shall have any liability for any obligations of the Issuers, the Guarantors, or such Guaranteeing Subsidiary or any other Subsidiary of an Issuer providing a Note Guarantee under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.
--- ---
5. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
--- ---
6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of signed copies of this Supplemental Indenture by facsimile transmission or emailed portable document format (pdf) shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and such copies may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or portable document format (pdf) shall be deemed to be their original signatures for all purposes other than authentication of Notes by the Trustee.
--- ---
7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.
--- ---
8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary and the Issuers
--- ---

(Signature Pages Follow)

2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

GUARANTEEING SUBSIDIARIES:

DISPOSALS OPERATING, LLC

GSR NORTHEAST TERMINALS LLC

NGL ENERGY GP LLC

NGL RECYCLING SERVICES, LLC

NGL WASTE SERVICES, LLC

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Sixth Supplemental Indenture)

ISSUERS:

NGL ENERGY PARTNERS LP

By: NGL Energy Holdings, LLC,

its general partner

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

NGL ENERGY FINANCE CORP.

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Sixth Supplemental Indenture)

EXISTING GUARANTORS:

ANTICLINE DISPOSAL, LLC

AWR DISPOSAL, LLC

CENTENNIAL ENERGY, LLC

CENTENNIAL GAS LIQUIDS ULC

CHOYA OPERATING, LLC

DACO PERMIAN 76, LLC

GGCOF HEP BLOCKER II, LLC

GGCOF HEP BLOCKER, LLC

GRAND MESA PIPELINE, LLC

HEP INTERMEDIATE HOLDCO SUB, LLC

HEP INTERMEDIATE HOLDCO, LLC

HEP OPERATIONS HOLDINGS, LLC

HEP OPERATIONS, LLC

HEP SHALEWATER SOLUTIONS, LLC

HILLSTONE DACO 76, LLC

HILLSTONE DACO PERMIAN, LLC

HILLSTONE ENVIRONMENTAL PARTNERS, LLC

HILLSTONE PERMIAN ADAMS, LLC

HILLSTONE PERMIAN ARTHUR, LLC

HILLSTONE PERMIAN CLEVELAND, LLC

HILLSTONE PERMIAN FORTRESS, LLC

HILLSTONE PERMIAN GARFIELD, LLC

HILLSTONE PERMIAN HAMILTON, LLC

HILLSTONE PERMIAN HARRISON, LLC

HILLSTONE PERMIAN HAYES, LLC,

HILLSTONE PERMIAN KNOX, LLC

HILLSTONE PERMIAN MADISON, LLC

HILLSTONE PERMIAN MCKINLEY, LLC

HILLSTONE PERMIAN MONROE, LLC

HILLSTONE PERMIAN PIPELINE LOVING BR, LLC

HILLSTONE PERMIAN PIPELINE, LLC

HILLSTONE PERMIAN POKER LAKE, LLC

HILLSTONE PERMIAN RATTLESNAKE, LLC

HILLSTONE PERMIAN REAGAN, LLC

HILLSTONE PERMIAN ROOSEVELT, LLC

HILLSTONE PERMIAN SHULTZ, LLC

HILLSTONE PERMIAN ST. LUCIA, LLC

HILLSTONE PERMIAN TAFT, LLC

HILLSTONE PERMIAN WILSON, LLC

LOVING FORTRESS, LLC

NGL CRUDE CUSHING, LLC

NGL CRUDE LOGISTICS, LLC

NGL CRUDE TERMINALS, LLC

NGL CRUDE TRANSPORTATION, LLC

NGL DELAWARE BASIN HOLDINGS, LLC

NGL ENERGY EQUIPMENT LLC

NGL ENERGY HOLDINGS II, LLC

NGL ENERGY LOGISTICS, LLC

NGL ENERGY OPERATING LLC

NGL LIQUIDS, LLC

NGL MARINE, LLC

NGL MILAN INVESTMENTS, LLC

NGL SOUTH RANCH, INC.

NGL SUPPLY TERMINAL COMPANY, LLC

NGL SUPPLY WHOLESALE, LLC

NGL TM LLC

NGL WATER PIPELINES, LLC

(Signature Page to Sixth Supplemental Indenture)

NGL WATER SOLUTIONS - ORLA SWD, LLC

NGL WATER SOLUTIONS DJ, LLC

NGL WATER SOLUTIONS EAGLE FORD, LLC

NGL WATER SOLUTIONS PERMIAN, LLC

NGL WATER SOLUTIONS, LLC

RED ROCK MIDSTREAM, LLC

SAND LAKE MIDSTREAM, LLC

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Sixth Supplemental Indenture)

TRUSTEE:

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By: /s/ Michael K. Herberger
Name: Michael K. Herberger
--- ---
Title: Vice President
--- ---

(Signature Page to Sixth Supplemental Indenture)

Exhibit A

Guaranteeing Subsidiaries
Name Jurisdiction and Form of Organization
Disposals Operating, LLC Delaware limited liability company
GSR Northeast Terminals LLC Delaware limited liability company
NGL Energy GP LLC Delaware limited liability company
NGL Recycling Services, LLC Delaware limited liability company
NGL Waste Services, LLC New Mexico limited liability company

Exhibit A - Page 1

		Exhibit

Exhibit 4.2

FIFTH SUPPLEMENTAL INDENTURE

FIFTH SUPPLEMENTAL INDENTURE, dated as of June 30, 2020 (this “Supplemental Indenture”), among NGL Energy Partners LP, a Delaware limited partnership (the “Company”), NGL Energy Finance Corp., a Delaware corporation (“Finance Corp.,” and, together with the Company, the “Issuers”), each of the Persons listed on Exhibit A to this Supplemental Indenture (each a “Guaranteeing Subsidiary” and collectively, the “Guaranteeing Subsidiaries”), the other Guarantors (as defined in the Indenture referred to below), and U.S. Bank National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee an indenture, dated as of February 22, 2017 (the “Original Indenture”), providing for the issuance by the Issuers of 6.125% Senior Notes due 2025 (the “Notes”);

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the First Supplemental Indenture, dated as of July 18, 2018 (the “First Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Second Supplemental Indenture, dated as of January 25, 2019 (the “Second Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Third Supplemental Indenture, dated as of October 31, 2019 (the “Third Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Fourth Supplemental Indenture, dated as of December 27, 2019 (the “Fourth Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Original Indenture as amended and supplemented by the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture and the Fourth Supplemental Indenture is referred to herein as the “Indenture”;

WHEREAS, the Indenture provides that under certain circumstances, each Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which such Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuers’ Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, each Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 10 thereof.
--- ---
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.
--- ---
4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, partner, employee, incorporator, organizer, manager, unitholder or other owner of Capital Stock (as defined in the Indenture) of a Guaranteeing Subsidiary or agent thereof, as such, shall have any liability for any obligations of the Issuers, the Guarantors, or such Guaranteeing Subsidiary or any other Subsidiary of an Issuer providing a Note Guarantee under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.
5. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
--- ---
6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of signed copies of this Supplemental Indenture by facsimile transmission or emailed portable document format (pdf) shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and such copies may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or portable document format (pdf) shall be deemed to be their original signatures for all purposes other than authentication of Notes by the Trustee.
--- ---
7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.
--- ---
8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary and the Issuers.
--- ---

(Signature Pages Follow)

2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

GUARANTEEING SUBSIDIARIES:

DISPOSALS OPERATING, LLC

GSR NORTHEAST TERMINALS LLC

NGL ENERGY GP LLC

NGL RECYCLING SERVICES, LLC

NGL WASTE SERVICES, LLC

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Fifth Supplemental Indenture)

ISSUERS:

NGL ENERGY PARTNERS LP

By: NGL Energy Holdings, LLC,

its general partner

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

NGL ENERGY FINANCE CORP.

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Fifth Supplemental Indenture)

EXISTING GUARANTORS:

ANTICLINE DISPOSAL, LLC

AWR DISPOSAL, LLC

CENTENNIAL ENERGY, LLC

CENTENNIAL GAS LIQUIDS ULC

CHOYA OPERATING, LLC

DACO PERMIAN 76, LLC

GGCOF HEP BLOCKER II, LLC

GGCOF HEP BLOCKER, LLC

GRAND MESA PIPELINE, LLC

HEP INTERMEDIATE HOLDCO SUB, LLC

HEP INTERMEDIATE HOLDCO, LLC

HEP OPERATIONS HOLDINGS, LLC

HEP OPERATIONS, LLC

HEP SHALEWATER SOLUTIONS, LLC

HILLSTONE DACO 76, LLC

HILLSTONE DACO PERMIAN, LLC

HILLSTONE ENVIRONMENTAL PARTNERS, LLC

HILLSTONE PERMIAN ADAMS, LLC

HILLSTONE PERMIAN ARTHUR, LLC

HILLSTONE PERMIAN CLEVELAND, LLC

HILLSTONE PERMIAN FORTRESS, LLC

HILLSTONE PERMIAN GARFIELD, LLC

HILLSTONE PERMIAN HAMILTON, LLC

HILLSTONE PERMIAN HARRISON, LLC

HILLSTONE PERMIAN HAYES, LLC,

HILLSTONE PERMIAN KNOX, LLC

HILLSTONE PERMIAN MADISON, LLC

HILLSTONE PERMIAN MCKINLEY, LLC

HILLSTONE PERMIAN MONROE, LLC

HILLSTONE PERMIAN PIPELINE LOVING BR, LLC

HILLSTONE PERMIAN PIPELINE, LLC

HILLSTONE PERMIAN POKER LAKE, LLC

HILLSTONE PERMIAN RATTLESNAKE, LLC

HILLSTONE PERMIAN REAGAN, LLC

HILLSTONE PERMIAN ROOSEVELT, LLC

HILLSTONE PERMIAN SHULTZ, LLC

HILLSTONE PERMIAN ST. LUCIA, LLC

HILLSTONE PERMIAN TAFT, LLC

HILLSTONE PERMIAN WILSON, LLC

LOVING FORTRESS, LLC

NGL CRUDE CUSHING, LLC

NGL CRUDE LOGISTICS, LLC

NGL CRUDE TERMINALS, LLC

NGL CRUDE TRANSPORTATION, LLC

NGL DELAWARE BASIN HOLDINGS, LLC

NGL ENERGY EQUIPMENT LLC

NGL ENERGY HOLDINGS II, LLC

NGL ENERGY LOGISTICS, LLC

NGL ENERGY OPERATING LLC

NGL LIQUIDS, LLC

NGL MARINE, LLC

NGL MILAN INVESTMENTS, LLC

NGL SOUTH RANCH, INC.

NGL SUPPLY TERMINAL COMPANY, LLC

NGL SUPPLY WHOLESALE, LLC

NGL TM LLC

NGL WATER PIPELINES, LLC

(Signature Page to Fifth Supplemental Indenture)

NGL WATER SOLUTIONS - ORLA SWD, LLC

NGL WATER SOLUTIONS DJ, LLC

NGL WATER SOLUTIONS EAGLE FORD, LLC

NGL WATER SOLUTIONS PERMIAN, LLC

NGL WATER SOLUTIONS, LLC

RED ROCK MIDSTREAM, LLC

SAND LAKE MIDSTREAM, LLC

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Fifth Supplemental Indenture)

TRUSTEE:

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By: /s/ Michael K. Herberger
Name: Michael K. Herberger
--- ---
Title: Vice President
--- ---

(Signature Page to Fifth Supplemental Indenture)

Exhibit A

Guaranteeing Subsidiaries
Name Jurisdiction and Form of Organization
Disposals Operating, LLC Delaware limited liability company
GSR Northeast Terminals LLC Delaware limited liability company
NGL Energy GP LLC Delaware limited liability company
NGL Recycling Services, LLC Delaware limited liability company
NGL Waste Services, LLC New Mexico limited liability company

Exhibit A - Page 1

		Exhibit

Exhibit 4.3

THIRD SUPPLEMENTAL INDENTURE

THIRD SUPPLEMENTAL INDENTURE, dated as of June 30, 2020 (this “Supplemental Indenture”), among NGL Energy Partners LP, a Delaware limited partnership (the “Company”), NGL Energy Finance Corp., a Delaware corporation (“Finance Corp.,” and, together with the Company, the “Issuers”), each of the Persons listed on Exhibit A to this Supplemental Indenture (each a “Guaranteeing Subsidiary” and collectively, the “Guaranteeing Subsidiaries”), the other Guarantors (as defined in the Indenture referred to below), and U.S. Bank National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee an indenture, dated as of April 9, 2019 (the “Indenture”), providing for the issuance by the Issuers of 6.125% Senior Notes due 2026 (the “Notes”);

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the First Supplemental Indenture, dated as of October 31, 2019 (the “First Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Issuers and certain Subsidiaries of the Company have heretofore executed and delivered to the Trustee the Second Supplemental Indenture, dated as of December 27, 2019 (the “Second Supplemental Indenture”), pursuant to which certain Subsidiaries of the Company became Guarantors;

WHEREAS, the Original Indenture as amended and supplemented by the First Supplemental Indenture and the Second Supplemental Indenture is referred to herein as the “Indenture”;

WHEREAS, the Indenture provides that under certain circumstances, each Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which such Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuers’ Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, each Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 10 thereof.
--- ---
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.
--- ---
4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, partner, employee, incorporator, organizer, manager, unitholder or other owner of Capital Stock (as defined in the Indenture) of a Guaranteeing Subsidiary or agent thereof, as such, shall have any liability for any obligations of the Issuers, the Guarantors, or such Guaranteeing Subsidiary or any other Subsidiary of an Issuer providing a Note Guarantee under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.
--- ---
5. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of signed copies of this Supplemental Indenture by facsimile transmission or emailed portable document format (pdf) shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and such copies may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or portable document format (pdf) shall be deemed to be their original signatures for all purposes other than authentication of Notes by the Trustee.
--- ---
7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.
--- ---
8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary and the Issuers.
--- ---

(Signature Pages Follow)

2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

GUARANTEEING SUBSIDIARIES:

DISPOSALS OPERATING, LLC

GSR NORTHEAST TERMINALS LLC

NGL ENERGY GP LLC

NGL RECYCLING SERVICES, LLC

NGL WASTE SERVICES, LLC

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Third Supplemental Indenture)

ISSUERS:

NGL ENERGY PARTNERS LP

By: NGL Energy Holdings, LLC,

its general partner

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

NGL ENERGY FINANCE CORP.

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Third Supplemental Indenture)

EXISTING GUARANTORS:

ANTICLINE DISPOSAL, LLC

AWR DISPOSAL, LLC

CENTENNIAL ENERGY, LLC

CENTENNIAL GAS LIQUIDS ULC

CHOYA OPERATING, LLC

DACO PERMIAN 76, LLC

GGCOF HEP BLOCKER II, LLC

GGCOF HEP BLOCKER, LLC

GRAND MESA PIPELINE, LLC

HEP INTERMEDIATE HOLDCO SUB, LLC

HEP INTERMEDIATE HOLDCO, LLC

HEP OPERATIONS HOLDINGS, LLC

HEP OPERATIONS, LLC

HEP SHALEWATER SOLUTIONS, LLC

HILLSTONE DACO 76, LLC

HILLSTONE DACO PERMIAN, LLC

HILLSTONE ENVIRONMENTAL PARTNERS, LLC

HILLSTONE PERMIAN ADAMS, LLC

HILLSTONE PERMIAN ARTHUR, LLC

HILLSTONE PERMIAN CLEVELAND, LLC

HILLSTONE PERMIAN FORTRESS, LLC

HILLSTONE PERMIAN GARFIELD, LLC

HILLSTONE PERMIAN HAMILTON, LLC

HILLSTONE PERMIAN HARRISON, LLC

HILLSTONE PERMIAN HAYES, LLC,

HILLSTONE PERMIAN KNOX, LLC

HILLSTONE PERMIAN MADISON, LLC

HILLSTONE PERMIAN MCKINLEY, LLC

HILLSTONE PERMIAN MONROE, LLC

HILLSTONE PERMIAN PIPELINE LOVING BR, LLC

HILLSTONE PERMIAN PIPELINE, LLC

HILLSTONE PERMIAN POKER LAKE, LLC

HILLSTONE PERMIAN RATTLESNAKE, LLC

HILLSTONE PERMIAN REAGAN, LLC

HILLSTONE PERMIAN ROOSEVELT, LLC

HILLSTONE PERMIAN SHULTZ, LLC

HILLSTONE PERMIAN ST. LUCIA, LLC

HILLSTONE PERMIAN TAFT, LLC

HILLSTONE PERMIAN WILSON, LLC

LOVING FORTRESS, LLC

NGL CRUDE CUSHING, LLC

NGL CRUDE LOGISTICS, LLC

NGL CRUDE TERMINALS, LLC

NGL CRUDE TRANSPORTATION, LLC

NGL DELAWARE BASIN HOLDINGS, LLC

NGL ENERGY EQUIPMENT LLC

NGL ENERGY HOLDINGS II, LLC

NGL ENERGY LOGISTICS, LLC

NGL ENERGY OPERATING LLC

NGL LIQUIDS, LLC

NGL MARINE, LLC

NGL MILAN INVESTMENTS, LLC

NGL SOUTH RANCH, INC.

NGL SUPPLY TERMINAL COMPANY, LLC

NGL SUPPLY WHOLESALE, LLC

NGL TM LLC

NGL WATER PIPELINES, LLC

(Signature Page to Third Supplemental Indenture)

NGL WATER SOLUTIONS - ORLA SWD, LLC

NGL WATER SOLUTIONS DJ, LLC

NGL WATER SOLUTIONS EAGLE FORD, LLC

NGL WATER SOLUTIONS PERMIAN, LLC

NGL WATER SOLUTIONS, LLC

RED ROCK MIDSTREAM, LLC

SAND LAKE MIDSTREAM, LLC

By: /s/ Robert W. Karlovich III
Name: Robert W. Karlovich III
--- ---
Title: Executive Vice President and Chief Financial Officer
--- ---

(Signature Page to Third Supplemental Indenture)

TRUSTEE:

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By: /s/ Michael K. Herberger
Name: Michael K. Herberger
--- ---
Title: Vice President
--- ---

(Signature Page to Third Supplemental Indenture)

Exhibit A

Guaranteeing Subsidiaries
Name Jurisdiction and Form of Organization
Disposals Operating, LLC Delaware limited liability company
GSR Northeast Terminals LLC Delaware limited liability company
NGL Energy GP LLC Delaware limited liability company
NGL Recycling Services, LLC Delaware limited liability company
NGL Waste Services, LLC New Mexico limited liability company

Exhibit A - Page 1

		Exhibit

Exhibit 22.1

LIST OF ISSUERS AND GUARANTOR SUBSIDIARIES

The following sets forth the issuers and subsidiary guarantors of the Partnership’s 7.50% senior unsecured notes due 2023, 6.125% senior unsecured notes due 2025 and 7.50% senior unsecured notes due 2026 (collectively, the “Senior Unsecured Notes”).

Entity Jurisdiction of<br><br>Organization NGL Energy Partners LP<br><br>Senior Unsecured Notes
NGL Energy Partners LP Delaware Issuer
NGL Energy Finance Corp. Delaware Issuer
AntiCline Disposal, LLC Wyoming Guarantor
AWR Disposal, LLC Delaware Guarantor
Centennial Energy, LLC Colorado Guarantor
Centennial Gas Liquids ULC Alberta Guarantor
Choya Operating, LLC Texas Guarantor
DACO Permian 76, LLC Texas Guarantor
Disposals Operating, LLC Delaware Guarantor
GGCOF HEP Blocker, LLC Delaware Guarantor
GGCOF HEP Blocker II, LLC Delaware Guarantor
Grand Mesa Pipeline, LLC Delaware Guarantor
GSR Northeast Terminals LLC Delaware Guarantor
HEP Intermediate Holdco, LLC Delaware Guarantor
HEP Intermediate Holdco Sub, LLC Delaware Guarantor
HEP Operations Holdings, LLC Delaware Guarantor
HEP Operations, LLC Delaware Guarantor
HEP Shalewater Solutions, LLC Delaware Guarantor
Hillstone DACO 76, LLC Delaware Guarantor
Hillstone DACO Permian, LLC Delaware Guarantor
Hillstone Environmental Partners, LLC Delaware Guarantor
Hillstone Permian Adams, LLC Delaware Guarantor
Hillstone Permian Arthur, LLC Delaware Guarantor
Hillstone Permian Cleveland, LLC Delaware Guarantor
Hillstone Permian Fortress, LLC Texas Guarantor
Hillstone Permian Garfield, LLC Delaware Guarantor
Hillstone Permian Hamilton, LLC Delaware Guarantor
Hillstone Permian Harrison, LLC Delaware Guarantor
Hillstone Permian Hayes, LLC Delaware Guarantor
Hillstone Permian Knox, LLC Delaware Guarantor
Hillstone Permian Madison, LLC Delaware Guarantor
Hillstone Permian McKinley, LLC Delaware Guarantor
Hillstone Permian Monroe, LLC Delaware Guarantor
Hillstone Permian Pipeline, LLC Delaware Guarantor
Hillstone Permian Pipeline Loving BR, LLC Delaware Guarantor
Hillstone Permian Poker Lake, LLC Delaware Guarantor
Hillstone Permian Rattlesnake, LLC Delaware Guarantor
Hillstone Permian Reagan, LLC Delaware Guarantor
Hillstone Permian Roosevelt, LLC Delaware Guarantor
Hillstone Permian Shultz, LLC Delaware Guarantor
Hillstone Permian St. Lucia, LLC Delaware Guarantor
Hillstone Permian Taft, LLC Delaware Guarantor
Entity Jurisdiction of<br><br>Organization NGL Energy Partners LP<br><br>Senior Unsecured Notes
Hillstone Permian Wilson, LLC Delaware Guarantor
Loving Fortress, LLC Texas Guarantor
NGL Crude Cushing, LLC Oklahoma Guarantor
NGL Crude Logistics, LLC Delaware Guarantor
NGL Crude Terminals, LLC Delaware Guarantor
NGL Crude Transportation, LLC Colorado Guarantor
NGL Delaware Basin Holdings, LLC Delaware Guarantor
NGL Energy Equipment LLC Colorado Guarantor
NGL Energy GP LLC Delaware Guarantor
NGL Energy Holdings II, LLC Delaware Guarantor
NGL Energy Logistics, LLC Delaware Guarantor
NGL Energy Operating LLC Delaware Guarantor
NGL Liquids, LLC Delaware Guarantor
NGL Marine, LLC Texas Guarantor
NGL Milan Investments, LLC Colorado Guarantor
NGL Recycling Services, LLC Delaware Guarantor
NGL South Ranch, Inc. New Mexico Guarantor
NGL Supply Terminal Company, LLC Delaware Guarantor
NGL Supply Wholesale, LLC Delaware Guarantor
NGL TM LLC Delaware Guarantor
NGL Waste Services, LLC New Mexico Guarantor
NGL Water Pipelines, LLC Texas Guarantor
NGL Water Solutions DJ, LLC Colorado Guarantor
NGL Water Solutions Eagle Ford, LLC Delaware Guarantor
NGL Water Solutions, LLC Colorado Guarantor
NGL Water Solutions Orla-SWD, LLC Delaware Guarantor
NGL Water Solutions Permian, LLC Colorado Guarantor
Red Rock Midstream, LLC Delaware Guarantor
Sand Lake Midstream, LLC Delaware Guarantor 
		Exhibit

Exhibit 31.1

CERTIFICATION

I, H. Michael Krimbill, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NGL Energy Partners LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
--- ---
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: August 10, 2020 /s/ H. Michael Krimbill
--- ---
H. Michael Krimbill
Chief Executive Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP 
		Exhibit

Exhibit 31.2

CERTIFICATION

I, Robert W. Karlovich III, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NGL Energy Partners LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
--- ---
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
--- ---
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
--- ---
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: August 10, 2020 /s/ Robert W. Karlovich III
--- ---
Robert W. Karlovich III
Chief Financial Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP 
		Exhibit

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of NGL Energy Partners LP (the “Partnership”) on Form 10-Q for the fiscal quarter ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, H. Michael Krimbill, Chief Executive Officer of NGL Energy Holdings LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
--- ---
Date: August 10, 2020 /s/ H. Michael Krimbill
--- ---
H. Michael Krimbill
Chief Executive Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP

This certification is being furnished solely pursuant to Section 906 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

		Exhibit

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of NGL Energy Partners LP (the “Partnership”) on Form 10-Q for the fiscal quarter ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert W. Karlovich III, Chief Financial Officer of NGL Energy Holdings LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
--- ---
Date: August 10, 2020 /s/ Robert W. Karlovich III
--- ---
Robert W. Karlovich III
Chief Financial Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP

This certification is being furnished solely pursuant to Section 906 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

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