NGL Energy Partners LP

Previous wording

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 and nine months ended December 31, 2023. 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, 2023 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on May 31, 2023.

Current wording

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, 2024. 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, 2024 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on June 6, 2024.

Previous wording

We are a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner (“GP”). At December 31, 2023, our operations included three segments: Water Solutions, Crude Oil Logistics and Liquids Logistics. See Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of these businesses.

Current wording

We are a Delaware master limited partnership. NGL Energy Holdings LLC serves as our general partner (“GP”). At June 30, 2024, our operations included three segments: Water Solutions, Crude Oil Logistics and Liquids Logistics. See Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of these businesses.

Previous wording

Our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to commodity price volatility, acquisitions, dispositions and other transactions. Our results of operations for the three months and nine months ended December 31, 2023 are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2024.

Current wording

Our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to commodity price volatility, demand fluctuations, acquisitions, dispositions and other transactions. Our results of operations for the three months ended June 30, 2024 are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2025.

Previous wording

Since March 2020, and throughout the last three years, global markets and commodity prices have been extremely volatile due to the impacts from the COVID-19 pandemic, with further impacts on volatility caused by the war in Ukraine that began in February 2022 and the current conflict between Israel and Hamas that began in October 2023. While we have seen continued recovery in commodity prices since the beginning of the pandemic, there is still volatility that we expect to continue at least for the near-term and possibly longer, due to the uncertainty of the pandemic, the war in Ukraine, the conflict between Israel and Hamas and the result of any economic recession or depression that has occurred or may occur in the future. This volatility could negatively impact future prices for crude oil, natural gas, petroleum products and industrial products.

Current wording

Since March 2020, and throughout the last three years, global markets and commodity prices have been extremely volatile due to the impacts from the COVID-19 pandemic, with further impacts on volatility caused by the war in Ukraine that began in February 2022, the current conflict between Israel and Hamas that began in October 2023 and conflicts involving Iran and its proxy forces. While we have seen continued recovery in commodity prices since the beginning of the pandemic, there is still volatility that we expect to continue at least for the near-term and possibly longer, due to these conflicts. This volatility could result in economic recession or depression and negatively impact future prices for crude oil, natural gas, petroleum products and industrial products.

Previous wording

In addition, if we see a continuation or acceleration of fiscal year 2023’s inflationary conditions, rising interest rates, supply chain disruptions and tight labor markets, then we may also see higher costs of operating our assets and executing on our capital projects in fiscal year 2024. During fiscal year 2023, the war in Ukraine may have amplified inflation and supply chain constraints complicating the rebound of the global economy after the COVID-19 pandemic. In an effort to curb inflation, the U.S. Federal Reserve raised interest rates during fiscal year 2023, in May 2023 and most recently on July 26, 2023. If the U.S. Federal Reserve implements additional increases, costs under the ABL Facility (as defined herein) and new Term Loan B (as defined herein) will increase. On the other hand, our ability to pass along rate increases reflecting changes in producer and/or consumer price indices to our customers, under our contracts, should help to counterbalance the impact of inflation on our costs.

Current wording

In addition, if we see a continuation or acceleration of inflationary conditions, rising interest rates, supply chain disruptions and tight labor markets, we may also see higher costs of operating our assets and executing on our capital projects in fiscal year 2025. In an effort to curb inflation, the U.S. Federal Reserve raised interest rates during fiscal year 2023, in May 2023 and most recently in July 2023. If the U.S. Federal Reserve implements additional increases, costs under our variable-rate debt and preferred units will increase (see “Item 3. Quantitative and Qualitative Disclosures About Market Risk–Interest Rate Risk” included in this Quarterly Report). On the other hand, our ability to pass along rate increases reflecting changes in producer and/or consumer price indices to our customers, under our contracts, should help to counterbalance the impact of inflation on our costs.

Previous wording

See Note 17 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of other transactions that occurred subsequent to December 31, 2023.

Current wording

See Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of transactions that occurred subsequent to June 30, 2024.

Previous wording

(1) Total produced water barrels processed during the three months ended December 31, 2023 and 2022 were 218,646,417 and 223,175,902, respectively. These amounts do not include 20,992,750 barrels and 1,106,986 barrels for the three months ended December 31, 2023 and 2022, respectively, related to payments received from producers for committed volumes not delivered, as discussed further below.

Current wording

(2) Total produced water barrels processed during the three months ended June 30, 2024 and 2023 were 224,348,310 and 223,720,295, respectively. These amounts do not include 11,699,806 barrels and 3,110,039 barrels for the three months ended June 30, 2024 and 2023, respectively, related to payments received from producers for committed volumes not delivered, as discussed further below.

Previous wording

Water Disposal Service Fee Revenues. The increase was due primarily to increased fees from new contracts entered into during fiscal year 2023 and higher fees charged for interruptible spot volumes. There was also an increase in payments made by certain producers for committed volumes not delivered. Service fees for produced water processed ($/barrel) also benefited from these deficiency payments. These increases were partially offset by a decrease in produced water volumes processed from contracted customers mainly in the Delaware Basin as certain producers reused their water in their operations.

Current wording

Water Disposal Service Fee Revenues. The decrease was due primarily to lower fees for produced water processed during the quarter due to rate changes for certain existing contracts, the expiration of certain higher fee per barrel contracts which were replaced with lower fee per barrel contracts with an extended term and higher volumes received under contracts with lower fees per barrel. Also contributing to the decrease were lower produced water volumes processed mainly in the DJ Basin as certain producers reused their water in their operations. These decreases were partially offset by an increase in produced water volumes processed from contracted customers in the Eagle Ford and Delaware Basins and higher fees charged for interruptible spot volumes. There was also an increase in payments made by certain producers for committed volumes not delivered, which also benefited service fees for produced water processed ($/barrel).

Previous wording

Recovered Crude Oil Revenues. The decrease was due primarily to lower realized crude oil prices received from the sale of skim oil barrels and a decrease in skim oil barrels sold as a result of lower skim oil recovered from produced water processed, partially offset by the sale during the current fiscal year of approximately 34,380 barrels of skim oil that were stored as of March 31, 2023 due to tighter pipeline specifications.

Current wording

Recovered Crude Oil Revenues. The increase was due primarily to an increase in skim oil barrels sold as a result of higher skim oil recovered from increased produced water processed and higher realized crude oil prices received from the sale of skim oil barrels. While the amount of skim oil recovered was in line with historical averages, a certain amount of skim oil barrels was stored as of June 30, 2023, due to tighter pipeline specifications which reduced the amount of skim oil sold during the prior year quarter.

Previous wording

Recycled Water Revenues. Revenue from recycled water includes the sale of produced water and recycled water for use in our customers’ completion activities. The decrease was due primarily to decreased sales of produced water as certain producers reused their water in their operations.

Current wording

Recycled Water Revenues. Revenue from recycled water includes the sale of produced water and recycled water for use in our customers’ completion activities. The decrease was due primarily to lower pricing for recycled water, partially offset by an increase in recycled water volumes related to timing of water to be used in completions.

Previous wording

Other Revenues. Other revenues primarily include brackish non-potable water revenues, water pipeline revenues, land surface use revenues, solids disposal revenues and reimbursements from construction projects, booster operating fees and generator rentals. The decrease was due primarily to lower reimbursements from construction projects and lower water pipeline revenues due to the expiration of certain pipeline commitment revenue in December 2022. These decreases were partially offset by higher reimbursements for booster operating fees and generator rentals.

Current wording

Other Revenues. Other revenues primarily include reimbursements from construction projects, booster operating fees and generator rentals, water pipeline revenues, solids disposal revenues, land surface use revenues and brackish non-potable water revenues. The decrease was due primarily to lower land surface use revenues, mining revenues and lease revenue from certain surface use and compensation agreements primarily due to the sale of our ranches in April 2024 (see Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report). We also had lower reimbursements from construction projects and lower sales of brackish non-potable water related to the timing of our customers transitioning from brackish non-potable water to recycled water. These decreases were partially offset by higher reimbursements from booster operating fees and generator rentals and higher pipeline revenues driven by an increase in drilling and completion activity primarily in the Eagle Ford and Delaware Basins as well as our increased capacity to meet demand for these services.

Previous wording

Cost of Sales-Excluding Impact of Derivatives. The increase was due primarily to costs incurred that will be reimbursed by producers for generator and fuel costs at various booster stations. In addition, we incurred trucking expenses for skim oil sales beginning during the three months ended September 30, 2023. These increases were partially offset by lower recycling costs due to a decrease in recycling activity.

Current wording

Cost of Sales-Excluding Impact of Derivatives. The decrease was due primarily to lower recycling costs due to a decrease in recycling activity, partially offset by costs incurred that will be reimbursed by producers for generator and fuel costs at various booster stations.

Previous wording

Derivative 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 produced water and selling recovered skim oil. During the three months ended December 31, 2023, we had $6.4 million of net unrealized gains on derivatives and $1.1 million of net realized losses on derivatives. During the three months ended December 31, 2022, we had no derivative activity.

Current wording

Derivative 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 produced water and selling recovered skim oil. During the three months ended June 30, 2024, we had $0.9 million of net unrealized gains on derivatives and less than $0.1 million of net realized losses on derivatives. During the three months ended June 30, 2023, we had no derivative activity.

Previous wording

Operating and General and Administrative Expenses. The decrease was due primarily to lower chemical expense due to purchasing fewer chemicals and using chemicals more efficiently, lower overhead costs, lower generator rental expense due to renting fewer generators combined with reimbursement for this expense from certain customers, lower utilities expense due to decreased produced water volumes processed and lower severance taxes due to a decrease in revenue from recovered crude oil. These decreases were partially offset by higher repairs and maintenance expense due to the timing of repairs, preventative maintenance and tank cleaning.

Current wording

Operating and General and Administrative Expenses. The decrease was due primarily to lower chemical expense due to purchasing fewer chemicals and using chemicals more efficiently and lower repairs and maintenance expense due to the timing of repairs and tank cleaning.

Previous wording

Depreciation and Amortization Expense. The increase was due primarily to depreciation of newly developed facilities and infrastructure partially offset by certain long-term assets being fully amortized or impaired during the fiscal year ended March 31, 2023 and nine months ended December 31, 2023.

Current wording

Depreciation and Amortization Expense. The decrease was due primarily to certain long-term assets being fully amortized, impaired or sold during the fiscal year ended March 31, 2024 and three months ended June 30, 2024, partially offset by depreciation of newly developed facilities and infrastructure.

Previous wording

(Gain) Loss on Disposal or Impairment of Assets, Net. During the three months ended December 31, 2023, we recorded a gain of $2.3 million from insurance recoveries for certain saltwater disposal facilities and boosters damaged in a prior period. In addition, we recorded a net loss of $0.9 million related to the abandonment of certain capital projects and the retirement of certain assets and a net loss of $0.9 million primarily related to the sale of certain assets. During the three months ended December 31, 2022, we recorded a net loss of $6.1 million primarily related to the sale of certain assets. We also recorded a net loss of $4.0 million to write down the value of two inactive saltwater disposal facilities and damaged equipment at another saltwater disposal facility as well as the abandonment of certain capital projects and the retirement of certain assets. In addition, we recorded a gain of $2.2 million from an insurance recovery for a saltwater disposal facility damaged in a prior period.

Current wording

Gain on Disposal or Impairment of Assets, Net. During the three months ended June 30, 2024, we recorded a net gain of $10.4 million primarily related to the sale of certain assets (see Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report) and a gain of $0.3 million from insurance recoveries for certain saltwater disposal facilities and boosters damaged in a prior period. In addition, we recorded a net loss of $0.1 million primarily related to the write down of the value of certain saltwater disposal wells as well as abandonment of certain capital projects and the retirement of certain assets. During the three months ended June 30, 2023, we recorded a net gain of $5.0 million primarily related to the sale of certain assets and a net loss of $3.8 million related to the abandonment of certain capital projects and the retirement of certain assets.

Previous wording

(1) Revenues include $0.1 million and $1.7 million of intersegment sales during the three months ended December 31, 2023 and 2022, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.

Current wording

(1) Revenues include $0.1 million and $0.2 million of intersegment sales during the three months ended June 30, 2024 and 2023, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.

Previous wording

Crude Oil Sales Revenues and Cost of Sales-Excluding Impact of Derivatives. The decreases were due primarily to a decrease in crude oil prices during the three months ended December 31, 2023, compared to the three months ended December 31, 2022 and lower sales volumes due to lower production on acreage dedicated to us in the DJ Basin.

Current wording

Crude Oil Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were due primarily to lower sales volumes due to lower production on acreage dedicated to us in the DJ Basin during the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023. This decrease was partially offset by higher crude oil prices.

Previous wording

Margins from the sale of crude oil decreased during the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The decrease in margins was due to lower crude oil prices and lower volumes. The falling crude oil prices lowered contracted rates with certain producers and lower contract differentials negatively impacted certain other sales contracts. Crude oil product margin calculations do not include gains and losses from derivatives that may offset the movement in the physical margin.

Current wording

The decrease in the crude oil product margin was primarily due to lower volumes purchased and sold year over year as discussed above. Crude oil product margin per barrel increased during the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023, primarily due to higher price and quality differentials realized in the current period compared to the prior period. Crude oil product margin calculations do not include gains and losses from derivatives that may offset the movement in the physical margin.

Previous wording

Derivative Gain. Our cost of sales during the three months ended December 31, 2023 included $59.6 million of net realized gains on derivatives, driven by decreasing crude oil prices, and $52.0 million of net unrealized losses on derivatives. The amounts in the previous sentence for the three months ended December 31, 2023 include net realized gains of $61.5 million and net unrealized losses of $61.0 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under “Non-GAAP Financial Measures.” Our cost of sales during the three months ended

Current wording

Derivative Gain. Our cost of sales during the three months ended June 30, 2024 included $1.1 million of net realized losses on derivatives and $2.0 million of net unrealized gains on derivatives. Our cost of sales during the three months ended June 30, 2023 included $12.4 million of net realized gains on derivatives, driven by decreasing crude oil prices, and $5.2 million of net unrealized losses on derivatives. The amounts for the three months ended June 30, 2023 included net realized gains of $8.7 million and net unrealized losses of $5.2 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under “Non-GAAP Financial Measures.” The CMA hedge expired as of December 31, 2023 and we did not enter into another hedge.

Previous wording

During the three months ended December 31, 2023, physical volumes on the Grand Mesa Pipeline averaged approximately 70,000 barrels per day, compared to approximately 77,000 barrels per day during the three months ended December 31, 2022. Lower contracted volumes were shipped on the Grand Mesa Pipeline due to lower demand for heavier crude oil grades, lower crude oil prices, and lower production on acreage dedicated to us in the DJ Basin. On December 6, 2023, we announced an open season for the Grand Mesa Pipeline. This open season ended at the close of business on January 5, 2024, and resulted in a new shipper with a five-year minimum volume commitment contract.

Current wording

During the three months ended June 30, 2024, physical volumes on the Grand Mesa Pipeline averaged approximately 63,000 barrels per day, compared to approximately 72,000 barrels per day during the three months ended June 30, 2023. Lower contracted volumes were shipped on the Grand Mesa Pipeline due to lower demand for heavier crude oil grades, lower crude oil prices, and lower production on acreage dedicated to us in the DJ Basin.

Previous wording

Depreciation and Amortization Expense. The decrease during the nine months ended December 31, 2023 was due to software that became fully depreciated during the nine months ended December 31, 2023.

Current wording

Depreciation and Amortization Expense. The decrease was due primarily to certain assets becoming fully depreciated during the year ended March 31, 2024.

Previous wording

Refined Products Sales Revenues and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues and cost of sales, excluding the impact of derivatives, during the three months ended December 31, 2023 were primarily due to a decrease in sales prices during the current year due to lower commodity prices. This decrease was partially offset by an increase in volumes, as we have added new supply and customer contracts in certain markets.

Current wording

Refined Products Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, during the three months ended June 30, 2024 were primarily due to lower prices during the current quarter and a decrease in volumes due to lower demand.

Previous wording

Refined Products product margins, excluding the impact of derivatives, decreased during the three months ended December 31, 2023. This decrease was due primarily to the higher margins generated in the prior year due to higher demand in several markets experiencing tighter supply. These supply issues returned to normal in the current year as supply issues were resolved and the supply/demand balance was restored.

Current wording

Refined Products product margins, excluding the impact of derivatives, decreased during the three months ended June 30, 2024. This decrease was primarily related to higher margins generated in April 2023 and May 2023 in several markets experiencing tighter supply. These supply issues returned to normal in June 2023 as supply issues were resolved and the supply/demand balance was restored.

Previous wording

Refined Products Derivative (Gain) Loss. Our Refined Products product margin during the three months ended December 31, 2023 included a realized gain of $0.1 million and the three months ended December 31, 2022 included a realized loss of $1.0 million.

Current wording

Refined Products Derivative (Gain) Loss. Our Refined Products product margin during the three months ended June 30, 2024 included a realized gain of $0.1 million and the three months ended June 30, 2023 included a realized loss of $0.1 million.

Previous wording

Propane Derivative (Gain) Loss. Our wholesale cost of propane sales during the three months ended December 31, 2023 included net unrealized gains of $3.0 million on derivatives and $1.9 million of net realized losses on derivatives. Our wholesale cost of propane sales during the three months ended December 31, 2022 included $1.2 million of net unrealized gains on derivatives and $8.7 million of net realized losses on derivatives.

Current wording

Propane Derivative Gain. Our cost of propane sales during the three months ended June 30, 2024 included net unrealized losses of $5.2 million on derivatives and $5.5 million of net realized gains on derivatives. Our cost of propane sales during the three months ended June 30, 2023 included $2.3 million of net unrealized gains on derivatives and $0.2 million of net realized losses on derivatives.

Previous wording

Butane Sales Revenues and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues and cost of sales, excluding the impact of derivatives, were due to increased prices rising during the three months ended December 31, 2023 compared to prices declining during the three months ended December 31, 2022. The increase was also due to increased volume due to strong blending demand.

Current wording

Butane Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in sales and cost of sales, excluding the impact of derivatives, were due to increased prices during the three months ended June 30, 2024 compared to prices during the three months ended June 30, 2023. The increase was also due to a stronger gasoline blending market during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 when there was weaker spot market and export demand.

Previous wording

Other product sales product margins, excluding the impact of derivatives, during the nine months ended December 31, 2023 decreased due to the increased supply of biodiesel in the market due to the EPA’s final RFS mandate, which lowered biodiesel and RIN’s prices and delivery of biodiesel contracts entered into in the prior year, when prices were higher, for delivery in the current period when prices were declining. Cost of sales increased due to a lower of cost or net realizable value charge of $4.5 million primarily for biodiesel during the nine months ended December 31, 2023.

Current wording

Butane product margins, excluding the impact of derivatives, increased due to increased prices during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. Also, the margins for the three months ended June 30, 2023 decreased due to a lower of cost or net realizable value adjustment of $5.4 million.

Previous wording

Butane Derivative Loss (Gain). Our cost of butane sales during the three months ended December 31, 2023 included $6.5 million of net unrealized losses on derivatives and $0.5 million of net realized losses on derivatives. Our cost of butane sales during the three months ended December 31, 2022 included $9.1 million of net unrealized losses on derivatives and $12.8 million of net realized gains on derivatives.

Current wording

Butane Derivative Loss (Gain). Our cost of butane sales during the three months ended June 30, 2024 included $2.5 million of net unrealized losses on derivatives and $0.4 million of net realized gains on derivatives. Our cost of butane sales during the three months ended June 30, 2023 included $6.8 million of net unrealized gains on derivatives and $0.4 million of net realized losses on derivatives.

Previous wording

Other Products Sales Revenues and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues and cost of sales, excluding the impact of derivatives, were due primarily to an increase in sales of biodiesel, due to selling product in new markets, increased sales of renewable identification numbers (“RINs”) and increased sales of asphalt due to consistent supply of product compared to the prior year. This was partially offset by the decrease in lower natural gasoline volumes due to the loss of certain supply contracts.

Current wording

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The increases in sales and cost of sales, excluding the impact of derivatives, were due primarily to an increase in biodiesel prices, increased sales of renewable identification numbers and increased sales of asphalt due to consistent supply of product compared to the prior year. These increases were partially offset by lower biodiesel volumes.

Previous wording

Other Products Derivative (Gain) Loss. Our derivatives of other products during the three months ended December 31, 2023 included $0.1 million of net unrealized losses on derivatives and $5.4 million of net realized gains on derivatives. Our derivatives of other products during the three months ended December 31, 2022 included $1.3 million of net unrealized gains on derivatives and $2.5 million of net realized losses on derivatives.

Current wording

Other Products Derivative Loss (Gain). Our derivatives of other products during the three months ended June 30, 2024 included $13.1 million of net unrealized losses on derivatives and $0.2 million of net realized losses on derivatives. Our derivatives of other products during the three months ended June 30, 2023 included $0.5 million of net unrealized losses on derivatives and $1.9 million of net realized gains on derivatives.

Previous wording

Service Revenues and Cost of Sales. This revenue includes storage, terminaling and transportation services income. Revenues during the three months ended December 31, 2023 remained consistent with the prior year but cost of sales decreased due to lower third-party costs.

Current wording

Service Sales and Cost of Sales. The sales includes storage, terminaling and transportation services income. Terminal sales and cost of sales increased during the three months ended June 30, 2024 due to a stronger export market.

Previous wording

Cost of Sales - Derivative Gain. Our cost of sales during the three months ended December 31, 2023 included $0.2 million of net realized gains on derivatives and $1.6 million of net unrealized gains on derivatives. We have entered into economic hedges to protect our liquidity positions and leverage from a significant increase in commodity prices that drive our working capital demands, as we experienced in the prior fiscal year, thus impacting our ability to reduce absolute indebtedness until commodity prices weakened. There were no open hedge positions as of December 31, 2023.

Current wording

Cost of Sales - Derivative Loss. Our cost of sales during the three months ended June 30, 2023 included $1.3 million of net realized losses and $2.9 million of net unrealized losses on derivatives. During the three months ended June 30, 2023, we entered into economic hedges to protect our liquidity positions and leverage from a significant increase in commodity prices that drive our working capital demands. There were no open hedge positions that would impact cost of sales as of June 30, 2024.

Previous wording

Depreciation and Amortization Expense. The decrease during the three months ended December 31, 2023 was due to software that became fully depreciated during the three months ended December 31, 2023.

Current wording

Depreciation and Amortization Expense. The decrease during the three months ended June 30, 2024 was due to software that became fully depreciated during the year ended March 31, 2024.

Previous wording

Equity in earnings of unconsolidated entities was $0.8 million during the three months ended December 31, 2023, compared to $1.2 million during the three months ended December 31, 2022. The decrease of $0.4 million during the three months ended December 31, 2023 was due primarily to lower earnings from certain membership interests related to specific land and water services operations partially offset by higher earnings from another entity due to a gain recognized on the sale of an airplane during the three months ended December 31, 2023 (see Note 12 to our unaudited condensed consolidated financial statements included in this Quarterly Report).

Current wording

Equity in earnings of unconsolidated entities was $0.3 million during the three months ended June 30, 2024, compared to $0.1 million during the three months ended June 30, 2023. The increase of $0.2 million during the three months ended June 30, 2024 was due primarily to higher earnings from certain membership interests related to specific land and water services operations and a lower loss from our interest in an aircraft company which was dissolved on April 30, 2024.

Previous wording

Gain on early extinguishment of liabilities, net was $2.7 million during the three months ended December 31, 2022. During the three months ended December 31, 2022, the net gain (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding Senior Unsecured Notes (as defined herein). We did not repurchase any debt during the three months ended December 31, 2023. See Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Current wording

Gain on early extinguishment of liabilities, net was $6.8 million during the three months ended June 30, 2023. During the three months ended June 30, 2023, the net gain (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding senior unsecured notes. We did not repurchase any debt during the three months ended June 30, 2024.

Previous wording

Other income, net of $0.5 million during the three months ended December 31, 2023 consisted primarily of interest income on loan receivables (see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion). Other income, net of $28.1 million during the three months ended December 31, 2022 consisted primarily of a settlement of a dispute associated with commercial activities not occurring in the current reporting periods.

Current wording

Other income, net of $0.2 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively, consisted primarily of interest income on loan receivables (see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Previous wording

Income tax expense was $0.6 million during the nine months ended December 31, 2023, compared to income tax expense of $0.1 million during the nine months ended December 31, 2022. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Current wording

Income tax benefit was $4.8 million during the three months ended June 30, 2024, compared to income tax expense of $0.1 million during the three months ended June 30, 2023. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Previous wording

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. Noncontrolling interest income was $0.1 million during the three months ended December 31, 2023, compared to $0.4 million during the three months ended December 31, 2022. The decrease of $0.3 million during the three months ended December 31, 2023 was due primarily to lower income from certain water solutions operations during the three months ended December 31, 2023.

Current wording

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. Noncontrolling interest income was $0.8 million during the three months ended June 30, 2024, compared to $0.3 million during the three months ended June 30, 2023. The increase of $0.5 million during the three months ended June 30, 2024 was due primarily to higher income from certain water solutions operations during the three months ended June 30, 2024.

Previous wording

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 certain refined products businesses within our Liquids Logistics segment as discussed below. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, income before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. 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.

Current wording

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, revaluation of liabilities and other. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, income before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity or the ability to service debt obligations. 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.