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01/11 03:37
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows mixed results: strong performance in Water Solutions and exceeding EBITDA guidance are positives, but declines in Crude and Liquids Logistics, along with unclear management responses, create uncertainty. The market's reaction may be tempered by these mixed signals, leading to a neutral stock price movement.
Consolidated Adjusted EBITDA (Q4 FY25) $176,800,000, up approximately 20% from $147,900,000 in Q4 FY24; increase driven by the performance of the Water Solutions business segment.
Full Year Adjusted EBITDA (FY25) $622,900,000, exceeding previous guidance of $620,000,000.
Water Solutions Adjusted EBITDA (Q4 FY25) $154,900,000, up from $123,400,000 in Q4 FY24; increase due to higher disposal revenues from increased volumes and higher fees for interruptible spot volumes.
Physical Water Disposal Volumes (Q4 FY25) 2,730,000 barrels per day, up from 2,390,000 barrels per day in Q4 FY24; increase attributed to higher disposal volumes.
Total Volumes Paid to Dispose (Q4 FY25) 2,890,000 barrels per day, up from 2,600,000 barrels per day in Q4 FY24; increase of 11% year-over-year.
Operating Cost per Barrel (FY25) $0.22, down from $0.24 per barrel in FY24; decrease due to improved operational efficiency.
Crude Oil Logistics Adjusted EBITDA (Q4 FY25) $13,100,000, down from $15,300,000 in Q4 FY24; decrease primarily due to lower volumes on the Grand Mesa pipeline.
Liquids Logistics Adjusted EBITDA (Q4 FY25) $17,700,000, down from $22,200,000 in Q4 FY24; decrease attributed to lower margins in product sales and reduced compensation expenses.
Total Capital Expenditures (FY26) $105,000,000, with $60,000,000 allocated for growth projects in the Water Solutions segment.
Dividend Arrearages Paid Off $475,000,000 paid to become current on preferred equity financial obligations.
Asset Sale Proceeds $270,000,000 raised from the sale of non-core assets, allowing for debt repayment and preferred equity purchases.
Asset Sales: Closed on the sale of 18 natural gas liquids terminals, including Green Bay, and monetized the Rack Marketing refined products business, Limestone Ranch ownership, and most of the crude oil railcar fleet for a double-digit multiple.
Water Solutions Growth: Achieved record water disposal volumes and adjusted EBITDA, with physical water disposal volumes increasing to 2,730,000 barrels per day in Q4 FY25.
Pipeline Contribution: Received a full quarter of contribution from the LEX II pipeline, which was put in service during the third fiscal quarter.
Operational Efficiency: Operating cost per barrel decreased to $0.22 for FY25 from $0.24 in FY24.
Debt Reduction: Paid off the entirety of the outstanding indebtedness on the ABL and purchased 20,000 units of Class D Preferreds at a discount.
Strategic Shift: Transitioning to focus more on the Water Solutions business, with approximately 85% of adjusted EBITDA expected to come from this segment.
Capital Structure Simplification: Retired Class D preferred equity to simplify capital structure and increase free cash flow.
Regulatory Issues: New guidelines from the Railroad Commission regarding enhanced regulations for Permian Water disposal could impact future permit applications, although the company has legacy permits that mitigate immediate risks.
Economic Factors: Uncertainty in oil prices may affect customer activity levels and overall business performance, with a noted decline in skim oil revenues due to lower crude prices.
Competitive Pressures: The company faces competition from other pipeline projects, which may influence market dynamics and customer decisions.
Supply Chain Challenges: Potential delays in growth opportunities due to oil price fluctuations could impact capital spending and operational planning.
Volatility in Earnings: The company has experienced significant volatility in its liquids logistics businesses, which has led to strategic asset sales to stabilize earnings.
Leverage and Capital Structure: The focus on reducing leverage and addressing high-cost capital structures, particularly concerning Class D Preferred Units, presents ongoing financial management challenges.
Asset Sales: Closed on the sale of 18 natural gas liquids terminals and monetized several non-core assets, allowing focus on core operations.
Biodiesel Business Wind Down: Completed the full wind down of the biodiesel business, eliminating $75 million to over $100 million of working capital.
Debt Reduction: Paid off outstanding indebtedness on ABL and purchased 20,000 units of Class D Preferreds at a discount.
Portfolio Right-Sizing: Continuing to right size the portfolio and organization, looking for further asset footprint reduction in the Liquids Logistics segment.
Water Solutions Growth: Achieved record water disposal volumes and adjusted EBITDA, with 85% of adjusted EBITDA expected from this segment.
Fiscal Year 2026 EBITDA Guidance: Guiding EBITDA of $615 million to $625 million for fiscal year 2026.
Capital Expenditures: Total capital expenditures of $105 million, with $60 million allocated for growth projects in the Water Solutions segment.
Water Solutions Volume Expectations: Water disposal volumes are ahead of internal expectations, with 90% of volumes committed through acreage dedications and MVCs.
Class D Preferred Units: Focus on reducing Class D preferred units to simplify capital structure and increase free cash flow.
Dividend Arrearages Paid Off: In February 2024, the company paid off dividend arrearages on all three classes of its outstanding preferred units, totaling $475,000,000.
Class D Preferred Units Purchased: The company purchased 20,000 units of Class D Preferreds in the open market at a discount.
Focus on Class D Preferreds: The company is prioritizing the reduction of Class D preferred units in its capital structure.
Share Repurchase Program: The company mentioned being opportunistic with share repurchases but emphasized that the focus is currently on Class D preferreds.
The earnings call summary and Q&A reveal strong performance in the Water Solutions segment and strategic repurchases of units, indicating positive financial health. The reaffirmation of full-year EBITDA guidance and potential for guidance revision add optimism. Risks are acknowledged but seem manageable. The Q&A supports a positive sentiment with clear responses and no evasive answers. The unit repurchase plan and Class D preferred units repurchase enhance shareholder returns, contributing to a positive outlook.
The earnings call presents a mixed picture. Positive aspects include increased EBITDA driven by Water Solutions and successful repurchase plans. However, challenges like declining Grand Mesa pipeline volumes, reduced Liquids Logistics EBITDA, and reliance on butane blending pose concerns. The Q&A shows management's strategic flexibility, but lack of clear guidance and dependency on market conditions add uncertainty. Overall, the positives and negatives balance out, suggesting a neutral stock price movement.
The company's strong financial performance, with EBITDA exceeding guidance and increased water disposal volumes, is a positive indicator. Despite some segment declines, the overall financial health is solid. Asset sales have provided significant capital, and the focus on reducing leverage by repurchasing preferred shares is prudent. While management's responses in the Q&A lacked clarity on some points, the market strategy and financial health remain strong, supporting a positive sentiment.
The earnings call shows mixed results: strong performance in Water Solutions and exceeding EBITDA guidance are positives, but declines in Crude and Liquids Logistics, along with unclear management responses, create uncertainty. The market's reaction may be tempered by these mixed signals, leading to a neutral stock price movement.
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