NGL 10-Q Quarterly Report Sept. 30, 2019

NGL ENERGY PARTNERS LP

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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 September 30, 2019



☐	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 November 4, 2019, there were 128,040,420 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 September 30, 2019 and March 31, 2019	3
	Unaudited Condensed Consolidated Statements of Operations for the three months and six months ended September 30, 2019 and 2018	4
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months and six months ended September 30, 2019 and 2018	5
	Unaudited Condensed Consolidated Statements of Changes in Equity for the three months and six months ended September 30, 2019 and 2018	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2019 and 2018	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	56
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	89
Item 4.	Controls and Procedures	90
PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	91
Item 1A.	Risk Factors	91
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91
Item 3.	Defaults Upon Senior Securities	91
Item 4.	Mine Safety Disclosures	91
Item 5.	Other Information	91
Item 6.	Exhibits	92
SIGNATURES		94

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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:


•	the prices of crude oil, natural gas liquids, gasoline, diesel, ethanol, and biodiesel;


•	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, ethanol, and biodiesel;


•	the level of crude oil and natural gas drilling and production in areas where we have water treatment and disposal facilities;


•	the price of gasoline relative to the price of corn, which affects the price of ethanol;


•	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, ethanol, 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, wastewater disposal, 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 marketers;


•	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, wastewater disposal, recycling, and discharge services;


•	the ability to renew leases for our leased equipment and storage facilities;

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•	the nonpayment or nonperformance 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 hydrocarbons recovered during the wastewater 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;


•	any reduction or the elimination of the federal Renewable Fuel Standard; 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, 2019.

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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)



	September 30, 2019			March 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	21,154		$	18,572
Accounts receivable-trade, net of allowance for doubtful accounts of $4,773 and $4,016, respectively	987,875			998,203
Accounts receivable-affiliates	14,374			12,867
Inventories	308,793			252,770
Prepaid expenses and other current assets	199,002			142,811
Assets held for sale	—			387,450
Total current assets	1,531,198			1,812,673
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $469,229 and $417,457, respectively	2,485,880			1,828,940
GOODWILL	1,176,042			1,113,149
INTANGIBLE ASSETS, net of accumulated amortization of $566,054 and $503,117, respectively	1,194,581			800,889
INVESTMENTS IN UNCONSOLIDATED ENTITIES	1,445			1,127
OPERATING LEASE RIGHT-OF-USE ASSETS	203,122			—
OTHER NONCURRENT ASSETS	71,755			113,857
ASSETS HELD FOR SALE	—			231,858
Total assets	$	6,664,023		$	5,902,493
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade	$	842,064		$	879,063
Accounts payable-affiliates	24,542			28,469
Accrued expenses and other payables	336,126			191,731
Advance payments received from customers	27,045			8,461
Current maturities of long-term debt	649			648
Operating lease obligations	68,084			—
Liabilities held for sale	—			142,781
Total current liabilities	1,298,510			1,251,153
LONG-TERM DEBT, net of debt issuance costs of $20,581 and $12,008, respectively, and current maturities	2,773,235			2,160,133
OPERATING LEASE OBLIGATIONS	132,132			—
OTHER NONCURRENT LIABILITIES	64,487			63,575
COMMITMENTS AND CONTINGENCIES (NOTE 9)

CLASS A 10.75% CONVERTIBLE PREFERRED UNITS, 0 and 19,942,169 preferred units issued and outstanding, respectively	—			149,814
CLASS D 9.00% PREFERRED UNITS, 400,000 and 0 preferred units issued and outstanding, respectively	343,748			—

EQUITY:
General partner, representing a 0.1% interest, 128,169 and 124,633 notional units, respectively	(51,014		)	(50,603		)
Limited partners, representing a 99.9% interest, 128,040,420 and 124,508,497 common units issued and outstanding, respectively	1,697,015			2,067,197
Class B preferred limited partners, 12,585,642 and 8,400,000 preferred units issued and outstanding, respectively	305,488			202,731
Class C preferred limited partners, 1,800,000 and 0 preferred units issued and outstanding, respectively	42,905			—
Accumulated other comprehensive loss	(264		)	(255		)
Noncontrolling interests	57,781			58,748
Total equity	2,051,911			2,277,818
Total liabilities and equity	$	6,664,023		$	5,902,493

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 September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
REVENUES:
Crude Oil Logistics	$	641,152		$	860,054		$	1,357,312		$	1,643,884
Water Solutions	101,249			79,764			173,032			155,909
Liquids	328,509			550,442			676,156			1,010,339
Refined Products and Renewables	3,218,162			3,625,123			7,248,742			6,564,168
Other	264			592			519			747
Total Revenues	4,289,336			5,115,975			9,455,761			9,375,047
COST OF SALES:
Crude Oil Logistics	569,699			792,735			1,218,939			1,540,980
Water Solutions	(6,496		)	7,892			(9,303		)	22,161
Liquids	296,246			520,944			613,598			961,459
Refined Products and Renewables	3,197,492			3,622,915			7,228,208			6,625,845
Other	435			718			900			987
Total Cost of Sales	4,057,376			4,945,204			9,052,342			9,151,432
OPERATING COSTS AND EXPENSES:
Operating	75,433			58,510			137,529			112,977
General and administrative	43,908			39,328			64,250			61,669
Depreciation and amortization	63,113			52,598			116,867			104,490
Loss on disposal or impairment of assets, net	3,111			5,988			2,144			107,323
Revaluation of liabilities	—			—			—			800
Operating Income (Loss)	46,395			14,347			82,629			(163,644		)
OTHER INCOME (EXPENSE):
(Loss) equity in earnings of unconsolidated entities	(265		)	379			(257		)	598
Interest expense	(45,016		)	(41,358		)	(84,910		)	(87,625		)
Loss on early extinguishment of liabilities, net	—			—			—			(137		)
Other income (expense), net	184			1,301			1,193			(32,602		)
Income (Loss) From Continuing Operations Before Income Taxes	1,298			(25,331		)	(1,345		)	(283,410		)
INCOME TAX EXPENSE	(640		)	(691		)	(319		)	(1,342		)
Income (Loss) From Continuing Operations	658			(26,022		)	(1,664		)	(284,752		)
(Loss) Income From Discontinued Operations, net of Tax	(202,024		)	380,961			(191,663		)	470,402
Net (Loss) Income	(201,366		)	354,939			(193,327		)	185,650
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	129			518			397			863
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS	—			48			—			446
NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	(201,237	)	$	355,505		$	(192,930	)	$	186,959
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3)	$	(16,295	)	$	(49,466	)	$	(147,714	)	$	(327,764	)
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS (NOTE 3)	$	(201,822	)	$	380,627		$	(191,471	)	$	470,377
NET (LOSS) INCOME ALLOCATED TO COMMON UNITHOLDERS	$	(218,117	)	$	331,161		$	(339,185	)	$	142,613
BASIC (LOSS) INCOME PER COMMON UNIT
Loss From Continuing Operations	$	(0.13	)	$	(0.40	)	$	(1.17	)	$	(2.69	)
(Loss) Income From Discontinued Operations, net of Tax	(1.59		)	3.10			(1.51		)	3.86
Net (Loss) Income	$	(1.72	)	$	2.70		$	(2.68	)	$	1.17
DILUTED (LOSS) INCOME PER COMMON UNIT
Loss From Continuing Operations	$	(0.13	)	$	(0.40	)	$	(1.17	)	$	(2.69	)
(Loss) Income From Discontinued Operations, net of Tax	(1.59		)	3.10			(1.51		)	3.86
Net (Loss) Income	$	(1.72	)	$	2.70		$	(2.68	)	$	1.17
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING	126,979,034			122,380,197			126,435,870			121,964,593
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING	126,979,034			122,380,197			126,435,870			121,964,593

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 September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
Net (loss) income	$	(201,366	)	$	354,939		$	(193,327	)	$	185,650
Other comprehensive loss	(46		)	(13		)	(9		)	(24		)
Comprehensive (loss) income	$	(201,412	)	$	354,926		$	(193,336	)	$	185,626

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 and Six Months Ended September 30, 2019

(in Thousands, except unit amounts)



				Limited Partners
				Preferred			Common					Accumulated Other
	General Partner			Units	Amount		Units		Amount			Comprehensive Income (Loss)			Noncontrolling Interests			Total 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 (Note 10)	(85		)	—	—		—		(63,274		)	—			—			(63,359		)
Issuance of Class C preferred units, net of offering costs (Note 10)	—			1,800,000	42,638		—		—			—			—			42,638
Equity issued pursuant to incentive compensation plan (Note 10)	—			—	—		—		2,752			—			—			2,752
Warrants exercised (Note 10)	—			—	—		1,458,371		15			—			—			15
Accretion of beneficial conversion feature of Class A convertible preferred units (Note 10)	—			—	—		—		(36,517		)	—			—			(36,517		)
Class A convertible preferred units redemption - amount paid in excess of carrying value (Note 10)	—			—	—		—		(78,797		)	—			—			(78,797		)
Investment in NGL Energy Holdings LLC (Note 13)	—			—	—		—		(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
Distributions to general and common unit partners and preferred unitholders (Note 10)	(85		)	—	—		—		(55,025		)	—			—			(55,110		)
Sawtooth joint venture	—			—	—		—		—			—			(570		)	(570		)
Common unit repurchases and cancellations (Note 10)	—			—	—		(78,229	)	(1,098		)	—			—			(1,098		)
Issuance of Class B preferred units, net of offering costs (see Note 10)	—			4,185,642	102,757		—		—			—			—			102,757
Class C preferred units issuance costs	—			—	267		—		—			—			—			267
Issuance of warrants, net of offering costs (Note 10)	—			—	—		—		41,685			—			—			41,685
Equity issued pursuant to incentive compensation plan (Note 10)	27			—	—		2,151,781		26,566			—			—			26,593
Investment in NGL Energy Holdings LLC (Note 13)	—			—	—		—		(11,466		)	—			—			(11,466		)
Net loss	(183		)	—	—		—		(201,054		)	—			(129		)	(201,366		)
Other comprehensive loss	—			—	—		—		—			(46		)	—			(46		)
BALANCES AT SEPTEMBER 30, 2019	$	(51,014	)	14,385,642	$	348,393	128,040,420		$	1,697,015		$	(264	)	$	57,781		$	2,051,911

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 and Six Months Ended September 30, 2018

(in Thousands, except unit amounts)



				Limited Partners
				Preferred			Common					Accumulated Other
	General Partner			Units	Amount		Units		Amount			Comprehensive Income (Loss)			Noncontrolling Interests			Total Equity
BALANCES AT MARCH 31, 2018	$	(50,819	)	8,400,000	$	202,731	121,472,725		$	1,852,495		$	(1,815	)	$	83,503		2,086,095
Distributions to general and common unit partners and preferred unitholders	(82		)	—	—		—		(58,548		)	—			—			(58,630		)
Contributions	—			—	—		—		—			—			169			169
Sawtooth joint venture	—			—	—		—		(63		)	—			63			—
Purchase of noncontrolling interest	—			—	—		—		(33		)	—			(3,927		)	(3,960		)
Redeemable noncontrolling interest valuation adjustment	—			—	—		—		(3,300		)	—			—			(3,300		)
Repurchase of warrants	—			—	—		—		(14,988		)	—			—			(14,988		)
Equity issued pursuant to incentive compensation plan	—			—	—		50,992		4,619			—			—			4,619
Warrants exercised	—			—	—		228,797		2			—			—			2
Accretion of beneficial conversion feature of Class A convertible preferred units	—			—	—		—		(8,983		)	—			—			(8,983		)
Net loss	(155		)	—	—		—		(168,391		)	—			(345		)	(168,891		)
Other comprehensive loss	—			—	—		—		—			(11		)	—			(11		)
Cumulative effect adjustment for adoption of ASC 606	139			—	—		—		139,167			—			—			139,306
Cumulative effect adjustment for adoption of ASU 2016-01	(2		)	—	—		—		(1,567		)	1,569			—			—
BALANCES AT JUNE 30, 2018	(50,919		)	8,400,000	202,731		121,752,514		1,740,410			(257		)	79,463			1,971,428
Distributions to general and common unit partners and preferred unitholders	(82		)	—	—		—		(58,774		)	—			—			(58,856		)
Redeemable noncontrolling interest valuation adjustment	—			—	—		—		(49		)	—			—			(49		)
Common unit repurchases and cancellations	—			—	—		(4,661	)	(54		)	—			—			(54		)
Equity issued pursuant to incentive compensation plan	21			—	—		1,993,609		22,753			—			—			22,774
Accretion of beneficial conversion feature of Class A convertible preferred units	—			—	—		—		(12,803		)	—			—			(12,803		)
Net income (loss)	367			—	—		—		355,138			—			(518		)	354,987
Other comprehensive loss	—			—	—		—		—			(13		)	—			(13		)
BALANCES AT SEPTEMBER 30, 2018	$	(50,613	)	8,400,000	$	202,731	123,741,462		$	2,046,621		$	(270	)	$	78,945		$	2,277,414

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

Table of Contents

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in Thousands)



	Six Months Ended September 30,
	2019			2018
OPERATING ACTIVITIES:
Net (loss) income	$	(193,327	)	$	185,650
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Loss (income) from discontinued operations, net of tax	191,663			(470,402		)
Depreciation and amortization, including amortization of debt issuance costs	121,697			109,661
Loss on early extinguishment or revaluation of liabilities, net	—			937
Non-cash equity-based compensation expense	24,996			24,730
Loss on disposal or impairment of assets, net	2,144			107,323
Provision for doubtful accounts	767			163
Net adjustments to fair value of commodity derivatives	(54,229		)	56,698
Equity in earnings of unconsolidated entities	257			(598		)
Lower of cost or market value adjustment	979			131
Other	445			624
Changes in operating assets and liabilities, exclusive of acquisitions:
Accounts receivable-trade and affiliates	7,836			(385,782		)
Inventories	(60,121		)	(105,639		)
Other current and noncurrent assets	(35,899		)	(6,132		)
Accounts payable-trade and affiliates	(41,637		)	181,650
Other current and noncurrent liabilities	13,736			60,072
Net cash used in operating activities-continuing operations	(20,693		)	(240,914		)
Net cash provided by operating activities-discontinued operations	16,205			153,033
Net cash used in operating activities	(4,488		)	(87,881		)
INVESTING ACTIVITIES:
Capital expenditures	(259,075		)	(193,519		)
Acquisitions, net of cash acquired	(647,048		)	(197,971		)
Net settlements of commodity derivatives	49,293			(59,119		)
Proceeds from sales of assets	1,982			8,204
Proceeds from divestitures of businesses and investments, net	—			18,594
Investments in unconsolidated entities	(1,015		)	(92		)
Distributions of capital from unconsolidated entities	439			—
Repayments on loan for natural gas liquids facility	3,022			4,558
Loan to affiliate	—			(1,515		)
Deposit paid to acquire business	(49,875		)	—
Net cash used in investing activities-continuing operations	(902,277		)	(420,860		)
Net cash provided by investing activities-discontinued operations	269,063			810,019
Net cash (used in) provided by investing activities	(633,214		)	389,159
FINANCING ACTIVITIES:
Proceeds from borrowings under Revolving Credit Facility	2,198,000			2,008,000
Payments on Revolving Credit Facility	(2,276,000		)	(2,153,500		)
Issuance of senior unsecured notes and term credit agreement	700,000			—
Repayment and repurchase of senior unsecured notes	—			(5,069		)
Payments on other long-term debt	(326		)	(326		)
Debt issuance costs	(10,446		)	(780		)
Contributions from noncontrolling interest owners, net	—			169
Distributions to general and common unit partners and preferred unitholders	(117,386		)	(117,486		)
Distributions to noncontrolling interest owners	(570		)	—
Proceeds from sale of preferred units, net of offering costs	428,338			—
Payments for redemption of preferred units	(265,128		)	—
Repurchase of warrants	—			(14,988		)
Common unit repurchases and cancellations	(1,098		)	(54		)
Payments for settlement and early extinguishment of liabilities	(1,273		)	(2,639		)
Investment in NGL Energy Holdings LLC	(13,827		)	—
Net cash provided by (used in) financing activities-continuing operations	640,284			(286,673		)
Net cash used in financing activities-discontinued operations	—			(325		)
Net cash provided by (used in) financing activities	640,284			(286,998		)
Net increase in cash and cash equivalents	2,582			14,280
Cash and cash equivalents, beginning of period	18,572			22,094
Cash and cash equivalents, end of period	$	21,154		$	36,374
Supplemental cash flow information:
Cash interest paid	$	65,615		$	82,690
Income taxes paid (net of income tax refunds)	$	3,237		$	1,368
Supplemental non-cash investing and financing activities:
Distributions declared but not paid to Class B and Class C preferred unitholders	$	8,162		$	4,725
Accrued capital expenditures	$	48,393		$	21,508

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

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 September 30, 2019, our operations included:


•	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, trucking, marine and pipeline transportation services through its owned assets.

•

Our Water Solutions segment provides services for the treatment and disposal of wastewater generated from crude oil and natural gas production and for the disposal of solids such as tank bottoms, drilling fluids and drilling muds and performs truck and frac tank washouts. In addition, our Water Solutions segment sells the recovered hydrocarbons that result from performing these services and sells freshwater to producers for exploration and production activities.

•

Our Liquids segment supplies natural gas liquids to retailers, wholesalers, refiners, and petrochemical plants throughout the United States and in Canada using its leased underground storage and fleet of leased railcars, markets regionally through its 27 owned terminals throughout the United States, and provides terminaling and storage services at its salt dome storage facility joint venture in Utah.

•

Our Refined Products and Renewables segment conducts gasoline, diesel, ethanol, and biodiesel marketing operations, purchases refined petroleum and renewable products primarily in the Gulf Coast, Southeast and Midwest regions of the United States and schedules them for delivery at various locations throughout the country. In addition, in certain storage locations, our Refined Products and Renewables segment may also purchase unfinished gasoline blending components for subsequent blending into finished gasoline to supply our marketing business as well as third parties. See below for a discussion of the sale of a portion of our Refined Products and Renewables segment.

Recent Developments

On September 30, 2019, we completed the sale of TransMontaigne Product Services, LLC (“TPSL”) and associated assets to Trajectory Acquisition Company, LLC (“Trajectory”) for total consideration of approximately $275.5 million, including equity consideration, inventory and net working capital. TPSL makes up a portion of our Refined Products and Renewables segment. The divested assets include (i) TPSL Terminaling Services Agreement with TransMontaigne Partners LP, including the exclusive rights to utilize 19 terminals; (ii) line space along Colonial and Plantation Pipelines; (iii) two wholly-owned refined products terminals in Georgia that we acquired in January 2019 and multiple third-party throughput agreements; and (iv) all associated customer contracts, inventory and other working capital associated with the assets. This transaction represents a strategic shift in our operations and will have a significant effect on our operations and financial results going forward. Accordingly, the results of operations and cash flows related to TPSL have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows. In addition, the assets and liabilities related to TPSL have been classified as held for sale in our March 31, 2019 unaudited condensed consolidated balance sheet.

As previously disclosed, on July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior Plus Corp. (“Superior”) for total consideration of $889.8 million in cash. We retained our 50% ownership interest in Victory Propane, LLC (“Victory Propane”), which we subsequently sold on August 14, 2018. This transaction represented a strategic shift in our operations and will have a significant effect on our operations and financial results going forward. Accordingly, the results of operations and cash flows related to our former Retail Propane segment (including equity in earnings of Victory Propane) have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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, 2019 was derived from our audited consolidated financial statements for the fiscal year ended March 31, 2019 included in our Annual Report on Form 10-K (“Annual Report”) filed with the SEC on May 30, 2019.

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, 2020.

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 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.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Fair value is based upon assumptions that market participants would use when pricing an asset or liability. We use the following fair value hierarchy, which prioritizes valuation technique inputs used to measure fair value into three broad levels:


•	Level 1: Quoted prices in active markets for identical assets and liabilities that we have the ability to access at the measurement date.


•	Level 2: Inputs (other than quoted prices included within Level 1) that are either directly or indirectly observable for the asset or liability, including (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

prices for identical or similar assets or liabilities in inactive markets, (iii) inputs other than quoted prices that are observable for the asset or liability, and (iv) inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include non-exchange traded derivatives such as over-the-counter commodity price swap and option contracts and forward commodity contracts. We determine the fair value of all of our derivative financial instruments utilizing pricing models for similar instruments. Inputs to the pricing models include publicly available prices and forward curves generated from a compilation of data gathered from third parties.


•	Level 3: Unobservable inputs for the asset or liability including situations where there is little, if any, market activity for the asset or liability.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to a fair value measurement requires judgment, considering factors specific to the asset or liability.

Derivative Financial Instruments

We record all derivative financial instrument contracts at fair value in our unaudited condensed consolidated balance sheets except for certain physical contracts that qualify for 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.

We have not designated any financial instruments as hedges for accounting purposes. 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.

We utilize various commodity derivative financial instrument contracts to attempt to reduce our exposure to price fluctuations. We do not enter into such contracts for trading purposes. Changes in assets and liabilities from commodity derivative financial instruments result primarily from changes in market prices, newly originated transactions, and the timing of settlements and are reported within cost of sales on the unaudited condensed consolidated statements of operations, along with related settlements. We attempt to balance our contractual portfolio in terms of notional amounts and timing of performance and delivery obligations. However, net unbalanced positions can exist or are established based on our assessment of anticipated market movements. Inherent in the resulting contractual portfolio are 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.

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 certain taxable corporate subsidiaries in the United States and Canada, and our operations in Texas are subject to a state franchise tax that is calculated based on revenues net of cost of sales.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

We have a deferred tax liability of $12.6 million at September 30, 2019 as a result of acquiring a corporation in connection with one 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 for the six months ended September 30, 2019 was $1.0 million with an effective tax rate of 24.9%.

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 September 30, 2019 or March 31, 2019.

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.

Inventories consist of the following at the dates indicated:



	September 30, 2019		March 31, 2019
	(in thousands)
Crude oil	$	62,794	$	51,359
Natural gas liquids:
Propane	49,060		33,478
Butane	35,386		15,294
Other	8,238		7,482
Refined products:
Gasoline	106,083		87,661
Diesel	23,751		37,791
Renewables:
Ethanol	10,790		14,955
Biodiesel	12,691		4,750
Total	$	308,793	$	252,770

Amounts as of March 31, 2019 in the table above do not include inventory related to TPSL, as these amounts have been classified as current assets held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

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. Under the equity method, we do not report the individual assets and liabilities of these entities on our unaudited condensed consolidated balance sheets; instead, our ownership interests are reported within investments in unconsolidated entities on our unaudited condensed consolidated balance sheets. Under the equity method, the investment is recorded at acquisition cost, increased by our proportionate share of any earnings and additional capital contributions and decreased by our proportionate share of any losses, distributions paid, and amortization of any excess investment. Excess investment is the amount by which our total investment exceeds our proportionate share of the net assets of the investee.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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



Entity	Segment	Ownership Interest (1)	Date Acquired	September 30, 2019		March 31, 2019
				(in thousands)
Aircraft rental company (2)	Corporate and Other	50%	June 2019	$	796	$	—
Water services company (3)	Water Solutions	50%	August 2018	480		920
Natural gas liquids terminal company (4)	Liquids	50%	March 2019	169		207
Total				$	1,445	$	1,127


(1)	Ownership interest percentages are at September 30, 2019.


(2)	This is an investment with a related party. See Note 13 for a further discussion.


(3)	This is an investment that we acquired as part of an acquisition in August 2018.


(4)	This is an investment that we acquired as part of an acquisition in March 2019.

Other Noncurrent Assets

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



	September 30, 2019		March 31, 2019
	(in thousands)
Loan receivable (1)	$	12,637	$	19,474
Line fill (2)	33,437		33,437
Minimum shipping fees - pipeline commitments (3)	—		23,494
Other	25,681		37,452
Total	$	71,755	$	113,857

(1)

Represents the noncurrent portion of a loan receivable associated with our interest in the construction of a natural gas liquids loading/unloading facility that is utilized by a third party that filed for Chapter11 bankruptcy during the three months ended September 30, 2019. As of September 30, 2019, we are owed a total of $26.4 million under this loan receivable, of which $16.5 million is recorded within prepaid expenses and other current assets in our unaudited condensed unconsolidated balance sheet. Our loan receivable is secured by a lien interest on the natural gas liquids loading/unloading facility. We have filed our Proof of Claim within the bankruptcy case and while the third party may have the option to reject the receivable in the context of the bankruptcy proceeding, we believe, that due to the importance of the natural gas liquids loading/unloading facility to the third party’s overall business it will keep our note receivable in place once it emerges from bankruptcy or effectuates an asset sale and that we will be paid the full amount owed. We will continue to monitor the bankruptcy case as it progresses. The remaining amount represents the noncurrent portion of a loan receivable with Victory Propane.

(2)

Represents minimum volumes of product we are required to leave on certain third-party owned pipelines under long-term shipment commitments. At September 30, 2019, line fill consisted of 335,069 barrels of crude oil and 262,000 barrels of propane. At March 31, 2019, 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 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). At June 30, 2019, the deficiency credit of $23.5 million was reclassified to prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet. In October 2019, we extended our commitment with this crude oil pipeline operator and this extension provides us with an additional 5.5 years in which to use the deficiency credit (see Note 9).

Amounts as of March 31, 2019 in the table above do not include other noncurrent assets related to TPSL, as these amounts have been classified as noncurrent assets held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Accrued Expenses and Other Payables

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



	September 30, 2019		March 31, 2019
	(in thousands)
Accrued compensation and benefits	$	16,174	$	19,312
Excise and other tax liabilities	12,737		10,481
Derivative liabilities	31,108		88,932
Accrued interest	39,865		24,882
Product exchange liabilities	7,486		5,945
Gavilon legal matter settlement (Note 9)	12,500		12,500
Contingent consideration liability (Note 4)	190,000		—
Other	26,256		29,679
Total	$	336,126	$	191,731

Amounts as of March 31, 2019 in the table above do not include accrued expenses and other payables related to TPSL, as these amounts have been classified as current liabilities held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

Noncontrolling Interests

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties. Amounts are adjusted by the noncontrolling interest holder’s proportionate share of the subsidiaries’ earnings or losses each period and any distributions that are paid. Noncontrolling interests are reported as a component of equity.

Acquisitions

To determine if a transaction should be accounted for as a business combination or an acquisition of assets, we first calculate the relative fair values of the assets acquired. If substantially all of the relative fair value is concentrated in a single asset or group of similar assets, or if not but the transaction does not include a significant process (does not meet the definition of a business), we record the transaction as an acquisition of assets. For acquisitions of assets, the purchase price is allocated based on the relative fair values. For an acquisition of assets, goodwill is not recorded. All other transactions are recorded as business combinations. We record the assets acquired and liabilities assumed in a business combination at their acquisition date fair values. For a business combination, the excess of the purchase price over the net fair value of acquired assets and assumed liabilities is recorded as goodwill, which is not amortized but instead is evaluated for impairment at least annually.

Pursuant to GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination. As discussed in Note 4, certain of our acquisitions are still within this measurement period, and as a result, the acquisition date fair values we have recorded for the assets acquired and liabilities assumed are subject to change.

Also, as discussed in Note 4, we made certain adjustments during the six months ended September 30, 2019 to our estimates of the acquisition date fair values of the assets acquired and liabilities assumed in business combinations that occurred during the fiscal year ended March 31, 2019.

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.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Recent Accounting Pronouncements

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 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. The ASU is effective for the Partnership beginning April 1, 2020, and requires a modified retrospective method of adoption, although early adoption is permitted. We are currently in the process of assessing the impact of this ASU on our consolidated financial statements.

In February 2016, the FASB issued ASC 842, “Leases.” This ASU replaced previous lease accounting guidance in GAAP. The new guidance requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. It also retains a distinction between finance leases and operating leases. For lessors, the new accounting model remains largely the same, although some changes have been made to align it with the new lessee model and the ASC 606 revenue recognition guidance. We adopted ASC 842 effective April 1, 2019 using the modified retrospective method, with no adjustment to comparative period information, which remains reported under ASC 840, and no cumulative effect adjustment to equity. See Note 15 for a further discussion of the impact of adoption of ASC 842 to our unaudited condensed consolidated financial statements.

Note 3—(Loss) Income 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 September 30,		Six Months Ended September 30,
	2019	2018	2019	2018
Weighted average common units outstanding during the period:
Common units - Basic	126,979,034	122,380,197	126,435,870	121,964,593
Common units - Diluted	126,979,034	122,380,197	126,435,870	121,964,593

All securities that could be potentially dilutive were anti-dilutive for all periods presented.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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



	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands, except unit and per unit amounts)
Income (loss) from continuing operations	$	658		$	(26,022	)	$	(1,664	)	$	(284,752	)
Less: Continuing operations loss attributable to noncontrolling interests	129			518			397			863
Net income (loss) from continuing operations attributable to NGL Energy Partners LP	787			(25,504		)	(1,267		)	(283,889		)
Less: Distributions to preferred unitholders (1)	(17,063		)	(23,977		)	(146,523		)	(44,134		)
Less: Continuing operations net (income) loss allocated to general partner (2)	(19		)	15			76			259
Net loss from continuing operations allocated to common unitholders	$	(16,295	)	$	(49,466	)	$	(147,714	)	$	(327,764	)

(Loss) income from discontinued operations, net of tax	$	(202,024	)	$	380,961		$	(191,663	)	$	470,402
Less: Discontinued operations loss attributable to redeemable noncontrolling interests	—			48			—			446
Less: Discontinued operations loss (income) allocated to general partner (2)	202			(382		)	192			(471		)
Net (loss) income from discontinued operations allocated to common unitholders	$	(201,822	)	$	380,627		$	(191,471	)	$	470,377

Net (loss) income allocated to common unitholders	$	(218,117	)	$	331,161		$	(339,185	)	$	142,613

Basic (loss) income per common unit
Loss from continuing operations	$	(0.13	)	$	(0.40	)	$	(1.17	)	$	(2.69	)
(Loss) income from discontinued operations, net of tax	(1.59		)	3.10			(1.51		)	3.86
Net (loss) income	$	(1.72	)	$	2.70		$	(2.68	)	$	1.17
Diluted (loss) income per common unit
Loss from continuing operations	$	(0.13	)	$	(0.40	)	$	(1.17	)	$	(2.69	)
(Loss) income from discontinued operations, net of tax	(1.59		)	3.10			(1.51		)	3.86
Net (loss) income	$	(1.72	)	$	2.70		$	(2.68	)	$	1.17
Basic weighted average common units outstanding	126,979,034			122,380,197			126,435,870			121,964,593
Diluted weighted average common units outstanding	126,979,034			122,380,197			126,435,870			121,964,593


(1)	This amount includes distributions to preferred unitholders, the final accretion for the beneficial conversion of the Class A Preferred Units and the excess of the Class A Preferred Units repurchase price over the carrying value of the units, as discussed further in Note 10.


(2)	Net (income) 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 our acquisitions during the six months ended September 30, 2019:

Mesquite Acquisition

On July 2, 2019, we acquired all of the assets of Mesquite Disposals Unlimited, LLC (“Mesquite”) (including 34 saltwater disposal wells). The purchase price was comprised of (i) $592.5 million in cash, (ii) the issuance of $102.8 million of our Class B Preferred Units (as defined herein) and (iii) additional cash payments of $200.0 million to be paid in two deferred installments contingent on the average daily volume of wastewater processed utilizing the assets being acquired. Mesquite SWD Inc. will remain the operator of the Mesquite assets led by Mesquite’s current management team. The assets consist of a fully interconnected produced water pipeline transportation and disposal system in Eddy and Lea Counties, New Mexico, and Loving County, Texas.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

To determine our preliminary purchase price of $885.3 million, we included the fair value of the deferred payments at the date of acquisition of $190.0 million, to the sum of the cash paid and the value of the preferred units issued.

As part of this acquisition, we recorded customer commitment, customer relationship and right-of way intangible assets. We estimated the value of these intangible assets using the income approach, which uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.

The agreement for this acquisition contemplates post-closing payments for certain working capital items. We are accounting for this transaction as a business combination. The following table summarizes the preliminary estimates of the fair values as of September 30, 2019 for the assets acquired and liabilities assumed (in thousands):



Property, plant and equipment	$	377,525
Goodwill	57,782
Intangible assets	454,650
Other noncurrent liabilities	(4,700		)
Fair value of net assets acquired	$	885,257

As of September 30, 2019, the allocation of the purchase price is considered preliminary as we are continuing to gather additional information to (i) finalize the fair values of the property, plant and equipment and intangible assets and (ii) finalize the calculation of asset retirement obligations.

Goodwill represents the excess of the consideration paid for the acquired business over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill represents a premium paid to expand the number of our disposal sites in an oilfield production basin currently serviced by us, thereby enhancing our competitive position as a provider of disposal services in this oilfield production basin. We expect that all of the goodwill will be deductible for federal income tax purposes.

The operations of these water solutions facilities have been included in our unaudited condensed consolidated statement of operations since their acquisition date. Our unaudited condensed consolidated statement of operations for the six months ended September 30, 2019 includes revenues of $25.6 million and operating income of $8.4 million that were generated by the operations of these water solutions facilities. We incurred $5.9 million of transaction costs related to this acquisition during the six months ended September 30, 2019, which is recorded within general and administrative expenses in our unaudited condensed consolidated statement of operations.

Saltwater Water Solutions Facilities

During the six months ended September 30, 2019, we acquired one saltwater disposal facility (including three saltwater disposal wells) for total consideration of approximately $53.0 million.

As part of this acquisition, we recorded customer relationship, favorable contract, non-compete agreement and right-of way intangible assets. We estimated the value of these intangible assets using the income approach, which uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.



Property, plant and equipment	$	24,324
Goodwill	2,413
Intangible assets	26,688
Other noncurrent liabilities	(425		)
Fair value of net assets acquired	$	53,000

As of September 30, 2019, the allocation of the purchase price is considered preliminary as we are continuing to gather additional information to finalize the fair values of the property, plant and equipment and intangible assets.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The operations of these water solutions facilities have been included in our unaudited condensed consolidated statement of operations since their acquisition date. Our unaudited condensed consolidated statement of operations for the six months ended September 30, 2019 includes revenues of $3.4 million and operating income of $0.8 million that were generated by the operations of these water solutions facilities. We incurred less than $0.1 million of transaction costs related to this acquisition during the six months ended September 30, 2019, which is recorded within general and administrative expenses in our unaudited condensed consolidated statement of operations.

During the six months ended September 30, 2019, we also acquired land and two saltwater disposal wells for total consideration of $13.0 million, which we are accounting for as an acquisition of assets. The consideration paid for this transaction was allocated primarily to property, plant and equipment.

The following summarizes the status of the preliminary purchase price allocation of acquisitions prior to April 1, 2019:

Saltwater Water Solutions Facilities

During the three months ended June 30, 2019, we completed the acquisition accounting for all saltwater disposal facilities and saltwater disposal wells acquired during the fiscal year ended March 31, 2019. Due to the receipt of additional information, we recorded a decrease of $2.3 million to intangible assets with the offset recorded to goodwill. There were no other adjustments to the fair value of assets acquired and liabilities assumed during the three months ended June 30, 2019.

Freshwater Water Solutions Facilities

During the three months ended June 30, 2019, we completed the acquisition accounting for four freshwater facilities (including 16 freshwater wells). There were no adjustments to the fair value of assets acquired and liabilities assumed during the three months ended June 30, 2019 for this acquisition.

During the six months ended September 30, 2019, we completed the acquisition accounting for a separate freshwater acquisition. We paid $2.5 million in cash to the sellers during the six months ended September 30, 2019 to complete the settlement of the acquisition. The offset of the cash payment was recorded to goodwill. There were no other adjustments to the fair value of assets acquired and liabilities assumed during the six months ended September 30, 2019.

Natural Gas Liquids Terminal Business

During the six months ended September 30, 2019, we finalized the adjustments related to the working capital items received and recorded a decrease of $2.7 million to inventories, an increase of $0.3 million to other current assets, an increase of $0.1 million to property, plant and equipment, a decrease of $0.9 million to current liabilities and a decrease of $0.5 million to noncurrent liabilities. Also, due to the receipt of additional information, we recorded an increase of $29.0 million to property, plant and equipment, a decrease of $26.9 million to intangible assets and a decrease of $2.1 million to goodwill. The purchase price allocation is still preliminary as we are continuing to finalize the fair value of the property, plant and equipment.

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 Useful Lives			September 30, 2019			March 31, 2019
	(in years)			(in thousands)
Natural gas liquids terminal and storage assets	2	-	30	$	307,886		$	280,106
Pipeline and related facilities	30	-	40	243,882			243,799
Vehicles and railcars	3	-	25	121,168			124,948
Water treatment facilities and equipment	3	-	30	1,101,336			704,666
Crude oil tanks and related equipment	2	-	30	227,829			225,476
Barges and towboats	5	-	30	120,912			103,735
Information technology equipment	3	-	7	32,933			31,831
Buildings and leasehold improvements	3	-	40	145,356			143,711
Land				77,001			62,379
Tank bottoms and line fill (1)				20,339			20,071
Other	3	-	20	15,024			14,870
Construction in progress				541,443			290,805
				2,955,109			2,246,397
Accumulated depreciation				(469,229		)	(417,457		)
Net property, plant and equipment				$	2,485,880		$	1,828,940


(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.

Amounts as of March 31, 2019 in the table above do not include property, plant and equipment and accumulated depreciation related to TPSL, as these amounts have been classified as noncurrent assets held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

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



	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
	(in thousands)
Depreciation expense	$	31,334	$	25,831	$	56,790	$	50,408
Capitalized interest expense	$	—	$	173	$	—	$	322

Amounts in the table above do not include depreciation expense and capitalized interest related to TPSL and our former Retail Propane segment, as these amounts have been classified within discontinued operations in our unaudited condensed consolidated statements of operations (see Note 16).

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

We record (gains) losses from the sales of property, plant and equipment and any write-downs in value due to impairment within loss 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 September 30,					Six Months Ended September 30,
	2019			2018		2019			2018
	(in thousands)
Crude Oil Logistics	$	(257	)	$	3,367	$	(790	)	$	1,326
Water Solutions	3,551			730		3,599			3,205
Liquids	(4		)	1,004		(7		)	994
Total	$	3,290		$	5,101	$	2,802		$	5,525

Note 6—Goodwill

The following table summarizes changes in goodwill by segment during the six months ended September 30, 2019:



	Crude Oil Logistics		Water Solutions		Liquids			Refined Products and Renewables		Total
	(in thousands)
Balances at March 31, 2019	$	579,846	$	410,139	$	103,421		$	19,743	$	1,113,149
Revisions to acquisition accounting (Note 4)	—		4,755		(2,057		)	—		2,698
Acquisitions (Note 4)	—		60,195		—			—		60,195
Balances at September 30, 2019	$	579,846	$	475,089	$	101,364		$	19,743	$	1,176,042

Note 7—Intangible Assets

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



				September 30, 2019							March 31, 2019
Description	Amortizable Lives			Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
	(in years)			(in thousands)
Amortizable:
Customer relationships	3	-	30	$	982,932	$	(406,049	)	$	576,883	$	742,832	$	(369,983	)	$	372,849
Customer commitments	10	-	25	500,000		(92,317		)	407,683		310,000		(74,917		)	235,083
Pipeline capacity rights	30			7,800		(1,517		)	6,283		7,799		(1,387		)	6,412
Rights-of-way and easements	1	-	45	85,001		(5,616		)	79,385		73,409		(4,509		)	68,900
Water rights	13	-	14	64,868		(5,479		)	59,389		64,868		(3,018		)	61,850
Executory contracts and other agreements	5	-	30	55,030		(18,636		)	36,394		47,230		(17,212		)	30,018
Non-compete agreements	2	-	24	19,823		(4,363		)	15,460		12,723		(2,570		)	10,153
Debt issuance costs (1)	5			42,381		(32,077		)	10,304		42,345		(29,521		)	12,824
Total amortizable				1,757,835		(566,054		)	1,191,781		1,301,206		(503,117		)	798,089
Non-amortizable:
Trade names				2,800		—			2,800		2,800		—			2,800
Total				$	1,760,635	$	(566,054	)	$	1,194,581	$	1,304,006	$	(503,117	)	$	800,889


(1)	Includes debt issuance costs related to the Revolving Credit Facility (as defined herein). Debt issuance costs related to fixed-rate notes and Term Credit Agreement (as defined herein) are reported as a reduction of the carrying amount of long-term debt.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Amounts as of March 31, 2019 in the table above do not include intangible assets and accumulated amortization of TPSL, as these amounts have been classified as noncurrent assets held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

The weighted-average remaining amortization period for intangible assets is approximately 16.2 years.

Amortization expense is as follows for the periods indicated:



	Three Months Ended September 30,				Six Months Ended September 30,
Recorded In	2019		2018		2019		2018
	(in thousands)
Depreciation and amortization	$	31,779	$	26,766	$	60,077	$	54,082
Cost of sales	88		101		176		283
Interest expense	1,280		1,225		2,556		2,418
Operating expenses	111		—		262		—
Total	$	33,258	$	28,092	$	63,071	$	56,783

Amounts in the table above do not include amortization expense related to TPSL and our former Retail Propane segment, as these amounts have been classified within discontinued operations within our unaudited condensed consolidated statements of operations (see Note 16).

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



Fiscal Year Ending March 31,
2020 (six months)	$	68,078
2021	124,549
2022	111,700
2023	103,672
2024	97,533
Thereafter	686,249
Total	$	1,191,781

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 8—Long-Term Debt

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



	September 30, 2019							March 31, 2019
	Face Amount		Unamortized Debt Issuance Costs (1)			Book Value		Face Amount		Unamortized Debt Issuance Costs (1)			Book Value
	(in thousands)
Revolving credit facility:
Expansion capital borrowings	$	450,000	$	—		$	450,000	$	275,000	$	—		$	275,000
Working capital borrowings	643,000		—			643,000		896,000		—			896,000
Senior unsecured notes:
7.500% Notes due 2023 ("2023 Notes")	607,323		(6,159		)	601,164		607,323		(6,916		)	600,407
6.125% Notes due 2025 ("2025 Notes")	389,135		(4,665		)	384,470		389,135		(5,092		)	384,043
7.500% Notes due 2026 ("2026 Notes")	450,000		(7,452		)	442,548		—		—			—
Term credit agreement	250,000		(2,305		)	247,695		—		—			—
Other long-term debt	5,007		—			5,007		5,331		—			5,331
	2,794,465		(20,581		)	2,773,884		2,172,789		(12,008		)	2,160,781
Less: Current maturities	649		—			649		648		—			648
Long-term debt	$	2,793,816	$	(20,581	)	$	2,773,235	$	2,172,141	$	(12,008	)	$	2,160,133


(1)	Debt issuance costs related to the Revolving Credit Facility 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 $1.0 million and $1.2 million during the three months ended September 30, 2019 and 2018, respectively, and $1.8 million and $2.5 million during the six months ended September 30, 2019 and 2018.

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



Fiscal Year Ending March 31,
2020 (six months)	$	2,571
2021	3,867
2022	3,854
2023	3,854
2024	3,230
Thereafter	3,205
Total	$	20,581

Credit Agreement

As of September 30, 2019, we were party to a $1.765 billion credit agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement includes a revolving credit facility to fund working capital needs, which had a capacity of $1.250 billion for cash borrowings and letters of credit (the “Working Capital Facility”), and a revolving credit facility to fund acquisitions and expansion projects, which had a capacity of $515.0 million (the “Expansion Capital Facility,” and together with the Working Capital Facility, the “Revolving Credit Facility”). We had letters of credit of $189.6 million on the Working Capital Facility at September 30, 2019. 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.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

On October 30, 2019, we amended the Credit Agreement, to, among other things, adjust the allocation of the commitments of the lenders to make revolving loans thereunder and, effective with the fiscal quarter ending December 31, 2019, eliminate the leverage ratio financial covenant (as defined in the Credit Agreement) and adjust the senior secured leverage ratio (as defined in the Credit Agreement), interest coverage ratio (as defined in the Credit Agreement) and total leverage indebtedness ratio financial covenants (as defined in the Credit Agreement). The new debt covenant levels are presented in the table below. As amended, the Credit Agreement provides for up to $1.790 billion in aggregate commitments, consisting of (i) a $600 million Working Capital Facility for working capital requirements and other general corporate purposes and (ii) a $1.190 billion Expansion Capital Facility, for acquisitions, internal growth projects, other capital expenditures and general corporate purposes.

At September 30, 2019, the borrowings under the Credit Agreement had a weighted average interest rate of 4.23%, calculated as the weighted average LIBOR rate of 2.05% plus a margin of 2.00% for LIBOR borrowings and the prime rate of 5.00% plus a margin of 1.00% on alternate base rate borrowings. At September 30, 2019, the interest rate in effect on letters of credit was 2.00%. Commitment fees are charged at a rate ranging from 0.375% to 0.50% on any unused capacity.

The following table summarizes the debt covenant levels specified in the Credit Agreement (as amended):



		Senior Secured	Interest	Total Leverage
Period Beginning	Leverage Ratio (1)	Leverage Ratio (1)	Coverage Ratio (2)	Indebtedness Ratio (1)
September 30, 2019	4.50	3.25	2.75	6.25
December 31, 2019	—	3.50	2.50	5.75
June 30, 2020 and thereafter	—	3.50	2.50	5.50


(1)	Represents the maximum ratio for the period presented.


(2)	Represents the minimum ratio for the period presented.

At September 30, 2019, our leverage ratio was approximately 3.73 to 1, our senior secured leverage ratio was approximately 1.22 to 1, our interest coverage ratio was approximately 3.73 to 1 and our total leverage indebtedness ratio was approximately 4.85 to 1.

We were in compliance with the covenants under the Credit Agreement at September 30, 2019.

Senior Unsecured Notes

On April 9, 2019, we issued $450.0 million of 7.50% Senior Unsecured Notes Due 2026 (the “2026 Notes”) in a private placement. The 2026 Notes bear interest, which is payable on April 15 and October 15 of each year, beginning on October 15, 2019 at 7.50% per annum. We received net proceeds of $442.1 million, after the initial purchasers’ discount of $6.8 million and offering costs of $1.1 million. The 2026 Notes mature on April 15, 2026.

At September 30, 2019, we were in compliance with the covenants under the indentures for all of the Senior Unsecured Notes.

Term Credit Agreement

On July 2, 2019 (the “Closing Date”), we entered into a term credit agreement (the “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. Proceeds from the term loan facility were used to fund a portion of the purchase price for the Mesquite (as defined herein) acquisition (see Note 4).

The commitments under the Term Credit Agreement expire on July 2, 2024. 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 the Borrower’s 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.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

All borrowings under the Term Credit Agreement bear interest, at either (a) an alternate base rate plus (i) during the first three-month period after the Closing Date, margin equal to the applicable margin for alternate base rate loans calculated under our existing revolving credit facility, (ii) 2.00% per annum for the second three-month period after the Closing Date, (iii) 2.25% per annum for the third three-month period after the Closing Date, (iv) 2.50% per annum for the fourth three-month period after the Closing Date, and (v) thereafter, the rate per year such that the alternate base rate equals a rate of interest agreed to between us and the administrative agent, or (b) an adjusted LIBOR rate plus (i) during the first three-month period after the Closing Date, margin equal to the applicable margin for LIBOR rate loans calculated under our existing revolving credit facility, (ii) 3.00% per annum for the second three-month period after the Closing Date, (iii) 3.25% per annum for the third three-month period after the Closing Date, (iv) 3.50% per annum for the fourth three-month period after the Closing Date, and (v) thereafter, such rate per annum such that the adjusted LIBOR rate equals a rate of interest agreed to between us and the administrative agent. At September 30, 2019, the borrowings under the Term Credit Agreement had a weighted average interest rate of 3.79% calculated as the prime rate of 2.04% plus a margin of 1.75%.

The Term Credit Agreement contains various customary representations, warranties and covenants by the Partnership and its subsidiaries, including, without limitation, (i) commencing September 30, 2019, the Partnership and the subsidiary guarantors will be subject to financial covenants limiting leverage, including senior leverage, secured leverage and total leverage, and requiring a minimum interest coverage, (ii) negative covenants limiting indebtedness, liens, equity distributions and fundamental changes 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 Partnership’s existing Revolving Credit Facility, which is described above.

On October 30, 2019, we amended the Term Credit Agreement, to, among other things, conform financial covenants in the Term Credit Agreement to the financial covenants set forth in the amended Credit Agreement, as described above.

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 $5.0 million at September 30, 2019.

Debt Maturity Schedule

The scheduled maturities of our long-term debt are as follows at September 30, 2019:



Fiscal Year Ending March 31,	Revolving Credit Facility		Senior Unsecured Notes		Term Credit Agreement		Other Long-Term Debt		Total
	(in thousands)
2020 (six months)	$	—	$	—	$	—	$	630	$	630
2021	—		—		—		4,377		4,377
2022	1,093,000		—		—		—		1,093,000
2023	—		—		—		—		—
2024	—		607,323		—		—		607,323
Thereafter	—		839,135		250,000		—		1,089,135
Total	$	1,093,000	$	1,446,458	$	250,000	$	5,007	$	2,794,465

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

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

contend that the jury verdict, at least in respect of fraudulent misrepresentation, is not supportable by either controlling law or the evidentiary record. Both defendants have a pending motion for judgment as a matter of law on the fraudulent misrepresentation claim and plan to file post-verdict motions as appropriate before the trial court, and, if need be, will file an appeal to the Delaware Supreme Court. 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 once all information is available to it and after the post-trial and any appellate process has run its course 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 September 30, 2019, we have accrued $2.5 million related to this matter.

We are party to various 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 September 30, 2019, we have an environmental liability, measured on an undiscounted basis, of $2.3 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.

In 2015, as previously disclosed, the U.S. Environmental Protection Agency (“EPA”) informed NGL Crude Logistics, LLC, formerly known as Gavilon, LLC (“Gavilon Energy”), of alleged violations that occurred in 2011 by Gavilon Energy of the Clean Air Act’s renewable fuel standards regulations (prior to its acquisition by us in December 2013). On October 4, 2016, the U.S. Department of Justice, acting at the request of the EPA, filed a civil complaint in the Northern District of Iowa against Gavilon Energy and one of its then suppliers, Western Dubuque Biodiesel LLC (“Western Dubuque”). Consistent with the earlier allegations by the EPA, the civil complaint related to transactions between Gavilon Energy and Western Dubuque and the generation of biodiesel renewable identification numbers (“RINs”) sold by Western Dubuque to Gavilon Energy in 2011. On December 19, 2016, we filed a motion to dismiss the complaint. On January 9, 2017, the EPA filed an amended complaint. The amended complaint seeks an order declaring Western Dubuque’s RINs invalid and requiring the defendants to retire an equivalent number of valid RINs and that the defendants pay statutory civil penalties. On January 23, 2017, we filed a motion to dismiss the amended complaint. On May 24, 2017, the court denied our motion to dismiss. Subsequently, the EPA filed a second amended complaint seeking an order declaring Western Dubuque’s RINs invalid, an order requiring us to retire an equivalent number of valid RINs and an award against us of statutory civil penalties. In May 2018, the parties completed briefing on cross-motions for summary judgment concerning liability issues in the case. On July 3, 2018, the Court denied our summary judgment motion and largely granted the plaintiff’s two summary judgment motions on liability. On July 19, 2018, Gavilon Energy reached an agreement in principle with the EPA regarding the terms of a settlement of the case, which was memorialized in a consent decree lodged to the Court on September 27, 2018. Such terms will result in Gavilon Energy paying cash of $25.0 million and retiring 36 million RINs, over a twelve-month period. The consent decree was approved by the Court on November 8, 2018. The consent decree resolves all matters between Gavilon Energy and the EPA in connection with the above-described complaint. During the fiscal year ended March 31, 2019, we paid the EPA $12.5 million and retired all 36 million RINs. As of September 30, 2019, we have an accrual, which is included within accrued expenses and other payables in our unaudited condensed consolidated balance sheet, of $12.5 million.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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 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, 2019	$	9,723
Liabilities incurred	609
Liabilities assumed in acquisitions	5,125
Liabilities settled	(127		)
Accretion expense	382
Balance at September 30, 2019	$	15,712

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 various noncancelable agreements for product storage, railcar spurs and real estate. The following table summarizes future minimum payments under these agreements at September 30, 2019 (in thousands):



Fiscal Year Ending March 31,
2020 (six months)	$	8,520
2021	12,005
2022	9,621
2023	5,605
2024	4,478
Thereafter	679
Total	$	40,908

Pipeline Capacity Agreements

We have executed 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 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). During September 2019, we extended our commitment with one pipeline operator through March 31, 2025 and in October 2019, we extended our commitment with another pipeline operator through October 31, 2024. Both extensions are backed by long-term purchase agreements. The extension with the second operator also allows us an additional 5.5 years to recapture the minimum shipping deficiency fees discussed above.

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 September 30, 2019 (in thousands):



Fiscal Year Ending March 31,
2020 (six months)	$	21,341
2021	35,314
2022	35,314
2023	35,314
2024	35,410
Thereafter	30,897
Total	$	193,590

Construction Commitments

At September 30, 2019, we had construction commitments of $8.0 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 September 30, 2019, we had the following commodity purchase commitments (in thousands):



	Crude Oil (1)			Natural Gas Liquids
	Value		Volume (in barrels)	Value		Volume (in gallons)
Fixed-Price Commodity Purchase Commitments:
2020 (six months)	$	75,128	1,327	$	15,597	27,786
2021	—		—	1,341		2,100
Total	$	75,128	1,327	$	16,938	29,886

Index-Price Commodity Purchase Commitments:
2020 (six months)	$	731,963	14,717	$	341,410	795,303
2021	226,304		5,212	1,561		3,914
2022	118,158		2,783	—		—
Total	$	1,076,425	22,712	$	342,971	799,217

(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.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

At September 30, 2019, we had the following commodity sale commitments (in thousands):



	Crude Oil			Natural Gas Liquids
	Value		Volume (in barrels)	Value		Volume (in gallons)
Fixed-Price Commodity Sale Commitments:
2020 (six months)	$	75,367	1,310	$	164,900	213,980
2021	—		—	10,257		14,651
2022	—		—	157		204
Total	$	75,367	1,310	$	175,314	228,835

Index-Price Commodity Sale Commitments:
2020 (six months)	$	693,194	12,872	$	607,644	928,007
2021	—		—	13,214		23,254
Total	$	693,194	12,872	$	620,858	951,261

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 $33.9 million of our prepaid expenses and other current assets and $31.0 million of our accrued expenses and other payables at September 30, 2019.

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.

General Partner Contributions

In connection with the issuance of common units for the vesting of restricted units and the warrants that were exercised for common units during the six months ended September 30, 2019, we issued 3,536 notional units to our general partner for less than $0.1 million in order to maintain its 0.1% interest in us.

Equity Issuances

On August 24, 2016, we entered into an equity distribution agreement in connection with an at-the-market program (the “ATM Program”) pursuant to which we may issue and sell up to $200.0 million of common units. We did not sell any common units under the ATM Program during the six months ended September 30, 2019, and approximately $134.7 million remained available for sale under the ATM Program at September 30, 2019. The registration statement applicable to this program expired in July 2019.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Common Unit Repurchase Program

On August 30, 2019, the board of directors of our general partner authorized a common unit repurchase plan, 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 September 30, 2019.

Our Distributions

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



Date Declared	Record Date	Payment Date	Amount Per Unit		Amount Paid/Payable to Limited Partners		Amount Paid/Payable to General Partner
					(in thousands)		(in thousands)
April 24, 2019	May 7, 2019	May 15, 2019	$	0.3900	$	49,127	$	85
July 23, 2019	August 7, 2019	August 14, 2019	$	0.3900	$	49,217	$	85
October 23, 2019	November 7, 2019	November 14, 2019	$	0.3900	$	49,936	$	86

Class A Convertible Preferred Units

In 2016, we received net proceeds of $235.0 million (net of offering costs of $5.0 million) in connection with the issuance of 19,942,169 Class A Convertible Preferred Units (“Class A Preferred Units”) and 4,375,112 warrants.

We allocated the net proceeds on a relative fair value basis to the Class A Preferred Units, which includes the value of a beneficial conversion feature, and warrants. There was no accretion for the beneficial conversion feature, recorded as a deemed distribution, for the three months ended September 30, 2019 as all Class A Preferred units have been redeemed, compared to $12.8 million for the three months ended September 30, 2018 and $36.5 million and $21.8 million during the six months ended September 30, 2019 and 2018, respectively.

On April 5, 2019, we redeemed 7,468,978 of the Class A Preferred Units. The applicable Class A redemption price was $13.389 per Class A Preferred Unit, calculated at 111.25% of $12.035 (the Class A Preferred Unit price), plus accrued but unpaid and accumulated distributions of $0.338. The amount per Class A Preferred Unit paid to each Class A preferred unitholder was $13.727, for a total payment of $102.5 million. On April 5, 2019, all 1,458,371 outstanding warrants to purchase common units were exercised for proceeds of less than $0.1 million.

On May 11, 2019, we redeemed the remaining 12,473,191 outstanding Class A Preferred Units. The applicable Class A redemption price was $13.2385 per Class A Preferred Unit, calculated at 110% of $12.035, plus accrued but unpaid and accumulated distributions of $0.1437. The amount per Class A Preferred Unit paid to each Class A preferred unitholder was $13.3822, for a total payment of $166.9 million. In addition, we paid the Class A preferred unitholders the distribution declared on April 24, 2019 for the quarter ended March 31, 2019 of $4.0 million, or $0.3234 per unit, which was paid to the holders of the Class A Preferred Units on May 10, 2019.

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 (see Note 4).

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The current distribution rate for the Class B Preferred Units is 9.0% 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 three quarters:



					Amount Paid to Class B
Date Declared	Record Date	Payment Date	Amount Per Unit		Preferred Unitholders
					(in thousands)
March 15, 2019	April 1, 2019	April 15, 2019	$	0.5625	$	4,725
June 14, 2019	July 1, 2019	July 15, 2019	$	0.5625	$	4,725
September 16, 2019	October 1, 2019	October 15, 2019	$	0.5625	$	7,079

The distribution amount paid on October 15, 2019 is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at September 30, 2019.

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)

June 14, 2019

July 1, 2019

July 15, 2019

0.5949

1,071

September 16, 2019

October 1, 2019

October 15, 2019

0.6016

1,083

The distribution amount paid on October 15, 2019 is included in accrued expenses and other payables in our unaudited condensed consolidated balance sheet at September 30, 2019.

Class D Preferred Units

On July 2, 2019, the closing date of the Mesquite acquisition, 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 an aggregate purchase price of $400.0 million. The private placement resulted in aggregate net proceeds to us of approximately $385.4 million (net of a closing fee of $14.6 million payable to affiliates of the purchasers and certain estimated expenses and expense reimbursements). We allocated the net proceeds, on a relative fair value basis, to the Class D Preferred Units ($343.7 million) and warrants ($41.7 million). Proceeds from this issuance of Class D Preferred Units were used to fund a portion of the purchase price for the Mesquite acquisition (see Note 4).

The holders of the Class D Preferred Units will be entitled to receive a cumulative, quarterly distribution in arrears on each Class D Preferred Unit then held at an annual rate of (i) 9.00% per annum for all periods during which the Class D Preferred Units are outstanding beginning on the Closing Date and ending on the date and including the last day of the eleventh full quarter following the Closing Date, (ii) 10.00% per annum for all periods during which the Class D Preferred Units are outstanding beginning on and including the first day of the twelfth full quarter following the Closing Date and ending on the last day of the nineteenth full quarter following the Closing Date, and (iii) thereafter, 10.00% per annum or, at the purchasers’ election from time to time, a floating rate equal to the applicable three-month LIBOR, plus 7.00% per annum. The current distribution rate for the Class D Preferred Units is 9.00% per year per unit (equal to $90.00 per unit per year). On October 23, 2019, the board of directors of our general partner declared a distribution on the Class D Preferred Units for the three months ended September 30, 2019 of $4.5 million or $11.125 per unit, which represents 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 Units shall automatically increase by the non-cash accretion which is approximately $4.5 million in the aggregate with respect to the

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

distribution for the three months ended September 30, 2019. The Class D Preferred distribution will be paid to the holders of the Class D Preferred Units on November 14, 2019.

At any time after the Closing Date, the Partnership shall have the right to redeem all of the outstanding Class D Preferred Units at a price per Class D Preferred Unit equal to the sum of the then-unpaid accumulations with respect to such Class D Preferred Unit and the greater of either the applicable multiple on invested capital or the applicable redemption price based on an applicable internal rate of return, as more fully described in the Amended and Restated Partnership Agreement. At any time on or after the eighth anniversary of the Closing Date, each Class D Preferred Unitholder will have the right to require the Partnership to redeem on a date not prior to the 180th day after such anniversary all or a portion of the Class D Preferred Units then held by such preferred unitholder for the then-applicable redemption price, which may be paid in cash or, at the Partnership’s election, a combination of cash and a number of Common Units not to exceed one-half of the aggregate then-applicable redemption price, as more fully described in the Amended and Restated Partnership Agreement. Upon a Class D Change of Control (as defined in the Amended and Restated Partnership Agreement), each Class D Preferred Unitholder will have the right to require the Partnership to redeem the Class D Preferred Units then held by such Preferred Unitholder at a price per Class D Preferred Unit equal to applicable redemption price. The Class D Preferred Units generally will not have any voting rights, except with respect to certain matters which require the vote of the Class D Preferred Units. The Class D Preferred Units generally do not have any voting rights, except that the Class D Preferred Units shall be entitled to vote as a separate class on any matter on which unitholders are entitled to vote that adversely affects the rights, powers, privileges or preferences of the Class D Preferred Units in relation to other classes of Partnership Interests (as defined in the Amended and Restated Partnership Agreement) or as required by law. The consent of a majority of the then-outstanding Class D Preferred Units, with one vote per Class D Preferred Unit, shall be required to approve any matter for which the preferred unitholders are entitled to vote as a separate class or the consent of the representative of the Class D Preferred Unitholders, as applicable.

The warrants issued in the private placement are exercisable for, in the aggregate, 17,000,000 common units. Warrants to purchase 10,000,000 common units were issued with an exercise price of $17.45 per common unit (the “Premium Warrants”), and the remaining warrants to purchase 7,000,000 common units were issued with an exercise price of $14.54 per common unit (the “Par Warrants”). The warrants may be exercised from and after the first anniversary of the Closing Date. Unexercised warrants will expire on the tenth anniversary of the Closing Date. The warrants will not participate in cash distributions.

Upon a change of control, all unvested warrants shall immediately vest and be exercisable in full. A change of control occurs when (a) the current general partner owners cease to own, directly or indirectly, at least 50% of the outstanding voting securities of the general partner, (b) the general partner withdraws or is removed by the limited partners, (c) the common units are no longer listed on a national exchange, or (d) the general partners and/or its affiliates become beneficial owner, directly or indirectly, of 80% or more of the outstanding common units or any transaction or event that occurs due to default on our credit agreement.

On October 31, 2019, the closing date of the Hillstone (as defined herein) acquisition, 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 an aggregate purchase price of $200.0 million. Proceeds from this issuance of Class D Preferred Units were used to fund a portion of the purchase price for the acquisition of Hillstone (see Note 17).

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Registration Rights Agreement

In connection with the issuance of the Class D Preferred Units, we entered into a registrations rights agreements (“Registration Rights Agreement”) with the purchasers of the Class D Preferred Units (“Purchasers”), pursuant to which we are required to prepare and file a registration statement (the “Registration Statement”) within 180 days of the Closing Date, to permit the public resale of (i) the Class D Preferred Units, (ii) the common units issued or issuable upon the exercise of the warrants, (iii) the common units that are issuable pursuant to the terms of the Class D Preferred Units in connection with a redemption of the Class D Preferred Units and (iv) any common units issued in lieu of cash as liquidated damages under the Registration Rights Agreement. The Partnership is also required to use its commercially reasonable efforts to cause the Registration Statement to become effective no later than 360 days after the Closing Date. The Registration Rights Agreement provides that if the Registration Statement is not declared effective on or prior to the Registration Statement Deadline, the Partnership will be liable to the Purchasers for liquidated damages in accordance with a formula, subject to the limitations set forth in the Registration Rights Agreement. Such liquidated damages would be payable in cash, or if payment in cash would breach any covenant or a cause a default under a credit facility or any other debt instrument filed by the Partnership as an exhibit to a periodic report filed with the SEC, then such liquidated damages would be payable in the form of newly issued common units. In addition, the Registration Rights Agreement grants the Purchasers piggyback registration rights. These registration rights are transferable to affiliates of the Purchasers and, in certain circumstances, to third parties.

Board Rights Agreement

In connection with the issuance of the Class D Preferred Units, we entered into a board rights agreement pursuant to which affiliates of the Purchasers will have the right to designate up to one director on the board of directors of our general partner, so long as the Purchasers and their respective affiliates, in the aggregate, own either at least (i) (A) 50% of the number of Preferred Units issued on the Closing Date or (B) 50% of the aggregate liquidation preference of any class or series of Class D Parity Securities (as defined in the Amended and Restated Partnership Agreement), or (ii) Warrants and/or common units that, in the aggregate, comprise 10% or more of the then-outstanding Common Units.

Amended and Restated Partnership Agreement

On July 2, 2019, NGL Energy Holdings LLC executed the Sixth Amended and Restated Agreement of Limited Partnership. The preferences, rights, powers and duties of holders of Class D Preferred Units are defined in the Amended and Restated Partnership Agreement. The Class D Preferred Units rank senior to the common units with respect to payment of distributions and distribution of assets upon liquidation, dissolution and winding up, and are in parity with the Class B Preferred Units and Class C Preferred Units. The Class D Preferred Units have no stated maturity, but we may redeem the Class D Preferred Units at any time after the Closing Date or upon the occurrence of a change in control.

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. 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 restricted units during the vesting period.

The restricted units vest contingent on the continued service of the recipients through the vesting date (the “Service Awards”).

The following table summarizes the Service Award activity during the six months ended September 30, 2019:



Unvested Service Award units at March 31, 2019	2,308,400
Units granted	1,956,181
Units vested and issued	(2,151,781	)
Units forfeited	(32,425	)
Unvested Service Award units at September 30, 2019	2,080,375

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

In connection with the vesting of certain restricted units during the six months ended September 30, 2019, we canceled 78,229 of the newly-vested common units in satisfaction of $1.1 million of employee tax liability paid by us. Pursuant to the terms of the LTIP, these canceled units are available for future grants under the LTIP.

The following table summarizes the scheduled vesting of our unvested Service Award units at September 30, 2019:



Fiscal Year Ending March 31,
2020 (six months)		756,450
2021		882,200
2022		441,725
Total		2,080,375

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. 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 September 30, 2019 and 2018, we recorded compensation expense related to Service Award units of $2.1 million and $2.4 million, respectively. During the six months ended September 30, 2019 and 2018, we recorded compensation expense related to Service Award units of $4.9 million and $5.1 million, respectively.

Of the restricted units granted and vested during the six months ended September 30, 2019, 1,886,131 units were granted as a bonus for performance during the fiscal year ended March 31, 2019. The total amount of these bonus payments was $24.5 million, of which we had accrued $8.7 million as of March 31, 2019.

The following table summarizes the estimated future expense we expect to record on the unvested Service Award units at September 30, 2019 (in thousands):



Fiscal Year Ending March 31,
2020 (six months)	$	3,501
2021	4,373
2022	1,445
Total	$	9,319

As of September 30, 2019, there are approximately 2.6 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.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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:



	September 30, 2019						March 31, 2019
	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
	(in thousands)
Level 1 measurements	$	45,652		$	(7,986	)	$	49,509		$	(7,273	)
Level 2 measurements	35,310			(31,409		)	77,926			(89,124		)
	80,962			(39,395		)	127,435			(96,397		)

Netting of counterparty contracts (1)	(8,350		)	8,350			(7,501		)	7,501
Net cash collateral held	(23,848		)	(179		)	(18,271		)	(208		)
Commodity derivatives	$	48,764		$	(31,224	)	$	101,663		$	(89,104	)


(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:



	September 30, 2019			March 31, 2019
	(in thousands)
Prepaid expenses and other current assets	$	48,718		$	101,662
Other noncurrent assets	46			1
Accrued expenses and other payables	(31,108		)	(88,932		)
Other noncurrent liabilities	(116		)	(172		)
Net commodity derivative asset	$	17,540		$	12,559

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 (Short) Notional Units (in barrels)		Fair Value of Net Assets (Liabilities)
		(in thousands)
At September 30, 2019:
Crude oil fixed-price (1)	October 2019–December 2020	(3,246	)	$	12,670
Propane fixed-price (1)	October 2019–March 2021	1,740		(6,850		)
Refined products fixed-price (1)	October 2019–January 2021	(2,206	)	31,737
Other	October 2019–March 2022			4,010
				41,567
Net cash collateral held				(24,027		)
Net commodity derivative asset				$	17,540

At March 31, 2019:
Crude oil fixed-price (1)	April 2019–December 2020	(1,961	)	1,014
Propane fixed-price (1)	April 2019–March 2020	198		608
Refined products fixed-price (1)	April 2019–January 2021	(2,884	)	24,669
Other	April 2019–March 2022			4,747
				31,038
Net cash collateral held				(18,479		)
Net commodity derivative asset				$	12,559


(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.

Amounts as of March 31, 2019 in the tables above do not include commodity derivative contract positions related to TPSL, as these amounts have been classified as current assets and liabilities held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

During the three months and six months ended September 30, 2019, we recorded net gains of $24.6 million and $54.2 million, respectively, from our commodity derivatives to revenues and cost of sales in our unaudited condensed consolidated statements of operations. During the three months and six months ended September 30, 2018, we recorded net losses of $21.6 million and $56.7 million, respectively, from our commodity derivatives to revenues and cost of sales in our unaudited condensed consolidated statements of operations.

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 September 30, 2019, 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.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Interest Rate Risk

Fair Value of Fixed-Rate Notes

The following table provides fair value estimates of our fixed-rate notes at September 30, 2019 (in thousands):



Senior Unsecured Notes:
2023 Notes	$	617,769
2025 Notes	$	370,286
2026 Notes	$	452,396

For the Senior Unsecured Notes, the fair value estimates were developed based on publicly traded quotes and would be classified as Level 1 in the fair value hierarchy.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 12—Segments

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.



	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Revenues:
Crude Oil Logistics:
Topic 606 revenues
Crude oil sales	$	596,674		$	825,571		$	1,278,743		$	1,582,082
Crude oil transportation and other	43,157			38,483			83,154			67,029
Non-Topic 606 revenues	3,619			3,084			7,240			6,382
Elimination of intersegment sales	(2,298		)	(7,084		)	(11,825		)	(11,609		)
Total Crude Oil Logistics revenues	641,152			860,054			1,357,312			1,643,884
Water Solutions:
Topic 606 revenues
Disposal service fees	80,209			58,099			131,349			112,103
Sale of recovered hydrocarbons	14,761			18,348			29,096			38,726
Freshwater revenues	2,007			788			4,103			1,288
Other service revenues	4,272			2,516			8,484			3,767
Non-Topic 606 revenues	—			13			—			25
Total Water Solutions revenues	101,249			79,764			173,032			155,909
Liquids:
Topic 606 revenues
Propane sales	115,778			234,892			255,152			421,381
Butane sales	87,821			145,847			170,046			259,047
Other product sales	116,461			168,496			231,066			320,301
Service revenues	8,262			4,222			17,049			9,893
Non-Topic 606 revenues	5,307			5,795			9,152			10,192
Elimination of intersegment sales	(5,120		)	(8,810		)	(6,309		)	(10,475		)
Total Liquids revenues	328,509			550,442			676,156			1,010,339
Refined Products and Renewables:
Topic 606 revenues
Refined products sales	810,409			934,410			1,643,228			1,748,481
Non-Topic 606 revenues	2,407,753			2,690,713			5,605,514			4,815,687
Total Refined Products and Renewables revenues	3,218,162			3,625,123			7,248,742			6,564,168
Corporate and Other:
Non-Topic 606 revenues	264			371			519			747
Elimination of intersegment sales	—			221			—			—
Total Corporate and Other revenues	264			592			519			747
Total revenues	$	4,289,336		$	5,115,975		$	9,455,761		$	9,375,047

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 September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Depreciation and Amortization:
Crude Oil Logistics	$	17,693		$	18,870		$	35,278		$	38,179
Water Solutions	38,031			26,342			66,254			51,651
Liquids	6,634			6,495			13,885			13,000
Refined Products and Renewables	190			233			381			466
Corporate and Other	3,031			3,218			5,899			6,365
Total depreciation and amortization	$	65,579		$	55,158		$	121,697		$	109,661

Operating Income (Loss):
Crude Oil Logistics	$	38,520		$	31,022		$	72,322		$	(68,716	)
Water Solutions	21,274			9,770			34,963			10,739
Liquids	8,397			10,758			16,881			13,381
Refined Products and Renewables	16,681			(1,851		)	12,282			(66,266		)
Corporate and Other	(38,477		)	(35,352		)	(53,819		)	(52,782		)
Total operating income (loss)	$	46,395		$	14,347		$	82,629		$	(163,644	)

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 September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
	(in thousands)
Crude Oil Logistics	$	4,059	$	7,150	$	18,864	$	15,532
Water Solutions	941,511		217,073		1,145,411		347,495
Liquids	5,275		389		10,824		1,381
Refined Products and Renewables	220		—		224		—
Corporate and Other	2,319		267		3,058		598
Total	$	953,384	$	224,879	$	1,178,381	$	365,006

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:



	September 30, 2019		March 31, 2019
	(in thousands)
Long-lived assets, net:
Crude Oil Logistics	$	1,595,979	$	1,584,636
Water Solutions	2,746,489		1,600,836
Liquids (1)	625,794		498,767
Refined Products and Renewables	58,641		32,170
Corporate and Other	32,722		26,569
Total	$	5,059,625	$	3,742,978


(1)	Includes $28.4 million and $0.5 million of non-US long-lived assets at September 30, 2019 and March 31, 2019, respectively.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



	September 30, 2019		March 31, 2019
	(in thousands)
Total assets:
Crude Oil Logistics	$	2,188,858	$	2,237,612
Water Solutions	2,851,109		1,668,292
Liquids (1)	844,059		721,008
Refined Products and Renewables	622,713		579,254
Corporate and Other	157,284		77,019
Assets held for sale	—		619,308
Total	$	6,664,023	$	5,902,493


(1)	Includes $46.0 million and $12.0 million of non-US total assets at September 30, 2019 and March 31, 2019, respectively.

All of the tables above do not include amounts related to TPSL and our former Retail Propane segment, as these amounts have been classified within discontinued operations in our unaudited condensed consolidated statements of operations and held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

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 wastewater and solids received from WPX.

SemGroup Corporation (“SemGroup”) holds ownership interests in our general partner. We sell product to and purchase product from SemGroup, and these transactions are included within revenues and cost of sales, respectively, in our unaudited condensed consolidated statements of operations. We also lease crude oil storage from SemGroup.

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



	Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018
	(in thousands)
Sales to WPX	$	14,392	$	8,553	$	22,828	$	9,771
Purchases from WPX (1)	$	85,396	$	82,185	$	166,167	$	157,327
Sales to SemGroup	$	217	$	549	$	458	$	669
Purchases from SemGroup	$	—	$	317	$	—	$	1,337
Sales to entities affiliated with management	$	699	$	1,583	$	1,720	$	5,645
Purchases from entities affiliated with management	$	959	$	414	$	2,115	$	1,806
Purchases from equity method investees	$	129	$	—	$	129	$	—


(1)	Amount primarily relates to purchases of crude oil under the definitive agreement we signed with WPX.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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



	September 30, 2019		March 31, 2019
	(in thousands)
Receivables from NGL Energy Holdings LLC	$	7,808	$	7,277
Receivables from WPX	6,312		5,185
Receivables from SemGroup	85		71
Receivables from entities affiliated with management	169		334
Total	$	14,374	$	12,867

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



	September 30, 2019		March 31, 2019
	(in thousands)
Payables to WPX	$	24,185	$	27,844
Payables to entities affiliated with management	287		625
Payables to equity method investees	70		—
Total	$	24,542	$	28,469

Other Related Party Transactions

Acquisition of Interest in KAIR2014 LLC

During the three months ended June 30, 2019, we purchased a 50% interest in an aircraft rental company, KAIR2014 LLC, for $0.9 million in cash and accounted for our interest using the equity method of accounting (see Note 2). The remaining interest in KAIR2014 LLC is owned by our Chief Executive Officer, H. Michael Krimbill.

Acquisition of Interest in NGL Energy Holdings LLC

During the three months ended June 30, 2019, we purchased, in two transactions, a 1.89% interest in our general partner, NGL Energy Holdings LLC, for $2.4 million in cash and accounted for this as a deduction within limited partners’ equity in our unaudited condensed consolidated balance sheet.

During the three months ended September 30, 2019, we purchased a 5.73% interest in our general partner, NGL Energy Holdings LLC, for $11.5 million in cash and accounted for this as a deduction within limited partners’ equity in our unaudited condensed consolidated balance sheet. This interest was purchased from a fund controlled by The Energy & Minerals Group, which is represented on the board of directors of our general partner.

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. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation in the contract and is recognized as revenue when, or as, the performance obligation is satisfied. Our revenue contracts in scope under ASC 606 primarily have a single performance obligation. The evaluation of when performance obligations have been satisfied and the transaction price that is allocated to our performance obligations requires significant judgment and assumptions, including our evaluation of the timing of when control of the underlying good or service has transferred to our customers and the relative stand-alone selling price of goods and services provided to customers under contracts with multiple performance obligations. Actual results can vary from those judgments and assumptions. We do not have any material contracts with multiple performance obligations or under which we receive material amounts of non-cash consideration. Our costs to obtain or fulfill our revenue contracts were not material as of September 30, 2019.

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

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

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 Refined Products and Renewables segment includes $81.0 million of net gains related to changes in the mark-to-market value of these arrangements recorded during the six months ended September 30, 2019.

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 September 30, 2019 (in thousands):



Fiscal Year Ending March 31,
2020 (six months)	$	116,337
2021	152,770
2022	143,533
2023	137,354
2024	122,880
Thereafter	275,952
Total	$	948,826

Contract Assets and Liabilities

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



	Balance at
	March 31, 2019		September 30, 2019
	(in thousands)
Accounts receivable from contracts with customers	$	613,827	$	553,407



Contract liabilities balance at March 31, 2019	$	8,461
Payment received and deferred	30,925
Payment recognized in revenue	(12,341		)
Contract liabilities balance at September 30, 2019	$	27,045

Amounts as of March 31, 2019 in the tables above do not include contract assets and liabilities related to TPSL, as these amounts have been classified as current assets and current liabilities held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet (see Note 16).

Note 15—Leases

We adopted ASC 842 effective April 1, 2019 using the modified retrospective method, with no adjustment to comparative period information, which remains reported under ASC 840, and no cumulative effect adjustment to equity. Upon adoption, we recorded operating lease right-of-use assets of $551.2 million and operating lease obligations of $549.0 million, including amounts classified as assets and liabilities held for sale. The adoption of this standard did not impact our unaudited condensed consolidated statement of operations or unaudited condensed consolidated statement of cash flows for the three months ended June 30, 2019.

We also elected the following transitional practical expedients, which allowed us to (i) not evaluate land easements prior to April 1, 2019; (ii) use hindsight in determining the lease term; (iii) not reassess whether current or expired contracts contain leases; (iv) not reassess the lease classification for any expired or existing leases; and (v) not reassess initial costs.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Lessee Accounting

Our leasing activity primarily consists of product storage, office space, real estate, railcars, and equipment. We determine if an agreement contains a lease at the inception of the arrangement. If an arrangement is determined to contain a lease, we classify the lease as an operating lease or a finance lease depending on the terms of the arrangement. All of our leases are classified as operating leases. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term when we control the use of the asset by obtaining substantially all of the economic benefits of the asset and direct the use of the asset. Operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and operating lease liabilities with an initial term of greater than one year are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Our incremental borrowing rate represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We do not have any leases that provide for guarantees of residual value.

Our lease agreements may include options to extend or terminate the lease which are included in the measurement of our operating lease liability when it is reasonably certain that we will exercise the option. Lease renewal terms vary from one year to 30 years. Operating lease expense is recognized on a straight-line basis over the lease term. We have variable lease payments, including adjustments to lease payments based on an index or rate, such as a consumer price index, fair value adjustments to lease payments, and common area maintenance, real estate taxes, and insurance payments in certain real estate leases. We also have certain land leases within our Water Solutions segment that require us to pay a royalty, which could be based on a flat rate per barrel disposed or a percentage of revenue generated. Variable lease payments are excluded from operating lease right-of-use assets and operating lease liabilities and are expensed as incurred. Operating lease right-of-use assets also include any lease prepayments and exclude lease incentives. For leases acquired as a result of an acquisition, the right-of-use asset also includes adjustments for any favorable or unfavorable market terms present in the lease.

Short-term leases with an initial term of 12 months or less that do not include a purchase option, with the exception of railcar leases, are not recorded on the unaudited condensed consolidated balance sheet. Operating lease expense for short-term leases is recognized on a straight-line basis over the lease term and amounts related to short-term leases are disclosed within our condensed consolidated financial statements.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain leases of buildings and land, we account for the lease and non-lease components as a single lease component based on the election of the practical expedient to not separate lease components from non-lease components.

At September 30, 2019, we had operating lease right-of-use assets of $203.1 million and current and noncurrent operating lease obligations of $68.1 million and $132.1 million, respectively, on our unaudited condensed consolidated balance sheet. At September 30, 2019, the weighted-average remaining lease term and weighted-average discount rate for our operating leases was 6.04 years and 5.78%, respectively.

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



	Three Months Ended September 30,		Six Months Ended September 30,
	2019		2019
	(in thousands)
Operating lease cost	$	22,294	$	44,387
Variable lease cost	3,857		5,665
Short-term lease cost	133		259
Total lease cost	$	26,284	$	50,311

Amounts in the table above do not include lease expense related to TPSL, as these amounts have been classified within discontinued operations within our unaudited condensed consolidated statements of operations (see Note 16).

Rental expense relating to operating leases was $26.4 million and $53.5 million during the three months and six months ended September 30, 2018. These amounts do not include rental expense related to TPSL and our former Retail Propane segment, as these amounts have been classified within discontinued operations in our unaudited condensed consolidated statements of operations (see Note 16).

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table summarizes maturities of our operating lease liabilities at September 30, 2019 (in thousands):



Fiscal Year Ending March 31,
2020 (six months)	$	39,970
2021	66,193
2022	45,490
2023	25,392
2024	14,081
Thereafter	53,452
Total lease payments	244,578
Less imputed interest	(44,362		)
Total operating lease liabilities	$	200,216

The following table summarizes future minimum lease payments under various noncancelable operating lease agreements at March 31, 2019 (in thousands):



Fiscal Year Ending March 31,
2020	$	100,552
2021	76,485
2022	54,611
2023	30,379
2024	18,341
Thereafter	41,845
Total	$	322,213

Amounts in the table above do not include future minimum lease payments related to TPSL as TPSL has been classified as discontinued operations in our unaudited condensed consolidated statements of operations (see Note 16).

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



	Six Months Ended September 30,
	2019
	(in thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	59,528
Operating lease right-of-use assets obtained in exchange for operating lease obligations	$	565,152

Lessor Accounting and Subleases

Our lessor arrangements include storage and railcar contracts, of which certain agreements contain renewal options for periods of between one year and five years. We determine if an agreement contains a lease at the inception of the arrangement. If an arrangement is determined to contain a lease, we classify the lease as operating, sales-type or direct financing. Lessor accounting under ASC 842 is substantially unchanged and all of our leases will continue to be classified as operating leases. 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 September 30, 2019, fixed rental revenue was $5.5 million, which includes $1.0 million of sublease revenue. During the six months ended September 30, 2019, fixed rental revenue was $10.9 million, which includes $2.4 million of sublease revenue.

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 September 30, 2019 (in thousands):



Fiscal Year Ending March 31,
2020 (six months)	$	11,695
2021	15,940
2022	6,247
2023	5,282
2024	5,057
Thereafter	16,282
Total	$	60,503

Note 16—Assets and Liabilities Held for Sale and Discontinued Operations

As discussed in Note 1, we met the criteria for classifying the assets and liabilities of TPSL as held for sale and the operations as discontinued. On September 30, 2019, we completed the sale of TPSL and associated assets to Trajectory. See Note 1 for a further discussion.

As discussed in Note 1, as of June 30, 2018, the operations of our Retail Propane segment were classified as discontinued. On July 10, 2018, we completed the sale of virtually all of our remaining Retail Propane segment to Superior and on August 14, 2018, we sold our previously held interest in Victory Propane. See Note 1 for a further discussion.

The following table summarizes the major classes of assets and liabilities of TPSL classified as held for sale at March 31, 2019 (in thousands):



Current Assets Held for Sale
Accounts receivable-trade, net	$	164,716
Inventories	210,373
Prepaid expenses and other current assets	12,361
Total current assets held for sale	387,450
Noncurrent Assets Held for Sale
Property, plant and equipment, net	15,553
Goodwill	32,712
Intangible assets, net	137,446
Other noncurrent assets (1)	46,147
Total noncurrent assets held for sale	231,858
Total assets held for sale	$	619,308

Current Liabilities Held for Sale
Accounts payable-trade	$	85,602
Accrued expenses and other payables	56,719
Advance payments received from customers	460
Total current liabilities held for sale	$	142,781

(1)

Primarily comprised of tank bottoms, which are product volumes required for the operation of storage tanks, that are recorded at historical cost. We recover tank bottoms when the storage tanks are removed from service. At March 31, 2019, tank bottoms held in third party terminals consisted of 389,737 barrels of refined products. Tank bottoms held in terminals we own are included within property, plant and equipment.

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 September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Revenues	$	1,304,232		$	1,542,845		$	2,775,698		$	3,194,880
Cost of sales	1,329,458			1,566,585			2,787,959			3,091,009
Operating expenses	1,999			4,126			4,170			30,762
General and administrative expense	32			234			53			2,679
Depreciation and amortization	295			152			749			9,011
Loss (gain) on disposal or impairment of assets, net	174,449			(407,837		)	174,449			(407,383		)
Operating (loss) income from discontinued operations	(202,001		)	379,585			(191,682		)	468,802
Equity in earnings of unconsolidated entities	—			1,298			—			1,183
Interest expense	(80		)	(1		)	(94		)	(126		)
Other income, net	67			204			133			668
(Loss) income from discontinued operations before taxes (1)	(202,014		)	381,086			(191,643		)	470,527
Income tax expense	(10		)	(125		)	(20		)	(125		)
(Loss) income from discontinued operations, net of tax	$	(202,024	)	$	380,961		$	(191,663	)	$	470,402


(1)	Amount includes losses attributable to redeemable noncontrolling interests of less than $0.1 million and $0.4 million for the three months and six months ended September 30, 2018, respectively.

Continuing Involvement

As of September 30, 2019, we have commitments to sell 0.1 million gallons of finished gasoline, valued at $7.1 million (based on the contract price), to Trajectory, the purchaser of TPSL, through October 2019, and we have commitments to purchase 0.1 million gallons of finished gasoline, valued at $5.2 million (based on the contract price), from Trajectory through October 2019.

As of September 30, 2019, we have commitments to sell up to 49.2 million gallons of propane, valued at $29.5 million (based on the contract price), to Superior and DCC LPG, the purchasers of our former Retail Propane segment, through March 2021. During the three months and six months ended September 30, 2019, we received a combined $2.3 million and $3.7 million, respectively, from Superior and DCC LPG for propane sold to them during the period.

Note 17—Subsequent Events

On October 31, 2019, we acquired all of the equity interests of Hillstone Environmental Partners, LLC (“Hillstone”) from Water Remainco, LLC (“Seller Representative”), Hillstone, GGCOF HEP Blocker II, LLC, GGCOF HEP Blocker, LLC, Golden Gate Capital Opportunity Fund-A, L.P., GGCOF AIV L.P. and GGCOF HEP Blocker II Holdings, LLC for $624.4 million, subject to certain adjustments. Hillstone provides water pipeline and disposal infrastructure solutions to producers with a core operational focus in the state line area of southern Eddy and Lea Counties, New Mexico and northern Loving County, Texas in the Delaware Basin. Hillstone has a fully interconnected produced water pipeline transportation and disposal system, which currently consists of 19 saltwater disposal wells, representing approximately 580,000 barrels per day of permitted disposal capacity, and a newly-built network of produced water pipelines with approximately 680,000 barrels per day of transportation capacity. Hillstone also has an additional 22 permits to develop another 660,000 barrels per day of disposal capacity.

In connection with entering into the purchase agreement, we deposited with Seller Representative approximately $49.9 million, which was credited against the purchase price at closing. This deposit is recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet as of September 30, 2019. As of the filing date of this Quarterly Report, we have not obtained all of the information to determine the preliminary purchase price allocation.

On November 7, 2019, we closed on a transaction to acquire 50% of one entity and 100% of another entity. Collectively, the entities we purchased own real property, right-of-ways and saltwater disposal permits. In addition, we entered

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

into a joint development agreement and surface use agreements with the seller and affiliates to build and operate produced, treated and blended water facilities. The total purchase price for this transaction was $55.9 million.

Note 18—Unaudited Condensed Consolidating Guarantor and Non-Guarantor Financial Information

Certain of our wholly owned subsidiaries have, jointly and severally, fully and unconditionally guaranteed the Senior Unsecured Notes and Term Credit Agreement (see Note 8). Pursuant to Rule 3-10 of Regulation S-X, we have presented in columnar format the unaudited condensed consolidating financial information for NGL Energy Partners LP (Parent), NGL Energy Finance Corp., the guarantor subsidiaries on a combined basis, and the non-guarantor subsidiaries on a combined basis in the tables below. NGL Energy Partners LP and NGL Energy Finance Corp. are co-issuers of the Senior Unsecured Notes. Since NGL Energy Partners LP received the proceeds from the issuance of the Senior Unsecured Notes, this activity has been included in the NGL Energy Partners LP (Parent) column in the tables below. NGL Energy Operating LLC entered into the Term Credit Agreement and the proceeds have been included in the Guarantor Subsidiaries column in the tables below.

During the periods presented in the tables below, the status of certain subsidiaries changed, in that they either became guarantors of or ceased to be guarantors of the Senior Unsecured Notes and Term Credit Agreement. For purposes of the tables below, when the status of a subsidiary changes, all subsidiary activity is included in either the guarantor subsidiaries column or non-guarantor subsidiaries column based on the status of the subsidiary at the balance sheet date regardless of activity during the year.

There are no significant restrictions that prevent the parent or any of the guarantor subsidiaries from obtaining funds from their respective subsidiaries by dividend or loan. 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.

For purposes of the tables below, (i) the unaudited condensed consolidating financial information is presented on a legal entity basis, (ii) investments in consolidated subsidiaries are accounted for as equity method investments, and (iii) contributions, distributions, and advances to (from) consolidated entities are reported on a net basis within net changes in advances with consolidated entities in the unaudited condensed consolidating statement of cash flow tables below.

As discussed further in Note 1 and Note 16, the assets and liabilities related to TPSL have been classified as held for sale within our March 31, 2019 unaudited condensed consolidated balance sheet and the results of operations and cash flows related to TPSL and our former Retail Propane segment (including equity in earnings of Victory Propane) have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Balance Sheet

(in Thousands)



	September 30, 2019
	NGL Energy Partners LP (Parent)		NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	22,504	$	—	$	(9,173	)	$	7,823		$	—		$	21,154
Accounts receivable-trade, net of allowance for doubtful accounts	—		—		982,746			5,129			—			987,875
Accounts receivable-affiliates	—		—		14,366			8			—			14,374
Inventories	—		—		307,796			997			—			308,793
Prepaid expenses and other current assets	—		—		197,483			1,519			—			199,002
Total current assets	22,504		—		1,493,218			15,476			—			1,531,198
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation	—		—		2,208,380			277,500			—			2,485,880
GOODWILL	—		—		1,170,867			5,175			—			1,176,042
INTANGIBLE ASSETS, net of accumulated amortization	—		—		1,119,321			75,260			—			1,194,581
INVESTMENTS IN UNCONSOLIDATED ENTITIES	—		—		1,445			—			—			1,445
NET INTERCOMPANY RECEIVABLES (PAYABLES)	1,602,365		—		(1,457,102		)	(145,263		)	—			—
INVESTMENTS IN CONSOLIDATED SUBSIDIARIES	2,183,804		—		150,843			—			(2,334,647		)	—
OPERATING LEASE RIGHT-OF-USE ASSETS	—		—		199,277			3,845			—			203,122
OTHER NONCURRENT ASSETS	—		—		71,755			—			—			71,755
Total assets	$	3,808,673	$	—	$	4,958,004		$	231,993		$	(2,334,647	)	$	6,664,023
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade	$	—	$	—	$	832,144		$	9,920		$	—		$	842,064
Accounts payable-affiliates	1		—		24,541			—			—			24,542
Accrued expenses and other payables	42,611		—		291,926			1,589			—			336,126
Advance payments received from customers	—		—		21,657			5,388			—			27,045
Current maturities of long-term debt	—		—		649			—			—			649
Operating lease obligations	—		—		67,725			359			—			68,084
Total current liabilities	42,612		—		1,238,642			17,256			—			1,298,510
LONG-TERM DEBT, net of debt issuance costs and current maturities	1,428,183		—		1,345,052			—			—			2,773,235
OPERATING LEASE OBLIGATIONS	—		—		128,739			3,393			—			132,132
OTHER NONCURRENT LIABILITIES	—		—		61,767			2,720			—			64,487
CLASS D 9.00% PREFERRED UNITS	343,748		—		—			—			—			343,748
EQUITY:
Partners’ equity	1,994,130		—		2,183,804			208,888			(2,392,428		)	1,994,394
Accumulated other comprehensive loss	—		—		—			(264		)	—			(264		)
Noncontrolling interests	—		—		—			—			57,781			57,781
Total equity	1,994,130		—		2,183,804			208,624			(2,334,647		)	2,051,911
Total liabilities and equity	$	3,808,673	$	—	$	4,958,004		$	231,993		$	(2,334,647	)	$	6,664,023

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Balance Sheet

(in Thousands)



	March 31, 2019
	NGL Energy Partners LP (Parent)		NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	12,798	$	—	$	3,728		$	2,046		$	—		$	18,572
Accounts receivable-trade, net of allowance for doubtful accounts	—		—		996,192			2,011			—			998,203
Accounts receivable-affiliates	—		—		12,867			—			—			12,867
Inventories	—		—		251,736			1,034			—			252,770
Prepaid expenses and other current assets	—		—		142,336			475			—			142,811
Assets held for sale	—		—		387,450			—			—			387,450
Total current assets	12,798		—		1,794,309			5,566			—			1,812,673
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation	—		—		1,620,084			208,856			—			1,828,940
GOODWILL	—		—		1,107,974			5,175			—			1,113,149
INTANGIBLE ASSETS, net of accumulated amortization	—		—		725,542			75,347			—			800,889
INVESTMENTS IN UNCONSOLIDATED ENTITIES	—		—		1,127			—			—			1,127
NET INTERCOMPANY RECEIVABLES (PAYABLES)	862,186		—		(808,610		)	(53,576		)	—			—
INVESTMENTS IN CONSOLIDATED SUBSIDIARIES	2,503,848		—		170,690			—			(2,674,538		)	—
OTHER NONCURRENT ASSETS	—		—		113,857			—			—			113,857
ASSETS HELD FOR SALE	—		—		231,858			—			—			231,858
Total assets	$	3,378,832	$	—	$	4,956,831		$	241,368		$	(2,674,538	)	$	5,902,493
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable-trade	$	—	$	—	$	872,122		$	6,941		$	—		$	879,063
Accounts payable-affiliates	1		—		28,468			—			—			28,469
Accrued expenses and other payables	25,497		—		164,737			1,497			—			191,731
Advance payments received from customers	—		—		7,550			911			—			8,461
Current maturities of long-term debt	—		—		648			—			—			648
Liabilities held for sale	—		—		142,781			—			—			142,781
Total current liabilities	25,498		—		1,216,306			9,349			—			1,251,153
LONG-TERM DEBT, net of debt issuance costs and current maturities	984,450		—		1,175,683			—			—			2,160,133
OTHER NONCURRENT LIABILITIES	—		—		60,994			2,581			—			63,575
CLASS A 10.75% CONVERTIBLE PREFERRED UNITS	149,814		—		—			—			—			149,814
EQUITY:
Partners’ equity	2,219,070		—		2,503,848			229,693			(2,733,286		)	2,219,325
Accumulated other comprehensive loss	—		—		—			(255		)	—			(255		)
Noncontrolling interests	—		—		—			—			58,748			58,748
Total equity	2,219,070		—		2,503,848			229,438			(2,674,538		)	2,277,818
Total liabilities and equity	$	3,378,832	$	—	$	4,956,831		$	241,368		$	(2,674,538	)	$	5,902,493

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Statement of Operations

(in Thousands)



	Three Months Ended September 30, 2019
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated

REVENUES	$	—		$	—	$	4,272,431		$	18,369		$	(1,464	)	$	4,289,336
COST OF SALES	—			—		4,058,083			507			(1,214		)	4,057,376
OPERATING COSTS AND EXPENSES:
Operating	—			—		69,052			6,631			(250		)	75,433
General and administrative	—			—		43,646			262			—			43,908
Depreciation and amortization	—			—		59,370			3,743			—			63,113
Loss (gain) on disposal or impairment of assets, net	—			—		3,115			(4		)	—			3,111
Operating Income	—			—		39,165			7,230			—			46,395
OTHER INCOME (EXPENSE):
Loss in earnings of unconsolidated entities	—			—		(265		)	—			—			(265		)
Interest expense	(26,666		)	—		(18,350		)	(12		)	12			(45,016		)
Other income, net	—			—		164			32			(12		)	184
(Loss) Income From Continuing Operations Before Income Taxes	(26,666		)	—		20,714			7,250			—			1,298
INCOME TAX EXPENSE	—			—		(640		)	—			—			(640		)
EQUITY IN NET (LOSS) INCOME FROM CONTINUING OPERATIONS OF CONSOLIDATED SUBSIDIARIES	(174,571		)	—		7,379			—			167,192			—
(Loss) Income From Continuing Operations	(201,237		)	—		27,453			7,250			167,192			658
Loss From Discontinued Operations, Net of Tax	—			—		(202,024		)	—			—			(202,024		)
Net (Loss) Income	(201,237		)	—		(174,571		)	7,250			167,192			(201,366		)
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS												129			129
NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	(201,237	)	$	—	$	(174,571	)	$	7,250		$	167,321		$	(201,237	)

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Statement of Operations

(in Thousands)



	Three Months Ended September 30, 2018
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated

REVENUES	$	—		$	—	$	5,115,057		$	1,789		$	(871	)	$	5,115,975
COST OF SALES	—			—		4,946,062			13			(871		)	4,945,204
OPERATING COSTS AND EXPENSES:
Operating	—			—		56,470			2,040			—			58,510
General and administrative	—			—		39,139			189			—			39,328
Depreciation and amortization	—			—		50,391			2,207			—			52,598
Loss on disposal or impairment of assets, net	—			—		5,988			—			—			5,988
Revaluation of liabilities	—			—		800			(800		)	—			—
Operating Income (Loss)	—			—		16,207			(1,860		)	—			14,347
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated entities	—			—		379			—			—			379
Interest expense	(29,485		)	—		(11,874		)	(11		)	12			(41,358		)
Other income, net	—			—		1,313			—			(12		)	1,301
(Loss) Income From Continuing Operations Before Income Taxes	(29,485		)	—		6,025			(1,871		)	—			(25,331		)
INCOME TAX EXPENSE	—			—		(691		)	—			—			(691		)
EQUITY IN NET INCOME (LOSS) FROM CONTINUING OPERATIONS OF CONSOLIDATED SUBSIDIARIES	384,990			—		(1,373		)	—			(383,617		)	—
Income (Loss) From Continuing Operations	355,505			—		3,961			(1,871		)	(383,617		)	(26,022		)
Income (Loss) From Discontinued Operations, Net of Tax	—			—		381,029			(68		)	—			380,961
Net Income (Loss)	355,505			—		384,990			(1,939		)	(383,617		)	354,939
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS												518			518
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS												48			48
NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	355,505		$	—	$	384,990		$	(1,939	)	$	(383,051	)	$	355,505

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Statement of Operations

(in Thousands)



	Six Months Ended September 30, 2019
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated

REVENUES	$	—		$	—	$	9,425,327		$	33,374		$	(2,940	)	$	9,455,761
COST OF SALES	—			—		9,054,283			499			(2,440		)	9,052,342
OPERATING COSTS AND EXPENSES:
Operating	—			—		126,813			11,216			(500		)	137,529
General and administrative	—			—		63,778			472			—			64,250
Depreciation and amortization	—			—		110,234			6,633			—			116,867
Loss (gain) on disposal or impairment of assets, net	—			—		2,148			(4		)	—			2,144
Operating Income	—			—		68,071			14,558			—			82,629
OTHER INCOME (EXPENSE):
Loss in earnings of unconsolidated entities	—			—		(257		)	—			—			(257		)
Interest expense	(52,455		)	—		(32,455		)	(23		)	23			(84,910		)
Other income, net	—			—		1,176			40			(23		)	1,193
(Loss) Income From Continuing Operations Before Income Taxes	(52,455		)	—		36,535			14,575			—			(1,345		)
INCOME TAX EXPENSE	—			—		(319		)	—			—			(319		)
EQUITY IN NET (LOSS) INCOME FROM CONTINUING OPERATIONS OF CONSOLIDATED SUBSIDIARIES	(140,475		)	—		14,972			—			125,503			—
(Loss) Income From Continuing Operations	(192,930		)	—		51,188			14,575			125,503			(1,664		)
Loss From Discontinued Operations, Net of Tax	—			—		(191,663		)	—			—			(191,663		)
Net (Loss) Income	(192,930		)	—		(140,475		)	14,575			125,503			(193,327		)
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS												397			397
NET (LOSS) INCOME ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	(192,930	)	$	—	$	(140,475	)	$	14,575		$	125,900		$	(192,930	)

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Statement of Operations

(in Thousands)



	Six Months Ended September 30, 2018
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated

REVENUES	$	—		$	—	$	9,370,234		$	6,482		$	(1,669	)	$	9,375,047
COST OF SALES	—			—		9,153,124			(23		)	(1,669		)	9,151,432
OPERATING COSTS AND EXPENSES:
Operating	—			—		108,847			4,130			—			112,977
General and administrative	—			—		61,138			531			—			61,669
Depreciation and amortization	—			—		99,369			5,121			—			104,490
Loss on disposal or impairment of assets, net	—			—		107,323			—			—			107,323
Revaluation of liabilities	—			—		800			—			—			800
Operating Loss	—			—		(160,367		)	(3,277		)	—			(163,644		)
OTHER INCOME (EXPENSE):
Equity in earnings of unconsolidated entities	—			—		598			—			—			598
Interest expense	(58,985		)	—		(28,640		)	(23		)	23			(87,625		)
Loss on early extinguishment of liabilities, net	(137		)	—		—			—			—			(137		)
Other expense, net	—			—		(32,394		)	—			(208		)	(32,602		)
Loss From Continuing Operations Before Income Taxes	(59,122		)	—		(220,803		)	(3,300		)	(185		)	(283,410		)
INCOME TAX EXPENSE	—			—		(1,342		)	—			—			(1,342		)
EQUITY IN NET INCOME (LOSS) FROM CONTINUING OPERATIONS OF CONSOLIDATED SUBSIDIARIES	246,081			—		(3,020		)	—			(243,061		)	—
Income (Loss) From Continuing Operations	186,959			—		(225,165		)	(3,300		)	(243,246		)	(284,752		)
Income (Loss) From Discontinued Operations, Net of Tax	—			—		471,246			(1,029		)	185			470,402
Net Income (Loss)	186,959			—		246,081			(4,329		)	(243,061		)	185,650
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS												863			863
LESS: NET LOSS ATTRIBUTABLE TO REDEEMABLE NONCONTROLLING INTERESTS												446			446
NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP	$	186,959		$	—	$	246,081		$	(4,329	)	$	(241,752	)	$	186,959

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Statements of Comprehensive (Loss) Income

(in Thousands)



	Three Months Ended September 30, 2019
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Net (loss) income	$	(201,237	)	$	—	$	(174,571	)	$	7,250		$	167,192	$	(201,366	)
Other comprehensive income (loss)	—			—		1			(47		)	—		(46		)
Comprehensive (loss) income	$	(201,237	)	$	—	$	(174,570	)	$	7,203		$	167,192	$	(201,412	)



	Three Months Ended September 30, 2018
	NGL Energy Partners LP (Parent)		NGL Energy Finance Corp.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	355,505	$	—	$	384,990	$	(1,939	)	$	(383,617	)	$	354,939
Other comprehensive loss	—		—		—		(13		)	—			(13		)
Comprehensive income (loss)	$	355,505	$	—	$	384,990	$	(1,952	)	$	(383,617	)	$	354,926



	Six Months Ended September 30, 2019
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Net (loss) income	$	(192,930	)	$	—	$	(140,475	)	$	14,575		$	125,503	$	(193,327	)
Other comprehensive income (loss)	—			—		18			(27		)	—		(9		)
Comprehensive (loss) income	$	(192,930	)	$	—	$	(140,457	)	$	14,548		$	125,503	$	(193,336	)



	Six Months Ended September 30, 2018
	NGL Energy Partners LP (Parent)		NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	186,959	$	—	$	246,081		$	(4,329	)	$	(243,061	)	$	185,650
Other comprehensive loss	—		—		(1		)	(23		)	—			(24		)
Comprehensive income (loss)	$	186,959	$	—	$	246,080		$	(4,352	)	$	(243,061	)	$	185,626

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Statement of Cash Flows

(in Thousands)



	Six Months Ended September 30, 2019
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities-continuing operations	$	(34,677	)	$	—	$	18,330		$	(4,346	)	$	(20,693	)
Net cash provided by operating activities-discontinued operations	—			—		16,205			—			16,205
Net cash (used in) provided by operating activities	(34,677		)	—		34,535			(4,346		)	(4,488		)
INVESTING ACTIVITIES:
Capital expenditures	—			—		(212,887		)	(46,188		)	(259,075		)
Acquisitions, net of cash acquired	—			—		(647,048		)	—			(647,048		)
Net settlements of commodity derivatives	—			—		49,293			—			49,293
Proceeds from sales of assets	—			—		1,978			4			1,982
Investments in unconsolidated entities	—			—		(1,015		)	—			(1,015		)
Distributions of capital from unconsolidated entities	—			—		439			—			439
Repayments on loan for natural gas liquids facility	—			—		3,022			—			3,022
Deposit paid to acquire business	—			—		(49,875		)	—			(49,875		)
Net cash used in investing activities-continuing operations	—			—		(856,093		)	(46,184		)	(902,277		)
Net cash provided by investing activities-discontinued operations	—			—		269,063			—			269,063
Net cash used in investing activities	—			—		(587,030		)	(46,184		)	(633,214		)
FINANCING ACTIVITIES:
Proceeds from borrowings under Revolving Credit Facility	—			—		2,198,000			—			2,198,000
Payments on Revolving Credit Facility	—			—		(2,276,000		)	—			(2,276,000		)
Issuance of senior unsecured notes and term credit agreement	450,000			—		250,000			—			700,000
Payments on other long-term debt	—			—		(326		)	—			(326		)
Debt issuance costs	(7,999		)	—		(2,447		)	—			(10,446		)
Distributions to general and common unit partners and preferred unitholders	(117,386		)	—		—			—			(117,386		)
Distributions to noncontrolling interest owners	—			—		—			(570		)	(570		)
Proceeds from sale of preferred units, net of offering costs	428,338			—		—			—			428,338
Payments for redemption of preferred units	(265,128		)	—		—			—			(265,128		)
Common unit repurchases and cancellations	(1,098		)	—		—			—			(1,098		)
Payments for settlement and early extinguishment of liabilities	—			—		(1,273		)	—			(1,273		)
Investment in NGL Energy Holdings LLC	(13,827		)	—		—			—			(13,827		)
Net changes in advances with consolidated entities	(428,517		)	—		371,640			56,877			—
Net cash provided by financing activities	44,383			—		539,594			56,307			640,284
Net increase (decrease) in cash and cash equivalents	9,706			—		(12,901		)	5,777			2,582
Cash and cash equivalents, beginning of period	12,798			—		3,728			2,046			18,572
Cash and cash equivalents, end of period	$	22,504		$	—	$	(9,173	)	$	7,823		$	21,154

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Unaudited Condensed Consolidating Statement of Cash Flows

(in Thousands)



	Six Months Ended September 30, 2018
	NGL Energy Partners LP (Parent)			NGL Energy Finance Corp.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities-continuing operations	$	(56,673	)	$	—	$	(186,335	)	$	2,279		$	(185	)	$	(240,914	)
Net cash provided by operating activities-discontinued operations	—			—		146,463			6,570			—			153,033
Net cash (used in) provided by operating activities	(56,673		)	—		(39,872		)	8,849			(185		)	(87,881		)
INVESTING ACTIVITIES:
Capital expenditures	—			—		(191,559		)	(1,960		)	—			(193,519		)
Acquisitions, net of cash acquired	—			—		(194,044		)	(3,927		)	—			(197,971		)
Net settlements of commodity derivatives	—			—		(59,119		)	—			—			(59,119		)
Proceeds from sales of assets	—			—		8,204			—			—			8,204
Proceeds from divestitures of businesses and investments, net	—			—		18,594			—			—			18,594
Investments in unconsolidated entities	—			—		(92		)	—			—			(92		)
Repayments on loan for natural gas liquids facility	—			—		4,558			—			—			4,558
Loan to affiliate	—			—		(1,515		)	—			—			(1,515		)
Net cash used in investing activities-continuing operations	—			—		(414,973		)	(5,887		)	—			(420,860		)
Net cash provided by investing activities-discontinued operations	—			—		803,037			6,982			—			810,019
Net cash provided by investing activities	—			—		388,064			1,095			—			389,159
FINANCING ACTIVITIES:
Proceeds from borrowings under Revolving Credit Facility	—			—		2,008,000			—			—			2,008,000
Payments on Revolving Credit Facility	—			—		(2,153,500		)	—			—			(2,153,500		)
Repurchase of senior unsecured notes	(5,069		)	—		—			—			—			(5,069		)
Payments on other long-term debt	—			—		(326		)	—			—			(326		)
Debt issuance costs	—			—		(780		)	—			—			(780		)
Contributions from noncontrolling interest owners, net	—			—		—			169			—			169
Distributions to general and common unit partners and preferred unitholders	(117,486		)	—		—			—			—			(117,486		)
Repurchase of warrants	(14,988		)	—		—			—			—			(14,988		)
Common unit repurchases and cancellations	(54		)	—		—			—			—			(54		)
Payments for settlement and early extinguishment of liabilities	—			—		(2,639		)	—			—			(2,639		)
Net changes in advances with consolidated entities	201,413			—		(197,214		)	(4,384		)	185			—
Net cash provided by (used in) financing activities-continuing operations	63,816			—		(346,459		)	(4,215		)	185			(286,673		)
Net cash used in financing activities-discontinued operations	—			—		(295		)	(30		)	—			(325		)
Net cash provided by (used in) financing activities	63,816			—		(346,754		)	(4,245		)	185			(286,998		)
Net increase in cash and cash equivalents	7,143			—		1,438			5,699			—			14,280
Cash and cash equivalents, beginning of period	16,915			—		3,329			1,850			—			22,094
Cash and cash equivalents, end of period	$	24,058		$	—	$	4,767		$	7,549		$	—		$	36,374

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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 and six months ended September 30, 2019. 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 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, 2019 (“Annual Report”) filed with the Securities and Exchange Commission on May 30, 2019.

Overview

We are a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner. At September 30, 2019, our operations included:


•	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, trucking, marine and pipeline transportation services through its owned assets.

•

Our Refined Products and Renewables segment conducts gasoline, diesel, ethanol, and biodiesel marketing operations, purchases refined petroleum and renewable products primarily in the Gulf Coast, Southeast and Midwest regions of the United States and schedules them for delivery at various locations throughout the country. In addition, in certain storage locations, our Refined Products and Renewables segment may also purchase unfinished gasoline blending components for subsequent blending into finished gasoline to supply our marketing business as well as third parties. See Note 1 and Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of the accounting for the sale of a portion of our Refined Products and Renewables segment.

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in earnings of Victory Propane) have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows. See Note 1 and Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of the transaction.

Consolidated Results of Operations

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



	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Total revenues	$	4,289,336		$	5,115,975		$	9,455,761		$	9,375,047
Total cost of sales	4,057,376			4,945,204			9,052,342			9,151,432
Operating expenses	75,433			58,510			137,529			112,977
General and administrative expense	43,908			39,328			64,250			61,669
Depreciation and amortization	63,113			52,598			116,867			104,490
Loss on disposal or impairment of assets, net	3,111			5,988			2,144			107,323
Revaluation of liabilities	—			—			—			800
Operating income (loss)	46,395			14,347			82,629			(163,644		)
(Loss) equity in earnings of unconsolidated entities	(265		)	379			(257		)	598
Interest expense	(45,016		)	(41,358		)	(84,910		)	(87,625		)
Loss on early extinguishment of liabilities, net	—			—			—			(137		)
Other income (expense), net	184			1,301			1,193			(32,602		)
Income (loss) from continuing operations before income taxes	1,298			(25,331		)	(1,345		)	(283,410		)
Income tax expense	(640		)	(691		)	(319		)	(1,342		)
Income (loss) from continuing operations	658			(26,022		)	(1,664		)	(284,752		)
(Loss) income from discontinued operations, net of tax	(202,024		)	380,961			(191,663		)	470,402
Net (loss) income	(201,366		)	354,939			(193,327		)	185,650
Less: Net loss attributable to noncontrolling interests	129			518			397			863
Less: Net loss attributable to redeemable noncontrolling interests	—			48			—			446
Net (loss) income attributable to NGL Energy Partners LP	$	(201,237	)	$	355,505		$	(192,930	)	$	186,959

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 and six months ended September 30, 2019 are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2020.

Recent Developments

Acquisitions

As discussed below, we completed numerous acquisitions during the fiscal year ended March 31, 2019 and the six months ended September 30, 2019. These acquisitions impact the comparability of our results of operations between our current and prior fiscal years.

On July 2, 2019, we acquired all of the assets of Mesquite Disposals Unlimited, LLC (“Mesquite”) (including 34 saltwater disposal wells). The assets consist of a fully interconnected produced water pipeline transportation and disposal system in Eddy and Lea Counties, New Mexico, and Loving County, Texas. Also, during the six months ended September 30, 2019, in our Water Solutions segment, we acquired land and one saltwater disposal facility (including five saltwater disposal

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wells). See Note 4 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

During the fiscal year ended March 31, 2019, in our Water Solutions segment, we acquired the remaining 18.375% interest in NGL Water Pipelines, LLC, six saltwater disposal facilities (including 22 saltwater disposal wells), two ranches and four freshwater facilities (including 45 freshwater wells). In our Liquids segment, we acquired the natural gas liquids terminal business of DCP Midstream, LP. In our Refined Products and Renewables segment, we acquired two refined products terminals, which were included in the sale of TPSL on September 30, 2019 and the operations have been classified as discontinued (see “Dispositions” below).

Disposition of TPSL

On September 30, 2019, we completed the sale of TPSL and associated assets to Trajectory for $275.5 million of total consideration and recorded a loss on disposal of $174.4 million during the six months ended September 30, 2019 (see Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Term Credit Agreement

On July 2, 2019, we entered into a term credit agreement (“the 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 (as defined herein). Proceeds from the term loan facility were used to fund a portion of the purchase price for the Mesquite acquisition discussed above (see Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Issuance of Class D Preferred Units

On July 2, 2019, we completed a private placement of 400,000 of our 9.00% Class D 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. Proceeds from this issuance were used to fund a portion of the purchase price for the Mesquite acquisition discussed above (see Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Common Unit Repurchase Program

On August 30, 2019, the board of directors of our general partner authorized a common unit repurchase plan, 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. See Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Subsequent Events

See Note 17 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of transactions that occurred subsequent to September 30, 2019.

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Segment Operating Results for the Three Months Ended September 30, 2019 and 2018

Crude Oil Logistics

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



	Three Months Ended September 30,
	2019			2018		Change
	(in thousands, except per barrel amounts)
Revenues:
Crude oil sales	$	596,674		$	825,571	$	(228,897	)
Crude oil transportation and other	46,776			41,567		5,209
Total revenues (1)	643,450			867,138		(223,688		)
Expenses:
Cost of sales-excluding impact of derivatives	578,789			799,377		(220,588		)
Cost of sales-derivative (gain) loss	(6,792		)	422		(7,214		)
Operating expenses	14,237			12,444		1,793
General and administrative expenses	1,633			1,636		(3		)
Depreciation and amortization expense	17,693			18,870		(1,177		)
(Gain) loss on disposal or impairment of assets, net	(630		)	3,367		(3,997		)
Total expenses	604,930			836,116		(231,186		)
Segment operating income (loss)	$	38,520		$	31,022	$	7,498

Crude oil sold (barrels)	10,421			11,891		(1,470		)
Crude oil transported on owned pipelines (barrels)	10,922			9,578		1,344
Crude oil storage capacity - owned and leased (barrels) (2)	5,232			7,287		(2,055		)
Crude oil storage capacity leased to third parties (barrels) (2)	2,563			—		2,563
Crude oil inventory (barrels) (2)	1,425			681		744
Crude oil sold ($/barrel)	$	57.257		$	69.428	$	(12.171	)
Cost per crude oil sold ($/barrel)	$	54.889		$	67.261	$	(12.372	)
Crude oil product margin ($/barrel)	$	2.368		$	2.167	$	0.201


(1)	Revenues include $2.3 million and $7.1 million of intersegment sales during the three months ended September 30, 2019 and 2018, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.


(2)	Information is presented as of September 30, 2019 and September 30, 2018, respectively.

Crude Oil Sales Revenues. The decrease was due primarily to a decrease in crude oil prices during the three months ended September 30, 2019, compared to the three months ended September 30, 2018. The decrease in volumes is due to a decrease in production due to the decreased crude oil prices.

Crude Oil Transportation and Other Revenues. The increase was partially due to our Grand Mesa Pipeline, which increased revenues by $2.9 million during the three months ended September 30, 2019, compared to the three months ended September 30, 2018, primarily due to increased production growth in the DJ Basin. During the three months ended September 30, 2019, financial volumes on the Grand Mesa Pipeline averaged approximately 128,000 barrels per day (volume amounts are from both internal and external parties). Also, crude transportation increased $2.3 million due to increased barge activity.

Cost of Sales-Excluding Impact of Derivatives. The decrease was due primarily to a decrease in crude oil prices during the three months ended September 30, 2019, compared to the three months ended September 30, 2018.

Cost of Sales-Derivatives. Our cost of sales during the three months ended September 30, 2019 included $2.7 million of net realized gains on derivatives and $4.1 million of net unrealized gains on derivatives. Our cost of sales during the three months ended September 30, 2018 included $6.6 million of net realized losses on derivatives and $6.2 million of net unrealized gains on derivatives.

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Operating and General and Administrative Expenses. The increase was due to utilities related to the higher volumes on Grand Mesa.

Depreciation and Amortization Expense. The decrease during the three months ended September 30, 2019, compared to the three months ended September 30, 2018 was due to asset retirements.

(Gain) Loss on Disposal or Impairment of Assets, Net. During the three months ended September 30, 2019, we recorded a net gain of $0.6 million related to the disposal of certain assets. During the three months ended September 30, 2018, we recorded a net loss of $3.4 million primarily related to the sale of a terminal.

Water Solutions

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



	Three Months Ended September 30,
	2019			2018		Change
	(in thousands, except per barrel and per day amounts)
Revenues:
Wastewater disposal service fees	$	74,335		$	51,471	$	22,864
Sale of recovered hydrocarbons	14,761			18,262		(3,501		)
Other service revenues	12,153			10,031		2,122
Total revenues	101,249			79,764		21,485
Expenses:
Cost of sales-excluding impact of derivatives	1,039			780		259
Cost of sales-derivative (gain) loss	(7,535		)	7,112		(14,647		)
Operating expenses	43,860			34,229		9,631
General and administrative expenses	946			801		145
Depreciation and amortization expense	37,921			26,342		11,579
Loss on disposal or impairment of assets, net	3,744			730		3,014
Total expenses	79,975			69,994		9,981
Segment operating income	$	21,274		$	9,770	$	11,504

Wastewater processed (barrels per day)
Northern Delaware Basin	465,453			7,850		457,603
Permian Basin	332,925			482,011		(149,086		)
Eagle Ford Basin	279,754			271,059		8,695
DJ Basin	169,485			166,152		3,333
Other Basins	10,736			80,577		(69,841		)
Total	1,258,353			1,007,649		250,704
Solids processed (barrels per day)	5,759			6,995		(1,236		)
Skim oil sold (barrels per day)	3,079			3,326		(247		)
Service fees for wastewater processed ($/barrel)	$	0.64		$	0.56	$	0.08
Recovered hydrocarbons for wastewater processed ($/barrel)	$	0.13		$	0.20	$	(0.07	)
Operating expenses for wastewater processed ($/barrel)	$	0.38		$	0.37	$	0.01

Wastewater Disposal Service Fee Revenues. The increase was due primarily to an increase in the price we are receiving to dispose of a barrel of water and an increase in the volume of wastewater processed at acquired and newly developed facilities, partially offset by wastewater volume reductions as a result of the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019.

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increase in wastewater transported through pipelines (which contains less oil per barrel of wastewater), as well as operational changes made by producers in the DJ Basin.

Other Service Revenues. Other service revenues primarily include solids disposal revenues, water pipeline revenues, land surface use revenues and freshwater revenues. The increase was due primarily to an increase in land surface use revenues and freshwater revenues in our New Mexico operations which began during the three months ended September 30, 2018 as well as freshwater revenues due to acquisitions. These increases were partially offset by lower solids disposal revenues and volumes due to a facility not currently in operation as well as reduced operations at another facility.

Cost of Sales-Excluding Impact of Derivatives. The increase was due primarily to operational changes in the Eagle Ford Basin during the three months ended September 30, 2019.

Cost of Sales-Derivatives. We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the hydrocarbons we expect to recover when processing the wastewater and selling the skim oil. Our cost of sales during the three months ended September 30, 2019 included $5.8 million of net unrealized gains on derivatives and $1.7 million of net realized gains on derivatives. Our cost of sales during the three months ended September 30, 2018 included $5.3 million of net realized losses on derivatives and $1.8 million of net unrealized losses on 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, partially offset by the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019.

Depreciation and Amortization Expense. The increase was due primarily to acquisitions and newly developed facilities, partially offset by the sale of our Bakken and South Pecos water disposal businesses during the fiscal year ended March 31, 2019.

Loss on Disposal or Impairment of Assets, Net. During the three months ended September 30, 2019, we recorded a net loss of $3.6 million on the disposals of certain assets. During the three months ended September 30, 2018, we recorded a net loss of $0.7 million on the disposals of certain assets.

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Liquids

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



	Three Months Ended September 30,
	2019			2018			Change
	(in thousands, except per gallon amounts)
Propane sales:
Revenues (1)	$	116,449		$	236,319		$	(119,870	)
Cost of sales-excluding impact of derivatives	108,356			222,355			(113,999		)
Cost of sales-derivative loss (gain)	4,676			(1,574		)	6,250
Product margin	3,417			15,538			(12,121		)

Butane sales:
Revenues (1)	87,983			146,951			(58,968		)
Cost of sales-excluding impact of derivatives	74,833			142,962			(68,129		)
Cost of sales-derivative (gain) loss	(1,384		)	4,092			(5,476		)
Product margin (loss)	14,534			(103		)	14,637

Other product sales:
Revenues (1)	117,997			171,099			(53,102		)
Cost of sales-excluding impact of derivatives	110,909			161,970			(51,061		)
Cost of sales-derivative loss (gain)	46			(665		)	711
Product margin	7,042			9,794			(2,752		)

Service revenues:
Revenues (1)	11,200			4,883			6,317
Cost of sales	3,930			614			3,316
Product margin	7,270			4,269			3,001

Expenses:
Operating expenses	15,764			9,888			5,876
General and administrative expenses	1,495			1,389			106
Depreciation and amortization expense	6,611			6,459			152
(Gain) loss on disposal or impairment of assets, net	(4		)	1,004			(1,008		)
Total expenses	23,866			18,740			5,126
Segment operating income	$	8,397		$	10,758		$	(2,361	)

Liquids storage capacity - owned and leased (gallons) (2)	397,343			399,967			(2,624		)

Propane sold (gallons)	262,183			266,654			(4,471		)
Propane sold ($/gallon)	$	0.444		$	0.886		$	(0.442	)
Cost per propane sold ($/gallon)	$	0.431		$	0.828		$	(0.397	)
Propane product margin ($/gallon)	$	0.013		$	0.058		$	(0.045	)
Propane inventory (gallons) (2)	104,048			117,206			(13,158		)
Propane storage capacity leased to third parties (gallons) (2)	45,436			30,440			14,996

Butane sold (gallons)	170,169			131,424			38,745
Butane sold ($/gallon)	$	0.517		$	1.118		$	(0.601	)
Cost per butane sold ($/gallon)	$	0.432		$	1.119		$	(0.687	)
Butane product margin (loss) ($/gallon)	$	0.085		$	(0.001	)	$	0.086
Butane inventory (gallons) (2)	80,839			67,448			13,391
Butane storage capacity leased to third parties (gallons) (2)	33,894			59,220			(25,326		)

Other products sold (gallons)	124,614			124,935			(321		)
Other products sold ($/gallon)	$	0.947		$	1.370		$	(0.423	)
Cost per other products sold ($/gallon)	$	0.890		$	1.291		$	(0.401	)
Other products product margin ($/gallon)	$	0.057		$	0.079		$	(0.022	)
Other products inventory (gallons) (2)	9,705			7,658			2,047

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(1)	Revenues include $5.1 million and $8.8 million of intersegment sales during the three months ended September 30, 2019 and 2018, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.


(2)	Information is presented as of September 30, 2019 and September 30, 2018, respectively.

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.

Cost of Sales-Derivatives. Our cost of wholesale propane sales included $4.8 million of net unrealized losses on derivatives and $0.1 million of net realized gains on derivatives during the three months ended September 30, 2019. During the three months ended September 30, 2018, our cost of wholesale propane sales included $2.4 million of net unrealized gains on derivatives and $0.8 million of net realized losses on derivatives.

Propane product margins, excluding the impact of derivatives, decreased as inventory values were slow to align 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, partially offset by increased volumes.

Cost of Sales-Derivatives. Our cost of butane sales during the three months ended September 30, 2019 included $0.3 million of net unrealized gains on derivatives and $1.1 million of net realized gains on derivatives. Our cost of butane sales included $5.0 million of net unrealized losses on derivatives and $0.9 million of net realized gains on derivatives during the three months ended September 30, 2018.

Butane product margins, excluding the impact of derivatives, increased versus the prior year quarter in large part due to increased volumes, including steady volumes at our Chesapeake, Virginia export terminal and strong domestic blending economics.

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.

Cost of Sales-Derivatives. Our cost of sales of other products included less than $0.1 million of net unrealized losses on derivatives and less than $0.1 million of net realized losses on derivatives during the three months ended September 30, 2019. Our cost of sales of other products during the three months ended September 30, 2018 included $0.2 million of net unrealized gains on derivatives and $0.5 million of net realized gains on derivatives.

Other product sales product margins during the three months ended September 30, 2019 were impacted by decreasing commodity prices.

Service Revenues. This revenue includes storage, terminaling and transportation services income. Revenue for the current quarter increased due to the addition of the new terminals in the northeast from the March 2019 acquisition.

Operating and General and Administrative Expenses. Expenses for the current quarter were higher primarily due to the addition of the new terminals in the northeast from the March 2019 acquisition.

Depreciation and Amortization Expense. Expense for the current quarter was higher due to the addition of the new terminals in the northeast from the March 2019 acquisition.

(Gain) Loss on Disposal or Impairment of Assets, Net. During the three months ended September 30, 2019 we recorded a gain of less than $0.1 million related to the sale of assets and during the three months ended September 30, 2018, we recorded a loss of $1.0 million related to the retirement of assets.

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Refined Products and Renewables

The following table summarizes the operating results of our Refined Products and Renewables segment for the periods indicated. On September 30, 2019, we sold TPSL and the operating results related to TPSL have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted.



	Three Months Ended September 30,
	2019			2018			Change
	(in thousands, except per barrel amounts)
Refined products sales:
Revenues-excluding impact of derivatives	$	3,084,572		$	3,558,229		$	(473,657	)
Cost of sales-excluding impact of derivatives	3,076,356			3,542,281			(465,925		)
Derivative (gain) loss	(14,369		)	11,884			(26,253		)
Product margin	22,585			4,064			18,521

Renewables sales:
Revenues-excluding impact of derivatives	86,252			66,386			19,866
Cost of sales-excluding impact of derivatives	88,173			68,471			19,702
Derivative loss	763			279			484
Product loss	(2,684		)	(2,364		)	(320		)

Service fees and other revenues	769			508			261

Expenses:
Operating expenses	1,573			1,647			(74		)
General and administrative expenses	2,291			2,244			47
Depreciation and amortization expense	125			168			(43		)
Total expenses	3,989			4,059			(70		)
Segment operating income (loss)	$	16,681		$	(1,851	)	$	18,532

Gasoline sold (barrels)	33,182			33,719			(537		)
Diesel sold (barrels)	8,611			7,388			1,223
Ethanol sold (barrels)	454			621			(167		)
Biodiesel sold (barrels)	195			250			(55		)
Refined products and renewables storage capacity - leased (barrels) (1)	4,474			3,773			701
Gasoline inventory (barrels) (1)	1,548			1,711			(163		)
Diesel inventory (barrels) (1)	288			527			(239		)
Ethanol inventory (barrels) (1)	1,087			1,072			15
Biodiesel inventory (barrels) (1)	406			942			(536		)
Refined products sold ($/barrel)	$	73.806		$	86.560		$	(12.754	)
Cost per refined products sold ($/barrel)	$	73.266		$	86.461		$	(13.195	)
Refined products product margin ($/barrel)	$	0.540		$	0.099		$	0.441
Renewable products sold ($/barrel)	$	132.900		$	76.218		$	56.682
Cost per renewable products sold ($/barrel)	$	137.035		$	78.932		$	58.103
Renewable products product loss ($/barrel)	$	(4.135	)	$	(2.714	)	$	(1.421	)


(1)	Information is presented as of September 30, 2019 and September 30, 2018, respectively.

Refined Products Revenues-Excluding Impact of Derivatives and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues-excluding impact of derivatives and cost of sales-excluding impact of derivatives were due to a decrease in refined product prices, partially offset by increased volumes. The decrease in prices was due primarily to supply and demand for refined fuels at our wholesale locations. During the three months ended September 30, 2019, Gulf Coast prices decreased

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compared to such prices during the three months ended September 30, 2018, which negatively affected our margins-excluding impact of derivatives. The increased volumes were due primarily to the continued demand for motor fuels.

Refined Products-Derivative (Gain) Loss. Our margin during the three months ended September 30, 2019 included a gain of $14.4 million from our risk management activities due primarily to unrealized gains on our open forward physical positions and due to NYMEX futures prices decreasing on our short future positions. Our margin during the three months ended September 30, 2018 included a loss of $11.9 million from our risk management activities due primarily to NYMEX futures prices increasing on our short future positions.

Renewables Revenues-Excluding Impact of Derivatives and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues-excluding impact of derivatives and cost of sales-excluding impact of derivatives were due primarily to an increase in renewables prices, partially offset by decreased volumes. The increase in prices was due primarily to more sales of ethanol renewable identification numbers during the three months ended September 30, 2019, compared to more sales of biodiesel and ethanol during the three months ended September 30, 2018.

Renewables-Derivative Loss. Our margin during the three months ended September 30, 2019 included a loss of $0.8 million from our risk management activities due primarily to unrealized losses on our open forward physical positions. Our margin during the three months ended September 30, 2018 included a loss of $0.3 million from our risk management activities due primarily to NYMEX futures prices increasing on our short future positions.

Service Fees and Other Revenues. The increase was due primarily to increased ancillary charges billed to our sublessee for returned railcars.

Operating and General and Administrative Expenses. Operating and general and administrative expense for the current quarter was consistent with the prior year.

Depreciation and Amortization Expense. The decrease was due primarily to certain assets being fully depreciated during the year ended March 31, 2019.

Corporate and Other

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



	Three Months Ended September 30,
	2019			2018			Change
	(in thousands)
Other revenues
Revenues	$	264		$	371		$	(107	)
Cost of sales	435			497			(62		)
Loss	(171		)	(126		)	(45		)

Expenses:
Operating expenses	(1		)	322			(323		)
General and administrative expenses	37,543			33,258			4,285
Depreciation and amortization expense	763			759			4
Loss on disposal or impairment of assets, net	1			887			(886		)
Total expenses	38,306			35,226			3,080
Operating loss	$	(38,477	)	$	(35,352	)	$	(3,125	)

General and Administrative Expenses. The increase during the three months ended September 30, 2019 was due primarily to higher equity-based compensation expense. During the three months ended September 30, 2019, equity-based compensation expense was $21.3 million, compared to $19.2 million during the three months ended September 30, 2018. The increase is primarily due to an increase in bonuses paid in common units of approximately $2.9 million, which is partially offset by a decrease in expense related to the cancellation of our performance awards during the year ended March 31, 2019. In addition, there was an increase in acquisition expense. During the three months ended September 30, 2019, acquisition expense

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was $5.4 million, compared to $2.9 million during the three months ended September 30, 2018. The increase is primarily due to expenses incurred in connection with our acquisitions of both Mesquite and Hillstone.

Equity in Earnings of Unconsolidated Entities

The decrease of $0.6 million during the three months ended September 30, 2019 was due primarily to lower earnings from our 50% interest in a water services company that we acquired in August 2018 and a loss from our 50% interest in an aircraft rental company during the three months ended September 30, 2019.

Interest Expense

Interest expense includes interest charged on the Revolving Credit Facility (as defined herein), senior unsecured notes and the Term Credit Agreement (as defined herein), 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 $3.7 million during the three months ended September 30, 2019 was primarily due to the issuance of our 2026 Notes (as defined herein), our entering in the Term Credit Agreement and higher average outstanding balances on our Revolving Credit Facility. These increases were offset by the redemption of our senior unsecured notes that were scheduled to mature in 2019 and 2021.

Other Income, Net

The following table summarizes the components of other income, net for the periods indicated:



	Three Months Ended September 30,
	2019			2018
	(in thousands)
Interest income (1)	$	192		$	1,212
Other	(8		)	89
Other income, net	$	184		$	1,301


(1)	Relates primarily to a loan receivable associated with our interest in the construction of a natural gas liquids loading/unloading facility that is utilized by a third party and a loan receivable with Victory Propane (see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Income Tax Expense

Income tax expense was $0.6 million during the three months ended September 30, 2019, compared to income tax expense of $0.7 million during the three months ended September 30, 2018. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Noncontrolling Interests - Redeemable and Non-redeemable

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third parties. The decrease in the noncontrolling interest loss of $0.4 million during the three months ended September 30, 2019 was due primarily to a loss from operations of Mesquite, which we acquired in July 2019.

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Segment Operating Results for the Six Months Ended September 30, 2019 and 2018

Crude Oil Logistics

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



	Six Months Ended September 30,
	2019			2018			Change
	(in thousands, except per barrel amounts)
Revenues:
Crude oil sales	$	1,278,743		$	1,582,082		$	(303,339	)
Crude oil transportation and other	90,394			73,411			16,983
Total revenues (1)	1,369,137			1,655,493			(286,356		)
Expenses:
Cost of sales-excluding impact of derivatives	1,240,827			1,540,887			(300,060		)
Cost of sales-derivative (gain) loss	(10,063		)	11,680			(21,743		)
Operating expenses	28,615			25,039			3,576
General and administrative expenses	3,404			3,243			161
Depreciation and amortization expense	35,278			38,099			(2,821		)
(Gain) loss on disposal or impairment of assets, net	(1,246		)	105,261			(106,507		)
Total expenses	1,296,815			1,724,209			(427,394		)
Segment operating income (loss)	$	72,322		$	(68,716	)	$	141,038

Crude oil sold (barrels)	21,712			23,116			(1,404		)
Crude oil transported on owned pipelines (barrels)	22,711			19,565			3,146
Crude oil storage capacity - owned and leased (barrels) (2)	5,232			7,287			(2,055		)
Crude oil storage capacity leased to third parties (barrels) (2)	2,563			—			2,563
Crude oil inventory (barrels) (2)	1,425			681			744
Crude oil sold ($/barrel)	$	58.896		$	68.441		$	(9.545	)
Cost per crude oil sold ($/barrel)	$	56.686		$	67.164		$	(10.478	)
Crude oil product margin ($/barrel)	$	2.210		$	1.277		$	0.933


(1)	Revenues include $11.8 million and $11.6 million of intersegment sales during the six months ended September 30, 2019 and 2018, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.


(2)	Information is presented as of September 30, 2019 and September 30, 2018, respectively.

Crude Oil Sales Revenues. The decrease was due primarily to a decrease in crude oil prices and sales volumes during the six months ended September 30, 2019, compared to the six months ended September 30, 2018.

Crude Oil Transportation and Other Revenues. The increase was partially due to our Grand Mesa Pipeline, which increased revenues by $5.8 million during the six months ended September 30, 2019, compared to the six months ended September 30, 2018, primarily due to increased production growth in the DJ Basin. During the six months ended September 30, 2019, 22.7 million barrels of crude were transported on the Grand Mesa Pipeline averaged approximately 130,000 barrels per day (volume amounts are from both internal and external parties). In addition, during the six months ended September 30, 2019, a new crude marketing contract increased revenues by $7.2 million. Also, crude transportation increased $2.5 million due to increased barge activity.

Cost of Sales-Excluding Impact of Derivatives. The decrease was due primarily to a decrease in crude oil prices during the six months ended September 30, 2019, compared to the six months ended September 30, 2018.

Cost of Sales-Derivatives. Our cost of sales during the six months ended September 30, 2019 included $4.1 million of net realized gains on derivatives and $6.0 million of net unrealized gains on derivatives. Our cost of sales during the six months ended September 30, 2018 included $10.4 million of net realized losses on derivatives and $1.3 million of net unrealized losses on derivatives.

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Operating and General and Administrative Expenses. The increase was due primarily to higher utility costs related to the higher volumes on Grand Mesa.

Depreciation and Amortization Expense. The decrease was due to the retirement of certain assets and other assets being fully depreciated or amortized during the six months ended September 30, 2018.

(Gain) Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2019, we recorded a net gain of $1.2 million related to the disposal of certain assets. During the six months ended September 30, 2018 we recorded a net loss of $105.3 million, which included the loss of $105.0 million on our transaction with a third party in which they agreed to be fully responsible for our future minimum volume commitment in exchange for $67.7 million of deficiency credits on a contract with a crude oil pipeline operator and $35.3 million in cash. The loss also includes additional costs related to this transaction of $2.0 million. In addition, we recorded a loss of $1.3 million primarily related to the sale of two terminals.

Water Solutions

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



	Six Months Ended September 30,
	2019			2018		Change
	(in thousands, except per barrel and per day amounts)
Revenues:
Wastewater disposal service fees	$	120,262		$	99,474	$	20,788
Sale of recovered hydrocarbons	29,096			38,489		(9,393		)
Other service revenues	23,674			17,946		5,728
Total revenues	173,032			155,909		17,123
Expenses:
Cost of sales-excluding impact of derivatives	1,287			1,369		(82		)
Cost of sales-derivative (gain) loss	(10,590		)	20,792		(31,382		)
Operating expenses	76,316			65,753		10,563
General and administrative expenses	1,909			1,600		309
Depreciation and amortization expense	65,992			51,651		14,341
Loss on disposal or impairment of assets, net	3,155			3,205		(50		)
Revaluation of liabilities	—			800		(800		)
Total expenses	138,069			145,170		(7,101		)
Segment operating income	$	34,963		$	10,739	$	24,224

Wastewater processed (barrels per day)
Northern Delaware Basin	277,802			3,946		273,856
Permian Basin	322,291			451,939		(129,648		)
Eagle Ford Basin	273,533			275,099		(1,566		)
DJ Basin	169,552			151,216		18,336
Other Basins	11,561			81,801		(70,240		)
Total	1,054,739			964,001		90,738
Solids processed (barrels per day)	5,601			6,450		(849		)
Skim oil sold (barrels per day)	2,970			3,470		(500		)
Service fees for wastewater processed ($/barrel)	$	0.62		$	0.56	$	0.06
Recovered hydrocarbons for wastewater processed ($/barrel)	$	0.15		$	0.22	$	(0.07	)
Operating expenses for wastewater processed ($/barrel)	$	0.40		$	0.37	$	0.03

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Recovered Hydrocarbon Revenues. The decrease was due primarily to a decrease in the percentage of skim oil volumes recovered per wastewater barrel processed and lower crude oil prices. This lower percentage was due primarily to an increase in wastewater transported through pipelines (which contains less oil per barrel of wastewater), as well as operational changes made by producers in the DJ Basin.

Other Service Revenues. The increase was due primarily to an increase in land surface use revenues and freshwater revenues in our New Mexico operations which began during the three months ended September 30, 2018 as well as freshwater revenues due to acquisitions. These increases were partially offset by lower solids disposal revenues and volumes due to a facility not currently in operation as well as reduced operations at another facility.

Cost of Sales-Excluding Impact of Derivatives. Cost of sales-excluding impact of derivatives for the current period was consistent with the prior year.

Cost of Sales-Derivatives. We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the hydrocarbons we expect to recover when processing the wastewater and selling the skim oil. Our cost of sales during the six months ended September 30, 2019 included $6.0 million of net unrealized gains on derivatives and $4.6 million of net realized gains on derivatives. In June 2019, we settled derivative contracts that had scheduled settlement dates from April through December 2020 and recorded a gain of $1.9 million on those derivatives. Our cost of sales during the six months ended September 30, 2018 included $9.9 million of net realized losses on derivatives and $10.9 million of net unrealized losses on derivatives.

Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2019, we recorded a net loss of $3.6 million on the disposals of certain assets. In addition, during the six months ended September 30, 2019, we recorded a gain of $1.0 million for cash received related to a previous loan receivable. During the six months ended September 30, 2018, we recorded a net loss of $3.2 million on the disposals of certain assets.

Revaluation of Liabilities. The revaluation of liabilities represents the change in the valuation of our contingent consideration liabilities related to royalty agreements acquired as part of certain business combinations. The expense during the six months ended September 30, 2018 was due primarily to higher actual and expected production from new customers, resulting in an increase to the expected future royalty payment.

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Liquids

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



	Six Months Ended September 30,
	2019			2018			Change
	(in thousands, except per gallon amounts)
Propane sales:
Revenues (1)	$	256,608		$	424,710		$	(168,102	)
Cost of sales-excluding impact of derivatives	243,555			402,900			(159,345		)
Cost of sales-derivative loss (gain)	7,486			(1,222		)	8,708
Product margin	5,567			23,032			(17,465		)

Butane sales:
Revenues (1)	170,295			261,174			(90,879		)
Cost of sales-excluding impact of derivatives	150,374			254,405			(104,031		)
Cost of sales-derivative (gain) loss	(7,489		)	6,658			(14,147		)
Product margin	27,410			111			27,299

Other product sales:
Revenues (1)	233,813			324,417			(90,604		)
Cost of sales-excluding impact of derivatives	217,865			309,649			(91,784		)
Cost of sales-derivative loss (gain)	203			(1,735		)	1,938
Product margin	15,745			16,503			(758		)

Service revenues:
Revenues (1)	21,749			10,513			11,236
Cost of sales	7,913			1,279			6,634
Product margin	13,836			9,234			4,602

Expenses:
Operating expenses	28,862			18,715			10,147
General and administrative expenses	2,982			2,863			119
Depreciation and amortization expense	13,840			12,927			913
(Gain) loss on disposal or impairment of assets, net	(7		)	994			(1,001		)
Total expenses	45,677			35,499			10,178
Segment operating income	$	16,881		$	13,381		$	3,500

Liquids storage capacity - owned and leased (gallons) (2)	397,343			399,967			(2,624		)

Propane sold (gallons)	507,450			500,440			7,010
Propane sold ($/gallon)	$	0.506		$	0.849		$	(0.343	)
Cost per propane sold ($/gallon)	$	0.495		$	0.803		$	(0.308	)
Propane product margin ($/gallon)	$	0.011		$	0.046		$	(0.035	)
Propane inventory (gallons) (2)	104,048			117,206			(13,158		)
Propane storage capacity leased to third parties (gallons) (2)	45,436			30,440			14,996

Butane sold (gallons)	312,648			244,449			68,199
Butane sold ($/gallon)	$	0.545		$	1.068		$	(0.523	)
Cost per butane sold ($/gallon)	$	0.457		$	1.068		$	(0.611	)
Butane product margin ($/gallon)	$	0.088		$	—		$	0.088
Butane inventory (gallons) (2)	80,839			67,448			13,391
Butane storage capacity leased to third parties (gallons) (2)	33,894			59,220			(25,326		)

Other products sold (gallons)	243,872			241,920			1,952
Other products sold ($/gallon)	$	0.959		$	1.341		$	(0.382	)
Cost per other products sold ($/gallon)	$	0.894		$	1.273		$	(0.379	)
Other products product margin ($/gallon)	$	0.065		$	0.068		$	(0.003	)
Other products inventory (gallons) (2)	9,705			7,658			2,047

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(1)	Revenues include $6.3 million and $10.5 million of intersegment sales during the six months ended September 30, 2019 and 2018, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.


(2)	Information is presented as of September 30, 2019 and September 30, 2018, respectively.

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.

Cost of Sales-Derivatives. Our cost of wholesale propane cost of sales included $8.0 million of net unrealized losses on derivatives and $0.5 million of net realized gains on derivatives during the six months ended September 30, 2019. During the six months ended September 30, 2018, our cost of wholesale propane sales included $2.0 million of net unrealized gains on derivatives and $0.8 million of net realized losses on derivatives.

Propane product margins per gallon of propane sold were lower during the six months ended September 30, 2019 than during the six months ended September 30, 2018. Propane product margins decreased due to inventory values being slow to align with reduced commodity prices.

Butane Sales and Cost of Sales-Excluding Impact of Derivatives. The decreases in revenues and cost of sales were due primarily to lower commodity prices in the first six months of the year. Volumes increased due to strong demand from domestic and international markets.

Cost of Sales-Derivatives. Our cost of butane sales during the six months ended September 30, 2019 included $5.1 million of net unrealized gains on derivatives and $2.4 million of net realized gains on derivatives. Our cost of butane sales included $7.5 million of net unrealized losses on derivatives and $0.8 million of net realized gains on derivatives during the six months ended September 30, 2018.

Butane product margins per gallon of butane sold were higher during the six months ended September 30, 2019 than during the six months ended September 30, 2018 due primarily to stronger domestic markets and international 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.

Cost of Sales-Derivatives. Our cost of sales of other products included less than $0.1 million of net unrealized gains on derivatives and $0.2 million of net realized losses on derivatives during the six months ended September 30, 2019. Our cost of sales of other products during the six months ended September 30, 2018 included $0.6 million of net unrealized gains on derivatives and $1.1 million of net realized gains on derivatives.

Other product sales product margins during the six months ended September 30, 2019 were consistent with the prior year.

Service Revenues. This revenue includes storage, terminaling and transportation services income. The increase during the six months ended September 30, 2019 was primarily related to the addition of the new terminals in the northeast from the March 2019 acquisition.

Operating and General and Administrative Expenses. Expenses were higher due to the addition of the new terminals in the northeast from the March 2019 acquisition.

Depreciation and Amortization Expense. Expense for the current quarter increased due to the addition of the new terminals in the northeast from the March 2019 acquisition.

(Gain) Loss on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2019, we recorded a net gain of less than $0.1 million and during the six months ended September 30, 2018 we recorded a loss of $1.0 million related to the retirement of assets.

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Refined Products and Renewables



	Six Months Ended September 30,
	2019			2018			Change
	(in thousands, except per barrel amounts)
Refined products sales:
Revenues-excluding impact of derivatives	$	6,999,835		$	6,431,540		$	568,295
Cost of sales-excluding impact of derivatives	7,017,481			6,471,572			545,909
Derivative (gain) loss	(38,874		)	19,455			(58,329		)
Product margin (loss)	21,228			(59,487		)	80,715

Renewables sales:
Revenues-excluding impact of derivatives	166,392			131,470			34,922
Cost of sales-excluding impact of derivatives	163,486			133,749			29,737
Derivative loss	5,096			1,069			4,027
Product loss	(2,190		)	(3,348		)	1,158

Service fees and other revenues	1,496			1,158			338

Expenses:
Operating expenses	3,432			2,789			643
General and administrative expenses	4,569			4,490			79
Depreciation and amortization expense	251			336			(85		)
Gain on disposal or impairment of assets, net	—			(3,026		)	3,026
Total expenses	8,252			4,589			3,663
Segment operating income (loss)	$	12,282		$	(66,266	)	$	78,548

Gasoline sold (barrels)	72,992			60,334			12,658
Diesel sold (barrels)	18,357			14,580			3,777
Ethanol sold (barrels)	1,133			1,165			(32		)
Biodiesel sold (barrels)	358			578			(220		)
Refined products and renewables storage capacity - leased (barrels) (1)	4,474			3,773			701
Gasoline inventory (barrels) (1)	1,548			1,711			(163		)
Diesel inventory (barrels) (1)	288			527			(239		)
Ethanol inventory (barrels) (1)	1,087			1,072			15
Biodiesel inventory (barrels) (1)	406			942			(536		)
Refined products sold ($/barrel)	$	76.627		$	85.852		$	(9.225	)
Cost per refined products sold ($/barrel)	$	76.395		$	86.646		$	(10.251	)
Refined products product margin (loss) ($/barrel)	$	0.232		$	(0.794	)	$	1.026
Renewable products sold ($/barrel)	$	111.598		$	75.427		$	36.171
Cost per renewable products sold ($/barrel)	$	113.066		$	77.348		$	35.718
Renewable products product loss ($/barrel)	$	(1.468	)	$	(1.921	)	$	0.453


(1)	Information is presented as of September 30, 2019 and September 30, 2018, respectively.

Refined Products Revenues-Excluding Impact of Derivatives and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues-excluding impact of derivatives and cost of sales-excluding impact of derivatives were due to increased volumes, partially offset by a decrease in refined products prices. The increased volumes were due primarily to the continued

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demand for motor fuels. The decrease in prices was due primarily to supply and demand for refined fuels at our wholesale locations. During the six months ended September 30, 2019, Gulf Coast prices decreased compared to such prices during the six months ended September 30, 2018, which negatively affected our margins-excluding impact of derivatives.

Refined Products-Derivative (Gain) Loss. Our margin during the six months ended September 30, 2019 included a gain of $38.9 million from our risk management activities due primarily to unrealized gains on our open forward physical positions and due to NYMEX futures prices decreasing on our short future positions. Our margin during the six months ended September 30, 2018 included a loss of $19.5 million from our risk management activities due primarily to NYMEX futures prices increasing on our short future positions.

Renewables Revenues-Excluding Impact of Derivatives and Cost of Sales-Excluding Impact of Derivatives. The increases in revenues-excluding impact of derivatives and cost of sales-excluding impact of derivatives were due primarily to an increase in renewables prices, partially offset by decreased volumes. The increase in prices was due primarily to more sales of ethanol renewable identification numbers during the six months ended September 30, 2019, compared to the six months ended September 30, 2018.

Renewables-Derivative Loss. Our margin during the six months ended September 30, 2019 included a loss of $5.1 million from our risk management activities due primarily to unrealized losses on our open forward physical positions. Our margin during the six months ended September 30, 2018 included a loss of $1.1 million from our risk management activities due primarily to NYMEX futures prices increasing on our short future positions.

Service Fees and Other Revenues. The increase was due primarily to increased ancillary charges billed to our sublessee for returned railcars.

Operating and General and Administrative Expenses. The increase was due primarily to lower environmental expense during the six months ended September 30, 2018 as a result of an insurance recovery we received related to a historical environmental indemnification agreement.

Depreciation and Amortization Expense. The decrease was due primarily to certain assets being fully depreciated during the year ended March 31, 2019.

Gain on Disposal or Impairment of Assets, Net. During the six months ended September 30, 2018, we recorded a gain of $3.0 million on the sale of our previously held 20% interest in E Energy Adams, LLC.

Corporate and Other

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



	Six Months Ended September 30,
	2019			2018			Change
	(in thousands)
Other revenues
Revenues	$	519		$	747		$	(228	)
Cost of sales	900			987			(87		)
Loss	(381		)	(240		)	(141		)

Expenses:
Operating expenses	304			703			(399		)
General and administrative expenses	51,386			49,473			1,913
Depreciation and amortization expense	1,506			1,477			29
Loss on disposal or impairment of assets, net	242			889			(647		)
Total expenses	53,438			52,542			896
Operating loss	$	(53,819	)	$	(52,782	)	$	(1,037	)

General and Administrative Expenses. The increase during the six months ended September 30, 2019 was due primarily to higher acquisition expense. During the six months ended September 30, 2019, acquisition expense was $7.5

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million, compared to $4.0 million during the six months ended September 30, 2018. The increase is primarily due to expenses incurred in connection with our acquisitions of both Mesquite and Hillstone. In addition, there was an increase in compensation expense. During the six months ended September 30, 2019, compensation expense was $18.5 million, compared to $16.4 million during the six months ended September 30, 2018. The increase was primarily due to an increase in group health insurance costs of approximately $0.8 million. These increases are partially offset by a decrease in legal expense of approximately $2.8 million.

Equity in Earnings of Unconsolidated Entities

The decrease of $0.9 million during the six months ended September 30, 2019 was due primarily to lower earnings from our 50% interest in a water services company that we acquired in August 2018, the sale of our investment in E Energy Adams, LLC on May 3, 2018, and a loss from our 50% interest in an aircraft rental company during the six months ended September 30, 2019.

Interest Expense

The decrease of $2.7 million during the six months ended September 30, 2019 was due to the repurchase of all of the unsecured notes that were scheduled to mature in 2019 and 2021 during our fiscal year ended March 31, 2019. This decrease was partially offset by the issuance of the 2026 Notes (as defined herein) and the Term Credit Agreement (as defined herein) which was entered into as part of the Mesquite acquisition.

Loss on Early Extinguishment of Liabilities, Net

During the six months ended September 30, 2018, the net loss (inclusive of debt issuance costs written off) relates to the early extinguishment of a portion of the outstanding senior unsecured notes.

Other Income (Expense), Net

The following table summarizes the components of other income (expense), net for the periods indicated:



	Six Months Ended September 30,
	2019			2018
	(in thousands)
Interest income (1)	$	1,204		$	2,468
Gavilon legal matter settlement (2)	—			(35,000		)
Other	(11		)	(70		)
Other income (expense), net	$	1,193		$	(32,602	)


(1)	Relates primarily to a loan receivable associated with our interest in the construction of a natural gas liquids loading/unloading facility that is utilized by a third party and a loan receivable with Victory Propane (see Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).


(2)	Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Income Tax Expense

Income tax expense was $0.3 million during the six months ended September 30, 2019, compared to income tax expense of $1.3 million during the six months ended September 30, 2018. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

Noncontrolling Interests - Redeemable and Non-redeemable

The decrease in the noncontrolling interest loss of $0.9 million during the six months ended September 30, 2019 was due primarily to a loss from operations of Atlantic Propane, LLC in the prior year quarter, which we sold in July 2018, a loss from operations of Mesquite, which we acquired in July 2019, and a loss from operations of the Sawtooth joint venture.

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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 market 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 our Refined Products and Renewables segment, as discussed below. EBITDA and Adjusted EBITDA should not be considered as alternatives to net (loss) income, income (loss) 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 our Refined Products and Renewables 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 our Refined Products and Renewables segment. The primary hedging strategy of our Refined Products and Renewables segment is to hedge against the risk of declines in the value of inventory over the course of the contract cycle, and many of the hedges are six months to one year in duration at inception. The “inventory valuation adjustment” row in the reconciliation table reflects the difference between the market value of the inventory of our Refined Products and Renewables segment 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 September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Net (loss) income	$	(201,366	)	$	354,939		$	(193,327	)	$	185,650
Less: Net loss attributable to noncontrolling interests	129			518			397			863
Less: Net loss attributable to redeemable noncontrolling interests	—			48			—			446
Net (loss) income attributable to NGL Energy Partners LP	(201,237		)	355,505			(192,930		)	186,959
Interest expense	45,113			41,367			85,023			87,779
Income tax expense	650			815			339			1,466
Depreciation and amortization	63,266			53,507			118,110			115,082
EBITDA	(92,208		)	451,194			10,542			391,286
Net unrealized (gains) losses on derivatives	(5,462		)	(1,893		)	(8,936		)	17,060
Inventory valuation adjustment (1)	(5,439		)	25,770			(25,185		)	1,168
Lower of cost or market adjustments	(901		)	—			(1,819		)	(413		)
Loss (gain) on disposal or impairment of assets, net	177,561			(403,185		)	176,594			(301,418		)
Loss on early extinguishment of liabilities, net	—			—			—			137
Equity-based compensation expense (2)	21,295			19,219			24,996			24,730
Acquisition expense (3)	5,085			2,863			7,176			4,115
Revaluation of liabilities (4)	—			—			—			800
Gavilon legal matter settlement (5)	—			—			—			35,000
Other (6)	3,332			1,402			6,655			3,219
Adjusted EBITDA	$	103,263		$	95,370		$	190,023		$	175,684
Adjusted EBITDA - Discontinued Operations	$	(15,714	)	$	3,708		$	(22,782	)	$	12,505
Adjusted EBITDA - Continuing Operations	$	118,977		$	91,662		$	212,805		$	163,179


(1)	Amount reflects the difference between the market value of the inventory of our Refined Products and Renewables segment at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge. See “Non-GAAP Financial Measures” section above for a further discussion.

(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.


(3)	Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including amounts accrued related to the LCT Capital, LLC legal matter (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion), partially offset by reimbursement for certain legal costs incurred in prior periods.


(4)	Amounts represent the non-cash valuation adjustment of contingent consideration liabilities, offset by the cash payments, related to royalty agreements acquired as part of acquisitions in our Water Solutions segment.


(5)	Represents the accrual for the estimated cost of the settlement of the Gavilon legal matter (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion). We have excluded this amount from Adjusted EBITDA as it relates to transactions that occurred prior to our acquisition of Gavilon LLC in December 2013.


(6)	Amounts for the three months and six months ended September 30, 2019 and 2018 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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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 September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Reconciliation to unaudited condensed consolidated statements of operations:
Depreciation and amortization per EBITDA table	$	63,266		$	53,507		$	118,110		$	115,082
Intangible asset amortization recorded to cost of sales	(88		)	(101		)	(176		)	(283		)
Depreciation and amortization of unconsolidated entities	(76		)	(45		)	(82		)	(234		)
Depreciation and amortization attributable to noncontrolling interests	733			722			1,474			1,456
Depreciation and amortization attributable to discontinued operations	(722		)	(1,485		)	(2,459		)	(11,531		)
Depreciation and amortization per unaudited condensed consolidated statements of operations	$	63,113		$	52,598		$	116,867		$	104,490



	Six Months Ended September 30,
	2019			2018
	(in thousands)
Reconciliation to unaudited condensed consolidated statements of cash flows:
Depreciation and amortization per EBITDA table	$	118,110		$	115,082
Amortization of debt issuance costs recorded to interest expense	4,392			4,888
Amortization of royalty expense recorded to operating expense	262			—
Depreciation and amortization of unconsolidated entities	(82		)	(234		)
Depreciation and amortization attributable to noncontrolling interests	1,474			1,456
Depreciation and amortization attributable to discontinued operations	(2,459		)	(11,531		)
Depreciation and amortization per unaudited condensed consolidated statements of cash flows	$	121,697		$	109,661

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 September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Interest expense per EBITDA table	$	45,113		$	41,367		$	85,023		$	87,779
Interest expense attributable to unconsolidated entities	(16		)	—			(18		)	(14		)
Interest expense attributable to discontinued operations	(81		)	(9		)	(95		)	(140		)
Interest expense per unaudited condensed consolidated statements of operations	$	45,016		$	41,358		$	84,910		$	87,625

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



	Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018
	(in thousands)
Income tax expense	$	10		$	125		$	20		$	125
Net unrealized (gains) losses on derivatives	$	—		$	(16	)	$	—		$	78
Inventory valuation adjustment	$	(1,339	)	$	15,589		$	(9,535	)	$	(387	)
Lower of cost or market adjustments	$	20		$	(53	)	$	(730	)	$	2
Loss (gain) on disposal or impairment of assets, net	$	174,449		$	(409,173	)	$	174,449		$	(408,740	)

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



	Three Months Ended September 30, 2019
	Crude Oil Logistics			Water Solutions			Liquids			Refined Products and Renewables			Corporate and Other			Continuing Operations			Discontinued Operations (TPSL)			Consolidated
	(in thousands)
Operating income (loss)	$	38,520		$	21,274		$	8,397		$	16,681		$	(38,477	)	$	46,395		$	—		$	46,395
Depreciation and amortization	17,693			37,921			6,611			125			763			63,113			—			63,113
Amortization recorded to cost of sales	—			—			23			65			—			88			—			88
Net unrealized (gains) losses on derivatives	(4,126		)	(5,870		)	4,534			—			—			(5,462		)	—			(5,462		)
Inventory valuation adjustment	—			—			—			(4,100		)	—			(4,100		)	—			(4,100		)
Lower of cost or market adjustments	—			—			—			(921		)	—			(921		)	—			(921		)
(Gain) loss on disposal or impairment of assets, net	(630		)	3,744			(4		)	—			1			3,111			—			3,111
Equity-based compensation expense	—			—			—			—			21,295			21,295			—			21,295
Acquisition expense	—			—			—			—			5,085			5,085			—			5,085
Other income (expense), net	43			(2		)	32			(51		)	162			184			—			184
Adjusted EBITDA attributable to unconsolidated entities	—			—			(26		)	—			(147		)	(173		)	—			(173		)
Adjusted EBITDA attributable to noncontrolling interest	—			(319		)	(283		)	—			—			(602		)	—			(602		)
Intersegment transactions (1)	—			—			—			(12,368		)	—			(12,368		)	—			(12,368		)
Other	3,132			131			17			52			—			3,332			—			3,332
Discontinued operations	—			—			—			—			—			—			(15,714		)	(15,714		)
Adjusted EBITDA	$	54,632		$	56,879		$	19,301		$	(517	)	$	(11,318	)	$	118,977		$	(15,714	)	$	103,263

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	Three Months Ended September 30, 2018
																			Discontinued Operations
	Crude Oil Logistics			Water Solutions			Liquids			Refined Products and Renewables			Corporate and Other			Continuing Operations			TPSL		Retail Propane			Consolidated
	(in thousands)
Operating income (loss)	$	31,022		$	9,770		$	10,758		$	(1,851	)	$	(35,352	)	$	14,347		$	—	$	—		$	14,347
Depreciation and amortization	18,870			26,342			6,459			168			759			52,598			—		—			52,598
Amortization recorded to cost of sales	—			—			36			65			—			101			—		—			101
Net unrealized (gains) losses on derivatives	(6,142		)	1,788			2,476			—			—			(1,878		)	—		—			(1,878		)
Inventory valuation adjustment	—			—			—			10,181			—			10,181			—		—			10,181
Lower of cost or market adjustments	—			—			—			53			—			53			—		—			53
Loss on disposal or impairment of assets, net	3,367			730			1,004			—			887			5,988			—		—			5,988
Equity-based compensation expense	—			—			—			—			19,219			19,219			—		—			19,219
Acquisition expense	—			—			1			—			2,864			2,865			—		—			2,865
Other income (expense), net	9			(370		)	9			93			1,560			1,301			—		—			1,301
Adjusted EBITDA attributable to unconsolidated entities	—			423			—			—			—			423			—		—			423
Adjusted EBITDA attributable to noncontrolling interest	—			26			(229		)	—			—			(203		)	—		—			(203		)
Intersegment transactions (1)	—			—			—			(14,734		)	—			(14,734		)	—		—			(14,734		)
Other	1,351			104			16			(70		)	—			1,401			—		—			1,401
Discontinued operations	—			—			—			—			—			—			4,219		(511		)	3,708
Adjusted EBITDA	$	48,477		$	38,813		$	20,530		$	(6,095	)	$	(10,063	)	$	91,662		$	4,219	$	(511	)	$	95,370

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	Six Months Ended September 30, 2019
	Crude Oil Logistics			Water Solutions			Liquids			Refined Products and Renewables			Corporate and Other			Continuing Operations			Discontinued Operations (TPSL)			Consolidated
	(in thousands)
Operating income (loss)	$	72,322		$	34,963		$	16,881		$	12,282		$	(53,819	)	$	82,629		$	—		$	82,629
Depreciation and amortization	35,278			65,992			13,840			251			1,506			116,867			—			116,867
Amortization recorded to cost of sales	—			—			46			130			—			176			—			176
Net unrealized (gains) losses on derivatives	(5,984		)	(6,037		)	3,085			—			—			(8,936		)	—			(8,936		)
Inventory valuation adjustment	—			—			—			(15,650		)	—			(15,650		)	—			(15,650		)
Lower of cost or market adjustments	—			—			(1,508		)	419			—			(1,089		)	—			(1,089		)
(Gain) loss on disposal or impairment of assets, net	(1,246		)	3,155			(7		)	—			242			2,144			—			2,144
Equity-based compensation expense	—			—			—			—			24,996			24,996			—			24,996
Acquisition expense	—			20			—			—			7,156			7,176			—			7,176
Other income (expense), net	39			(2		)	44			(44		)	1,156			1,193			—			1,193
Adjusted EBITDA attributable to unconsolidated entities	—			—			(22		)	—			(136		)	(158		)	—			(158		)
Adjusted EBITDA attributable to noncontrolling interest	—			(394		)	(680		)	—			—			(1,074		)	—			(1,074		)
Intersegment transactions (1)	—			—			—			(2,124		)	—			(2,124		)	—			(2,124		)
Other	6,297			271			35			52			—			6,655			—			6,655
Discontinued operations	—			—			—			—			—			—			(22,782		)	(22,782		)
Adjusted EBITDA	$	106,706		$	97,968		$	31,714		$	(4,684	)	$	(18,899	)	$	212,805		$	(22,782	)	$	190,023

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	Six Months Ended September 30, 2018
																			Discontinued Operations
	Crude Oil Logistics			Water Solutions			Liquids			Refined Products and Renewables			Corporate and Other			Continuing Operations			TPSL		Retail Propane		Consolidated
	(in thousands)
Operating (loss) income	$	(68,716	)	$	10,739		$	13,381		$	(66,266	)	$	(52,782	)	$	(163,644	)	$	—	$	—	$	(163,644	)
Depreciation and amortization	38,099			51,651			12,927			336			1,477			104,490			—		—		104,490
Amortization recorded to cost of sales	80			—			73			130			—			283			—		—		283
Net unrealized losses on derivatives	1,270			10,898			4,813			—			—			16,981			—		—		16,981
Inventory valuation adjustment	—			—			—			1,555			—			1,555			—		—		1,555
Lower of cost or market adjustments	—			—			(504		)	89			—			(415		)	—		—		(415		)
Loss (gain) on disposal or impairment of assets, net	105,261			3,205			994			(3,026		)	889			107,323			—		—		107,323
Equity-based compensation expense	—			—			—			—			24,730			24,730			—		—		24,730
Acquisition expense	—			—			161			—			4,000			4,161			—		—		4,161
Other income (expense), net	23			(370		)	44			(58		)	(32,241		)	(32,602		)	—		—		(32,602		)
Adjusted EBITDA attributable to unconsolidated entities	—			369			—			476			—			845			—		—		845
Adjusted EBITDA attributable to noncontrolling interest	—			(86		)	(551		)	—			—			(637		)	—		—		(637		)
Revaluation of liabilities	—			800			—			—			—			800			—		—		800
Gavilon legal matter settlement	—			—			—			—			35,000			35,000			—		—		35,000
Intersegment transactions (1)	—			—			—			61,091			—			61,091			—		—		61,091
Other	2,901			204			33			80			—			3,218			—		—		3,218
Discontinued operations	—			—			—			—			—			—			7,480		5,025		12,505
Adjusted EBITDA	$	78,918		$	77,410		$	31,371		$	(5,593	)	$	(18,927	)	$	163,179		$	7,480	$	5,025	$	175,684


(1)	Amount reflects the intersegment transactions between the continuing businesses within the Refined Products and Renewables segment and TPSL that are eliminated in consolidation.

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Liquidity, Sources of Capital and Capital Resource Activities

Our principal sources of liquidity and capital are the cash flows from our operations, borrowings under the Revolving Credit Facility and accessing capital markets. See Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a detailed description of our long-term debt. Our cash flows from operations are discussed below.

Our borrowing needs vary during the year due in part to the seasonal nature of our Liquids and Refined Products and Renewables businesses. 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 heating season as well as building our gasoline inventory in anticipation of the winter gasoline contango and blending season. Our working capital borrowing needs generally decline during the period of January through March, when the cash flows from our Liquids segment are the greatest and gasoline inventories need to be minimized due to certain inventory requirements.

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. Available cash for any quarter generally consists of all cash on hand at the end of that quarter, less the amount of cash reserves established by our general partner, to (i) provide for the proper conduct of our business, (ii) comply with applicable law, any of our debt instruments or other agreements, and (iii) provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters.

We believe that our anticipated cash flows from operations and the borrowing capacity under the Revolving Credit Facility are sufficient to meet our liquidity needs. If our plans or assumptions change or are inaccurate, or if we make acquisitions, we may need to raise additional capital or sell assets. Our ability to raise additional capital, if necessary, depends on various factors and conditions, including market conditions. We cannot give any assurances that we can raise additional capital to meet these needs. Commitments or expenditures, if any, we may make toward any acquisition projects are at our discretion.

We believe our Water Solutions and Crude Oil Logistics businesses have organic growth opportunities with the activity in our core basins, including the Delaware Basin and DJ Basin in particular. We plan to pursue a strategy of growth through acquisitions as well as undertaking certain capital expansion projects. We expect to consider financing future acquisitions and capital expansion projects through available capacity on the Revolving Credit Facility or other forms of financing.

Other sources of liquidity during the three months ended September 30, 2019 are discussed below.

Term Credit Agreement

On July 2, 2019, we entered into the 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. Proceeds from the term loan facility were used to fund a portion of the purchase price for the Mesquite acquisition discussed above (see Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

Issuance of Class D Preferred Units

On July 2, 2019, we completed a private placement of 400,000 Class D Preferred Units and warrants exercisable to purchase an aggregate of 17,000,000 common units for net proceeds of $385.4 million. Proceeds from this issuance were used to fund a portion of the purchase price for the Mesquite acquisition discussed above (see Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

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Disposition of TPSL

Subsequent Events

See Note 17 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of transactions that occurred subsequent to September 30, 2019.

Long-Term Debt

Credit Agreement

As of September 30, 2019, we were a party to a $1.765 billion credit agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement includes a revolving credit facility to fund working capital needs, which had a capacity of $1.250 billion for cash borrowings and letters of credit (the “Working Capital Facility”), and a revolving credit facility to fund acquisitions and expansion projects, which had a capacity of $515.0 million (the “Expansion Capital Facility,” and together with the Working Capital Facility, the “Revolving Credit Facility”). We had letters of credit of $189.6 million on the Working Capital Facility at September 30, 2019. The commitments under the Credit Agreement expire on October 5, 2021.

On October 30, 2019, we amended the Credit Agreement, to, among other things, adjust the allocation of the commitments of the lenders to make revolving loans thereunder and, effective with the fiscal quarter ending December 31, 2019, eliminate the leverage ratio financial covenant (as defined in the Credit Agreement) and adjust the senior secured leverage ratio (as defined in the Credit Agreement), interest coverage ratio (as defined in the Credit Agreement) and total leverage indebtedness ratio (as defined in the Credit Agreement). As amended, the Credit Agreement provides for up to $1.790 billion in aggregate commitments, consisting of (i) a $600 million Working Capital Facility capacity for working capital requirements and other general corporate purposes and (ii) a $1.190 billion Expansion Capital Facility capacity, for acquisitions, internal growth projects, other capital expenditures and general corporate purposes.

We were in compliance with the covenants under the Credit Agreement at September 30, 2019.

Senior Unsecured Notes

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

On April 9, 2019, we issued $450.0 million of the 7.50% Senior Unsecured Notes Due 2026 (the “2026 Notes”) in a private placement. Interest is payable on April 15 and October 15 of each year, beginning on October 15, 2019. We received net proceeds of $442.1 million, after the initial purchasers’ discount of $6.8 million and offering costs of $1.1 million. The 2026 Notes mature on April 15, 2026.

At September 30, 2019, we were in compliance with the covenants under the indentures for all of the Senior Unsecured Notes.

Term Credit Agreement

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

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Revolving Credit Facility Borrowings

The following table summarizes the Revolving Credit Facility borrowings for the periods indicated:



	Average Balance Outstanding		Lowest Balance		Highest Balance
	(in thousands)
Six Months Ended September 30, 2019
Expansion capital borrowings	$	256,115	$	—	$	480,000
Working capital borrowings	$	846,541	$	643,000	$	981,000

Six Months Ended September 30, 2018
Expansion capital borrowings	$	73,008	$	—	$	296,500
Working capital borrowings	$	795,568	$	439,000	$	1,095,500

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. Amounts in the table below include capital expenditures and acquisitions related to TPSL and our former Retail Propane segment.



	Capital Expenditures						Other
	Expansion (1)		Maintenance (2)		Acquisitions (3)		Investments (4)
	(in thousands)
Three Months Ended September 30,
2019	$	102,690	$	16,461	$	592,500	$	126
2018	$	113,767	$	15,299	$	94,209	$	86

Six Months Ended September 30,
2019	$	261,955	$	33,390	$	647,048	$	1,015
2018	$	190,765	$	27,689	$	229,871	$	92


(1)	There was no amount for the three months ended September 30, 2018 and the amount for the six months ended September 30, 2018 includes $0.4 million related to our former Retail Propane segment. There were no amounts for the three months and six months ended September 30, 2019 and 2018 related to TPSL.


(2)	Amounts for the three months and six months ended September 30, 2018 include $0.4 million and $3.8 million, respectively, related to our former Retail Propane segment. There were no amounts for the three months and six months ended September 30, 2019 and 2018 related to TPSL.


(3)	Amounts for the three months and six months ended September 30, 2018 include $12.8 million and $31.9 million, respectively, related to our former Retail Propane segment. There were no amounts for the three months and six months ended September 30, 2019 and 2018 related to TPSL.


(4)	Amounts for the three months and six months ended September 30, 2019 and 2018 primarily related to contributions made to unconsolidated entities. There were no amounts for the three months and six months ended September 30, 2019 and 2018 related to TPSL. There were no amounts for the three months and six months ended September 30, 2018 related to our former Retail Propane segment.

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Cash Flows

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



	Six Months Ended September 30,
Cash Flows Provided by (Used in):	2019			2018
	(in thousands)
Operating activities, before changes in operating assets and liabilities	$	95,392		$	14,917
Changes in operating assets and liabilities	(116,085		)	(255,831		)
Operating activities-continuing operations	$	(20,693	)	$	(240,914	)
Investing activities-continuing operations	$	(902,277	)	$	(420,860	)
Financing activities-continuing operations	$	640,284		$	(286,673	)

Operating Activities-Continuing Operations. The seasonality of our Liquids 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 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 heating season. The heating season runs through the six months ending March 31. The seasonal motor fuel blend during the third quarter of our fiscal year impacts the value of our gasoline inventory in our Refined Products and Renewables business and also represents a period when we build inventory into our system. 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 used in operating activities during the six months ended September 30, 2019 was due primarily to fluctuations in the value of accounts receivable and accounts payable during the six months ended September 30, 2019.

Investing Activities-Continuing Operations. Net cash used in investing activities was $902.3 million during the six months ended September 30, 2019, compared to net cash used in investing activities of $420.9 million during the six months ended September 30, 2018. The increase in net cash used in investing activities was due primarily to:


•	a $450.0 million increase in cash paid for acquisitions and investments in unconsolidated entities during the six months ended September 30, 2019;


•	an increase in capital expenditures from $193.5 million during the six months ended September 30, 2018 to $259.1 million during the six months ended September 30, 2019 due primarily to expansion projects in our Water Solutions segment; and


•	a $49.9 million deposit paid during the six months ended September 30, 2019 related to the acquisition of the equity interests of Hillstone (see Note 17 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion).

These increases in net cash used in investing activities were partially offset by a $108.4 million decrease in payments to settle derivatives.

Financing Activities-Continuing Operations. Net cash provided by financing activities was $640.3 million during the six months ended September 30, 2019, compared to net cash used in financing activities of $286.7 million during the six months ended September 30, 2018. The increase 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 six months ended September 30, 2019;


•	$428.3 million in net proceeds from the issuance of the 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) and Class D Preferred Units during the six months ended September 30, 2019;


•	$250.0 million in proceeds from the Term Loan Agreement during the six months ended September 30, 2019; and

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•	an increase of $67.5 million in borrowings on the Revolving Credit Facility (net of repayments) during the six months ended September 30, 2019.

These increases 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 six months ended September 30, 2019.

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 Item 5. Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities included in our Annual Report.

On September 16, 2019, 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 (“Class B Preferred Units”) and Class C Preferred Units for the three months ended September 30, 2019 of $7.1 million and $1.1 million, respectively. The distributions were paid to the holders of the Class B Preferred Units and Class C Preferred Units on October 15, 2019.

On October 23, 2019, the board of directors of our general partner declared a distribution on the common units and the Class D Preferred Units of $49.9 million and $4.5 million, respectively, for the holders of record on November 7, 2019. The distributions are to be paid on November 14, 2019.

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

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Contractual Obligations

The following table summarizes our contractual obligations at September 30, 2019 for our fiscal years ending thereafter:



			Six Months Ending March 31,		Fiscal Year Ending March 31,
	Total		2020		2021		2022		2023		2024		Thereafter
	(in thousands)
Principal payments on long-term debt:
Expansion capital borrowings	$	450,000	$	—	$	—	$	450,000	$	—	$	—	$	—
Working capital borrowings	643,000		—		—		643,000		—		—		—
Senior unsecured notes	1,446,458		—		—		—		—		607,323		839,135
Term credit agreement	250,000		—		—		—		—		—		250,000
Other long-term debt	5,007		630		4,377		—		—		—		—
Interest payments on long-term debt:
Revolving Credit Facility (1)	112,522		26,791		53,582		32,149		—		—		—
Senior unsecured notes	572,874		52,129		103,134		103,134		103,134		103,134		108,209
Term credit agreement	45,052		4,738		9,475		9,475		9,475		9,475		2,414
Other long-term debt	210		194		16		—		—		—		—
Letters of credit	189,644		—		—		189,644		—		—		—
Future minimum commitment payments under noncancelable agreements (2)	234,498		29,861		47,319		44,935		40,919		39,888		31,576
Future minimum lease payments under noncancelable operating leases	244,578		39,970		66,193		45,490		25,392		14,081		53,452
Construction commitments (3)	7,992		7,992		—		—		—		—		—
Fixed-price commodity purchase commitments:
Crude oil	75,128		75,128		—		—		—		—		—
Natural gas liquids	16,938		15,597		1,341		—		—		—		—
Index-price commodity purchase commitments (4):
Crude oil (5)	1,076,425		731,963		226,304		118,158		—		—		—
Natural gas liquids	342,971		341,410		1,561		—		—		—		—
Total contractual obligations	$	5,713,297	$	1,326,403	$	513,302	$	1,635,985	$	178,920	$	773,901	$	1,284,786


(1)	The estimated interest payments on the Revolving Credit Facility are based on principal and letters of credit outstanding at September 30, 2019. See Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report for additional information on the Credit Agreement.

(2)

We have executed 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 have extended these agreements and have an additional 5.5 years to recapture the minimum shipping deficiency fees. We also have executed noncancelable agreements for product storage, railcar spurs and real estate. See Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for additional information.


(3)	At September 30, 2019, the construction commitments relate to two new barges currently being built.

(4)

Index prices are based on a forward price curve at September 30, 2019. A theoretical change of $0.10 per gallon of natural gas liquids in the underlying commodity price at September 30, 2019 would result in a change of $79.9 million in the value of our index-price natural gas liquids purchase commitments. A theoretical change of $1.00 per barrel of crude oil in the underlying commodity price at September 30, 2019 would result in a change of $22.7 million in the value of our index-price crude oil purchase commitments. See Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report for further detail of the commitments.


(5)	Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (see Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report) 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,

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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.

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 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.

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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 September 30, 2019, we had $1.1 billion of outstanding borrowings under the Revolving Credit Facility at a weighted average interest rate of 4.23%. A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $1.4 million, based on borrowings outstanding at September 30, 2019.

The Term Credit Agreement is variable-rate debt with interest rates that are generally indexed to bank prime or LIBOR interest rates. At September 30, 2019, we had $250.0 million of outstanding borrowings under the Term Credit Agreement at a weighted average interest rate of 3.79%. A change in interest rates of 0.125% would result in an increase or decrease of our annual interest expense of $0.3 million, based on borrowings outstanding at September 30, 2019.

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 September 30, 2019, 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.

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The following table summarizes the hypothetical impact on the September 30, 2019 fair value of our commodity derivatives of an increase of 10% in the value of the underlying commodity (in thousands):



	Increase (Decrease) To Fair Value
Crude oil (Crude Oil Logistics segment)	$	(16,378	)
Propane (Liquids segment)	$	3,359
Butane (Liquids segment and Refined Products and Renewables segment)	$	(711	)
Gasoline (Refined Products and Renewables segment)	$	(13,035	)
Diesel (Refined Products and Renewables segment)	$	(3,764	)
Ethanol (Refined Products and Renewables segment)	$	(898	)
Biodiesel (Refined Products and Renewables segment)	$	(5	)
Canadian dollars (Liquids segment)	$	384

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 September 30, 2019. Based on this evaluation, the principal executive officer and principal financial officer of our general partner have concluded that as of September 30, 2019, 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 September 30, 2019 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” and “Environmental Matters” 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, 2019.

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

On August 30, 2019, the board of directors of our general partner authorized a common unit repurchase plan, 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. The common unit repurchase program authorization does not obligate us to repurchase any dollar amount or number of our common units.

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 an aggregate purchase price of $200.0 million.

The following table summarizes the repurchase of common units during the three months ended September 30, 2019:



				Total Number of
				Common Units	Approximate Dollar Value
	Total Number of	Average Price		Purchased as Part	of Common Units
	Common Units	Paid Per		of Publicly Announced	that May Yet Be Purchased
Period	Purchased	Common Unit		Program	Under the Program
July 1-31, 2019	34,350	$	15.00	—	$	—
August 1-31, 2019	43,879	$	13.28	—	$	150,000,000
September 1-30, 2019	—	$	—	—	$	150,000,000
Total	78,229			—	$	150,000,000

The common units not repurchased under the publicly announced program were surrendered by employees to pay tax withholding in connection with the vesting of restricted common units. As a result, we are including the common units surrendered in the Total Number of Common Units Purchased column.

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
2.1		Asset Purchase and Sale Agreement, dated May 13, 2019, by and among NGL Energy Partners LP, Mesquite Disposals Unlimited, LLC and Mesquite SWD, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
2.2		Membership Interest Purchase Agreement, dated as of August 7, 2019, between NGL Energy Operating, LLC and Trajectory Acquisition Company LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on October 4, 2019)
2.3		Equity Purchase Agreement, dated September 25, 2019, by and among NGL Energy Partners LP, NGL Water Solutions Permian, LLC, Water Remainco, LLC, Hillstone Environmental Partners, LLC, GGCOF HEP Blocker II, LLC, GGCOF HEP Blocker, LLC, Golden Gate Capital Opportunity Fund-A, L.P., GGCOF AIV L.P. and GGCOF HEP Blocker II Holdings, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on November 1, 2019)
3.1		Sixth Amended and Restated Agreement of Limited Partnership of NGL Energy Partners LP, dated as of July 2, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
3.2		Amendment No. 4 to Third Amended and Restated Limited Liability Company Agreement of NGL Energy Holdings LLC, dated as of August 20, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on August 21, 2019)
3.3		Seventh Amended and Restated Agreement of Limited Partnership of NGL Energy Partners LP, dated as of October 31, 2019 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on November 1, 2019)
4.1		Registration Rights Agreement, dated July 2, 2019, by and among NGL Energy Partners LP, EIG Neptune Aggregator, L.P. and FS Energy and Power Fund (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
4.2		Amended and Restated Registration Rights Agreement, dated October 31, 2019, by and among NGL Energy Partners LP, EIG Neptune Equity Aggregator, L.P., FS Energy and Power Fund and GCM Pellit Holdings, LLC (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on November 1, 2019)
4.3*		Fourth Supplemental Indenture, dated as of October 31, 2019, 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
4.4*		Third Supplemental Indenture, dated as of October 31, 2019, 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
4.5*		First Supplemental Indenture, dated as of October 31, 2019, 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. 8 to Amended and Restated Credit Agreement, dated as of June 26, 2019, among the Partnership, NGL Energy Operating LLC, the other subsidiary borrowers party thereto, Deutsche Bank Trust Company Americas, and the other financial institutions party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 2, 2019)
10.2		Class D Preferred Unit and Warrant Purchase Agreement, dated July 2, 2019, by and among NGL Energy Partners LP, EIG Neptune Equity Aggregator, L.P. and FS Energy and Power Fund (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
10.3		Board Representation Rights Agreement, dated July 2, 2019, by and among NGL Energy Partners LP, NGL Energy Holdings LLC and certain affiliates of EIG Neptune Equity Aggregator, L.P. and FS Energy and Power Fund (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
10.4		Voting Agreement, dated July 2, 2019, by and among the members of NGL Energy Holdings LLC named therein (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
10.5		Letter Agreement, dated July 2, 2019, by and among NGL Energy Partners LP, Mesquite Disposals Unlimited, LLC and Mesquite SWD, Inc. (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
10.6		Term Credit Agreement, dated July 2, 2019, by and among NGL Energy Operating LLC, as Borrower, NGL Energy Partner LP, the lenders thereto and TD Dominion (Texas LLC), as the administrative agent (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
10.7		Form of Par Warrant (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
10.8		Form of Premium Warrant (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on July 8, 2019)
10.9		Class D Preferred Unit and Warrant Purchase Agreement, dated September 25, 2019, by and among NGL Energy Partners LP, EIG Neptune Equity Aggregator, L.P., FS Energy and Power Fund and GCM Pellit Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on September 30, 2019)

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Exhibit Number		Exhibit
10.10		Form of Par Warrant (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on November 1, 2019)
10.11		Form of Premium Warrant (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on November 1, 2019)
10.12		Amendment No. 9 to Credit Agreement, dated October 30, 2019, 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 10.3 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on November 1, 2019)
10.13		Amendment No. 1 to Term Credit Agreement, dated October 30, 2019, by and among NGL Energy Partners LP, NGL Energy Operating LLC, the other subsidiary borrowers party thereto, Toronto-Dominion Bank, New York Branch, Toronto Dominion (Texas) LLC and the other financial institutions party thereto (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-35172) filed with the SEC on November 1, 2019)
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 September 30, 2019 and March 31, 2019, (ii) Unaudited Condensed Consolidated Statements of Operations for the three months and six months ended September 30, 2019 and 2018, (iii) Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months and six months ended September 30, 2019 and 2018, (iv) Unaudited Condensed Consolidated Statements of Changes in Equity for the three months and six months ended September 30, 2019 and 2018, (v) Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2019 and 2018, 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: November 8, 2019		By:	/s/ H. Michael Krimbill
			H. Michael Krimbill
			Chief Executive Officer

Date: November 8, 2019		By:	/s/ Robert W. Karlovich III
			Robert W. Karlovich III
			Chief Financial Officer

TABLE OF CONTENTS

Part I - Financial Information Item 1. Financial Statements Note 1 Organization and Operations Note 2 Significant Accounting Policies Note 3 (loss) Income Per Common Unit Note 4 Acquisitions Note 5 Property, Plant and Equipment Note 6 Goodwill Note 7 Intangible Assets Note 8 Long-term Debt Note 9 Commitments and Contingencies Note 10 Equity Note 11 Fair Value Of Financial Instruments Note 12 Segments Note 13 Transactions with Affiliates Note 14 Revenue From Contracts with Customers Note 15 Leases Note 16 Assets and Liabilities Held For Sale and Discontinued Operations Note 17 Subsequent Events Note 18 Unaudited Condensed Consolidating Guarantor and Non-guarantor Financial Information Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II - Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

NGL 10-Q Quarter ended Sept. 30, 2019

Exhibits