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 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.

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 and six months ended September 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

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.

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 and six months ended September 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, 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.

Current wording

Since March 2020, and throughout the last four 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

(1) As of June 30, 2023, approximately 53,000 barrels of skim oil were stored and were sold during the second quarter of fiscal year 2024.

Current wording

(1) As of June 30, 2023, approximately 53,000 barrels of skim oil were stored and were sold during the three months ended September 30, 2023.

Previous 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.

Current wording

(2) Total produced water barrels processed during the three months ended September 30, 2024 and 2023 were 246,700,755 and 224,605,594, respectively. These amounts do not include 7,693,542 barrels and 20,763,928 barrels for the three months ended September 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 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).

Current wording

Water Disposal Service Fee Revenues. During July 2023, we entered into a transaction in which a portion of the total consideration received was allocated to revenue due to the termination of a minimum volume water disposal contract. Also, revenue was higher in the prior year quarter due to the timing and recognition of payments made by certain producers for committed volumes not delivered. Excluding these items, revenue increased due primarily to an increase in produced water volumes processed from contracted customers and higher fees charged for interruptible spot volumes. These increases were partially offset by 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.

Previous 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.

Current wording

Recovered Crude Oil Revenues. The decrease was due primarily to a decrease in skim oil barrels sold as a result of lower skim oil recovered as certain producers recycled their water for use in their operations, lower realized crude oil prices received from the sale of skim oil barrels and the sale during the prior year quarter of approximately 53,000 barrels of skim oil that were stored at June 30, 2023 due to tighter pipeline specifications.

Previous 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.

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. These decreases were partially offset by higher reimbursements from booster operating fees and generator rentals.

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 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.

Current wording

Derivative (Gain) Loss. 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 September 30, 2024, we had $0.4 million of net unrealized losses on derivatives and $2.7 million of net realized gains on derivatives. During the three months ended September 30, 2023, we had $4.5 million of net unrealized losses on derivatives and less than $0.1 million of net realized losses on derivatives.

Previous 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.

Current wording

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

Previous 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.

Current wording

The decrease in the crude oil product margin was primarily due to lower contracted volumes purchased and sold year over year as discussed above. Crude oil product margin per barrel decreased during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to the sale of higher priced inventory into a market in which prices were declining, whereas during the three months ended September 30, 2023, we experienced the opposite in which we were selling lower priced inventory into a market in which prices were increasing. This decrease is partially offset by 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 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.

Current wording

Derivative (Gain) Loss. Our cost of sales during the three months ended September 30, 2024 included $0.3 million of net realized gains on derivatives and $4.0 million of net unrealized gains on derivatives. Our cost of sales during the three months ended September 30, 2023 included $10.8 million of net realized losses on derivatives and $4.6 million of net unrealized losses on derivatives. The amounts for the three months ended September 30, 2023 included net realized gains of $9.4 million and net unrealized losses of $4.8 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 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.

Current wording

During the three months ended September 30, 2024, physical volumes on the Grand Mesa Pipeline averaged approximately 63,000 barrels per day, compared to approximately 70,000 barrels per day during the three months ended September 30, 2023. Lower contracted volumes were shipped on the Grand Mesa Pipeline due to lower production on acreage dedicated to us in the DJ Basin.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Refined Products Derivative (Gain) Loss. Our Refined Products product margin during the three months ended September 30, 2024 included realized gains of less than $0.1 million and the three months ended September 30, 2023 included realized losses of $0.1 million.

Previous wording

Propane 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 volumes. Volumes decreased due to lower contracted volumes during the three months ended June 30, 2024, reduced retail customer demand and the loss of a supply contract. This decrease was partially offset by higher propane prices during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Propane 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 volumes. Volumes decreased due to lower contracted volumes during the three months ended September 30, 2024, due to reduced retail customer demand. This decrease was partially offset by higher average propane prices during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous 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.

Current wording

Propane Derivative (Gain) Loss. Our cost of propane sales during the three months ended September 30, 2024 included net unrealized losses of $1.1 million on derivatives and $2.6 million of net realized gains on derivatives. Our cost of propane sales during the three months ended September 30, 2023 included $0.9 million of net unrealized gains on derivatives and $3.7 million of net realized losses on derivatives.

Previous 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.

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 primarily due to increased commodity prices during the three months ended September 30, 2024 compared to prices during the three months ended September 30, 2023. The increase was also due to a strong start to the gasoline blending season and stronger exports during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous 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.

Current wording

Butane product margins, excluding the impact of derivatives, decreased primarily due to the prior year period benefiting from a lower of cost or realizable value adjustment recorded during the three months ended June 30, 2023. Excluding this adjustment, margins increased due to increased commodity prices and volumes during the three months ended September 30, 2024.

Previous 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.

Current wording

Butane Derivative Loss. Our cost of butane sales during the three months ended September 30, 2024 included $5.2 million of net unrealized losses on derivatives and $0.3 million of net realized losses on derivatives. Our cost of butane sales during the three months ended September 30, 2023 included $4.5 million of net unrealized losses on derivatives and $3.1 million of net realized gains on derivatives.

Previous 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.

Current wording

Other Products Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in sales and cost of sales, excluding the impact of derivatives, were due to a decrease in commodity prices, primarily biodiesel prices and prices for renewable identification numbers (“RINs”), during the three months ended September 30, 2024 compared with the three months ended September 30, 2023. This was offset by increased biodiesel volumes and increased sales of asphalt due to consistent supply of product compared to the prior year.

Previous 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.

Current wording

Other Products Derivative Gain. Our derivatives of other products during the three months ended September 30, 2024 included $2.9 million of net unrealized losses on derivatives and $9.4 million of net realized gains on derivatives. Our derivatives of other products during the three months ended September 30, 2023 included $0.5 million of net unrealized gains on derivatives and $6.4 million of net realized gains on derivatives.

Previous wording

Operating and General and Administrative Expenses. The decrease during the three months ended June 30, 2024 compared to three months ended June 30, 2023 was due to a decrease in sales commissions and a decrease in travel and entertainment expenses.

Current wording

Operating and General and Administrative Expenses. The increase during the three months ended September 30, 2024 compared to three months ended September 30, 2023 is due primarily to an increase to the provision for expected credit losses and an increase in sales commissions.

Previous 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.

Current wording

Equity in earnings of unconsolidated entities was $1.5 million during the three months ended September 30, 2024, compared to $0.9 million during the three months ended September 30, 2023. The increase of $0.7 million during the three months ended September 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

The debt interest expense increased $11.8 million during the three months ended June 30, 2024, due to higher interest rates on Term Loan B, the $900.0 million of 8.125% senior secured notes that mature on February 15, 2029 (“2029 Senior Secured Notes”) and the $1.3 billion of 8.375% senior secured notes that mature on February 15, 2032 (“2032 Senior Secured Notes”).

Current wording

The debt interest expense increased $14.0 million during the three months ended September 30, 2024 primarily due to higher interest rates on Term Loan B, the $900.0 million of 8.125% senior secured notes that mature on February 15, 2029 (“2029 Senior Secured Notes”) and the $1.3 billion of 8.375% senior secured notes that mature on February 15, 2032 (“2032 Senior Secured Notes”).

Previous 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).

Current wording

Other income, net of $1.8 million during the three months ended September 30, 2024 consisted of an unrealized gain on an investment and interest income on loan receivables. Other income, net of $0.3 million during the three months ended September 30, 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).

Previous 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.

Current wording

Income tax expense was $0.3 million during the three months ended September 30, 2024, compared to income tax expense of $0.3 million during the three months ended September 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 - Redeemable and Non-redeemable

Current wording

Noncontrolling Interests - Redeemable and Nonredeemable

Previous 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.

Current wording

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. Noncontrolling interest income was $0.9 million during the three months ended September 30, 2024, compared to $0.3 million during the three months ended September 30, 2023. The increase of $0.7 million during the three months ended September 30, 2024 was due primarily to higher income from certain water solutions operations.

Previous 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.

Current wording

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

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 and lower repairs and maintenance expense due to the timing of repairs 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. These decreases were partially offset by higher utilities expense due to increased produced water volumes processed, higher business insurance expense for remediation costs incurred and lower severance taxes in the prior year quarter as a result of a severance tax refund in September 2023 related to prior periods.

Previous 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.

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 six months ended September 30, 2024, partially offset by depreciation of newly developed facilities and infrastructure.

Previous 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.

Current wording

(Gain) Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2024, we recorded a net gain of $10.5 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 $1.8 million from insurance recoveries for certain saltwater disposal facilities and boosters damaged in a prior period. In addition, we recorded a net loss of $3.6 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 other assets. During the six months ended September 30, 2023, we recorded a net loss of $16.2 million primarily related to the sale of certain assets and a net loss of $6.1 million related to the abandonment of certain capital projects and the retirement of certain assets.

Previous 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.

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 six months ended September 30, 2024, compared to the six months ended September 30, 2023. This decrease was partially offset by higher crude oil prices and price differentials.

Previous wording

Crude Oil Transportation and Other Sales. The increase was primarily due to higher tariff revenue on the Grand Mesa Pipeline as a result of signing on a new shipper during the open season that ended January 5, 2024. This increase was partially offset by lower throughput fees due to lower volumes, and lower storage fees at our Cushing terminal during the quarter ended June 30, 2024, compared to the prior period.

Current wording

Crude Oil Transportation and Other Sales. The increase was primarily due to higher tariff revenue on the Grand Mesa Pipeline as a result of signing a new shipper during the open season that ended on January 5, 2024. Additionally, the six months ended September 30, 2024 also benefited from higher terminaling revenue from an acreage dedication in the Eagle Ford Basin as compared to the prior period. These increases were partially offset by lower throughput fees due to lower volumes, and lower storage fees at our Cushing terminal during the six months ended September 30, 2024, compared to the prior period.

Previous wording

Operating and General and Administrative Expenses. The decrease was primarily due to lower utilities expense on the Grand Mesa Pipeline and at our Cushing terminal due to lower volumes flowing through the system in the current quarter compared to the prior period. Additionally, the current quarter benefited from lower cleaning, repairs and maintenance costs on our owned railcars, and lower environmental expenses at one of our terminals compared to the prior period.

Current wording

Operating and General and Administrative Expenses. The decrease was primarily due to lower utilities expense and lower materials and supplies expense on the Grand Mesa Pipeline and at our Cushing terminal due to lower volumes flowing through the system during the six months ended September 30, 2024, compared to the six months ended September 30, 2023. Additionally, the six months ended September 30, 2024 benefited from lower cleaning, repairs and maintenance costs on our owned railcars, lower environmental costs at one of our terminals, and lower corporate cost allocations. These decreases were partially offset by higher ad valorem taxes on our Grand Mesa Pipeline assets due to a higher assessed value by the State of Colorado, which we are currently protesting, and higher compensation expense.

Previous 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.

Current wording

Refined Products product margins, excluding the impact of derivatives, decreased during the six months ended September 30, 2024. This decrease was due primarily to higher margins during the three months ended June 30, 2023 due to higher demand in several markets experiencing tighter supply.

Previous wording

Other products sales product margins, excluding the impact of derivatives, increased during the three months ended June 30, 2024 due to increased biodiesel prices.

Current wording

Other products sales product margins, excluding the impact of derivatives, during the six months ended September 30, 2024 increased due to the increase in biodiesel and asphalt volumes and higher commodity prices for other natural gas liquids.

Previous 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.

Current wording

Service Sales and Cost of Sales. The sales includes storage, terminaling and transportation services income. Revenues and cost of sales during the six months ended September 30, 2024 were consistent with the six months ended September 30, 2023.

Previous wording

Depreciation and Amortization Expense. The decrease during the three months ended June 30, 2024 was due to a customer relationship intangible asset being fully amortized as of June 30, 2023.

Current wording

Depreciation and Amortization Expense. The decrease during the six months ended September 30, 2024 compared to the six months ended September 30, 2023 was due to a customer relationship intangible asset being fully amortized as of June 30, 2023.