Good day, ladies and gentlemen, and welcome to the Q1 2016 NGL Energy Partners LP Earnings Conference Call. My name is Whitney, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Mike Krimbill, CEO of NGL Energy Partners. Please proceed. H. Krimbill: Thank you and welcome. This conference call will include forward-looking statements and information. While NGL Energy Partners LP believes that its expectations are based on reasonable assumptions, there can be no assurance that such expectations will prove to be correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations included in the forward-looking statements. These factors include the prices and market demand for natural gas liquids and crude oil, level of production of crude oil and natural gas, the effect of weather conditions on demand for oil, natural gas, natural gas liquids and the ability to identify and consummate strategic acquisitions at purchase prices that are accretive to financial results and to successfully integrate acquired businesses and assets. Other factors that could impact any forward-looking statements are described in risk factors in the partnership's annual report on Form 10-K, quarterly reports on Form 10-Q and other public filings and press releases. NGL Energy Partners LP undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. Please also see the partnership's website at www.nglenergypartners.com under Investor Relations for reconciliation of the differences between any non-GAAP measures discussed in this conference call and the most directly comparable GAAP financial measures. All right. Let's get started. I will turn it over to Atanas first, and then I think I'll have a few more time answering, and then we'll open it up for questions.

Thank you, Mike. Good afternoon, everyone. Overall, we were extremely pleased with our quarterly results and performance. We recorded adjusted EBITDA of $89 million for the quarter, which compares to EBITDA of $43.1 million for the same period last year, which represents an increase of 106%. NGL reported net loss of $38.5 million for the quarter ended June 30, '15, compared to a net loss of $39.9 million for the same quarter last year. If we exclude the year-over-year increase in performance, unit and LTIP awards of $32.3 million, we would be approximately $34 million higher. During the first fiscal quarter, we incurred $7.7 million of maintenance CapEx. This excludes $2.9 million of TLP maintenance CapEx, and we still expect maintenance CapEx to be in the range of $30 million to $35 million for fiscal '16. During the first quarter, we also spent approximately $186 million on growth CapEx in acquisitions, of which acquisitions accounted for $78 million, and organic growth, CapEx, approximately $108 million. This excludes $5.4 million attributable to TLP growth CapEx. And we still maintain our guidance of $750 million to $1 billion total for fiscal '16. Distributable cash flow for the first fiscal quarter is $55 million, and this is based on EBITDA of $89 million, interest expense of $26.4 million and maintenance CapEx of $7.7 million. The interest expense of $26.4 million excludes $2.1 million of interest attributable to TLP and $2.3 million of noncash amortization of deferred financing cost. We also reaffirm our adjusted EBITDA guidance of $500 million or greater for fiscal year 2016, and we reiterate our distribution growth guidance of 6% to 8% for calendar years '15 and 16. I'd also like to add some more color to our operating segments to highlight our year-over-year performance and growth. For crude logistics, volume is 260,000 barrels a day versus 212,000 barrels a day last year, which represents an increase of 23%. Average margin per barrel was $0.71 compared to $1.12 last year. The margin compression was driven primarily by significant drop in crude prices since the third quarter of fiscal '15, but this was more than offset by additional profits generating from the increased utilization of our storage assets at Cushing. As a result, segment operating income was up $10.5 million versus the same period last year. For water solutions, volume was at 600,000 barrels a day versus the 300,000 barrels a day last year, which represents an increase of 100%, and gross margin per barrel was $0.90 versus $1.25 for the same period last year. The main driver behind the decrease in margin per barrel was our continued growth in the Permian and Eagle Ford basins, where the fee per barrel were generally lower versus the that DJ and Anticline basins as well as the lower oil prices. For the refined fuels, the refined fuels segment has grown dramatically since the acquisition of TransMontaigne Inc. In July 2014 it continues to outperform our expectations. We're currently moving expect 230,000 barrels a day at an average margin of $0.06 per gallon versus $0.01 per gallon on our legacy-refined fuels business. For our liquid segment, propane volume was 228,000 -- 228 million barrels versus 184 million of the same time last year, which represents an increase of 24%. And that increase was driven primarily by our continued push to a longer-term supply marketing agreements and presales. Propane gross margin was breakeven for the quarter versus $0.02 the same time last year, and the primary driver for the decrease in margin was the decline in propane prices during the quarter, which affected our weight COG or weighted average cost of goods, similar to prior years. This basically represents a timing difference, which will reverse itself out once the actual presold gallons are pulled by the customers during the winter quarters, the 12/31/15 and the 3/31/16 quarters. We experienced a very similar dynamic last fiscal year when we recorded $30 million of profit in the last fiscal quarter, thus recouping the earlier loss based on weight COG. Our other NGLs within the liquid segment recorded volumes of 192 million gallons versus 187 million gallons last year, which is an increase of 3%, and margins were very healthy at $0.05 versus $0.04 during the same time last year. The margin increase was driven primarily by regional market price in those locations, which has allowed us to increase profitability by optimizing our rail car fleet. And finally, our retail propane business continues to outperform our expectations. Volume was at 24.4 million gallons versus 23.6 million gallons for the same period last year, or an increase of 3%; and margins were $1.10 this quarter versus $0.96 for the same time last year, which is an increase of 15%. So overall, very happy with our operating results and performance. And with this, I'll turn it back to Mike. H. Krimbill: Thanks, Atanas. I'd like to give a few comments on the macro as we're all sitting here looking at the MLP space together and commodity prices to evaluate what's going on, what's happening. So if we start back last December through this March, we saw a crude oil prices fall from the $90 level into the high-$40s. And of course, the upstream MLPs were hurt first having to cut capital budget, ultimately distributions. But it drag all of that -- everywhere in the MLP sector down. So then, what happens? Crude prices recover to $60. Everyone's happy, and then the fall again. So again, we're getting the equity prices depressed. The flip side of that, which we all seem to focus on the negatives and not the positives, is that construction costs have dropped dramatically. And on several projects we have, we're saving upwards to $200 million in capital because of the lower cost. It also causes a higher Contango. So if you have storage like we do, you can take advantage of that. You're going to make up for much of the fault with higher Contango revenues. And because we have multiple segments with lower crude prices, you have lower refined product prices. So our Bob [ph] gasoline is down to $1.65. We all know demand is increasing, I'll say significantly, because 4% is a pretty big move for gasoline or refined products. So third, what happens? NGL prices fall dramatically. We've all heard about Canadian producers having to pay to have their propane move to the storage hubs, which is true. But a dramatic decline from over $1 a year ago, I think the hubs today are in the $0.28 to $0.35 range. But again, lower prices cause higher demand, so we are seeing higher sales, which impacts our propane, butane and NGL logistics business, but also our retail propane business, where you'll see our volumes are actually up 3%. The major competitors in the industry indicated their volumes were actually down approximately 7%. And then in addition, we have storage, and as you know, we leased almost 3.5 million barrels of storage. A really nice Contango market develops around storage, which much higher current month versus fourth and first quarter than I think I've ever seen. So if that's not bad enough, the high-yield market falters. And it really adds a -- we saw it start with the Greek -- I call it Greek tragedy, and the high-yield market effectively shut down for about a week and now it's coming back. But I think recent trades have been, for midstream companies, in the 5.5% to upwards of 7%, depending on your credit rating. But again, capital is available, although what this does is impact yields on the MLPs. You just can't disconnect the high-yield market from yields on MLPs. So I guess, Point #1 is we are sitting here with the, I think average MLP for the index is about 8.4% yield and the 10-year treasury around 2.23. I think, it was this morning. So about 620 basis points above the 10-year treasury. And in our mind, that doesn't make any sense. I think the 10-year average was about 3.93, which included the '09 spike. And if you take out the '09 spike, you're going to be closer to 300 over because the average in here we are 620. So I think couple of things. When we got in the '09 spike, what was the case? There was no access to capital. There is today. The equity is more expensive, but the debt markets are still there. There was significantly decreasing demand. We're in an increasing demand situation. And there was significant margin selling, and we're not seeing the margin selling causing the market to be further depressed. But I think what is being factored in is 0 distribution growth, and that just isn't the case. As you know, we've consistently said 6% to 8%, and we've been raising our distribution so that we'll be in that range and will continue to do so. I think, as Atanas said, we're doing that in calendar '15 and calendar '16. So MLPs are -- the midstream MLPs are significantly undervalued. And then I think the Point #2 is there's always capital available for good projects. We still see many very attractive internal growth projects, which we're delighted that those have the lowest multiples; and several in crude and the number in our other segments. Again, having the 5 segments is very helpful and always having a pipeline of really attractive projects at a 6.5 multiple or less. Another question we should be asking instead of "Is the sky falling?" is "What's happening to your competitors?" And in several of our segments, our competitors have disappeared. When we come out of this, we're going to have a much stronger segment in areas like water disposal than we had going into it. And so let's not forget that about -- next year, not just next quarter. So with that, let's open up for questions

[Operator Instructions] Your first question comes from the line of Brian Zarahn of Barclays.

Mike, I guess, following up on some of your comments about the capital markets. How does that impact your plans? Do you have a robust CapEx program for this year? Grand Mesa being a big chunk of that. How does work -- in this type capital of market situation for the remainder of the year, how does that impact your financing? H. Krimbill: We have access to the high-yield market. We're evaluating that weekly. It was daily, now it's weekly. So meaning, we don't really see it's going to be a huge recovery, but that's still at a rate that is acceptable and, of course, well below our yield on the common units. Do we expect our comm union [ph] price to sit here? No. Is it difficult to issue at this level? Yes. But if you've got a 20% or a 25% project, you can still kind of hold your nose and issue some equity. So I don't think it impacts this year. Next year if we stay at this level. We're just going to have to do projects that are 4 to 5 multiples and issue an equity at 10%. I think it doesn't mean you go out of business on the acquisition internal growth side. It just means you have to do deals with higher rates of return, and we're fortunate enough to have a lot of those.

So is there a potential for some projects to be deferred until the market stabilize? H. Krimbill: No, we went back and look before this call at all of our projects, and we're moving ahead, full speed ahead. I think the interesting thing is going to be what new things come up at really attractive prices, if some of our -- some other MLP folks get to the point, where they have to sell some assets. So no, we're not slowing anything down. Again, what does that mean? We're still full speed ahead in Grand Mesa. We're washing out more -- drilling, washing out more caverns on Sawtooth, underground storage because the demand is there. They get completely contracted up before we can actually get them in service. So we have a number of smaller things that are going on that we don't issue press releases on, that we're -- we are not delaying. We think there's an opportunity here to get ahead some of our competitors especially in water, some in crude and refined products actually that we're not slowing down by any means.

Turning to -- you mentioned Grand Mesa. Any impact on your expectations for that project? And any changes in how you assess counter-party risk in this environment? H. Krimbill: No changes. We are over 80% complete on right away, permitting environmentals on schedule. We have -- we disclosed and so we've got another third-party interconnect that will bring more volume to the pipeline, and our -- we're building additional cushion storage tanks, which we've actually accelerated so we can get them in service by February and take advantage of the Contango market while we're waiting for the pipeline to come onstream and go into service in September. So looking at our counter-parties, I mean, we meet with them. We've -- the public and private ones. We've looked at their production curves. They've frankly -- most of them are telling us they're adding rigs, so we don't have any concern at this point that someone is not going to show up, we're not going to be able to meet their commitments.

And last one from me, turning the quarter, you had good results in your products renewables business. Can you elaborate a bit more on the improvement in that business? H. Krimbill: Sure. I mean, the biggest is just the fact that we had a full quarter of Morgan Stanley/TransMontaigne, which we didn't have last year. Last year, we had what we call the legacy Gavilon [ph] business. So most of the impact -- most of the increase is due to having a business this year we didn't have last year. But that said, demand is up 3% or 4% for gasoline. We're seeing -- we're probably a little different on the distillate side because we're on the Colonial pipeline, and in Line 2, which is now distillate, much of the time like Line 1, so we wouldn't expect to see a decline in our distillate sales. The margins are stronger on gasoline than they are on distillates, that being said. But combined, margins are up. And when we say margin a penny is a lot of increase. So we're tickled pink in getting an extra penny per gallon. So it's -- thank goodness, we got the business, because we are seeing some weakness on our crude oil marketing as everyone is. When you have lesser volume, you have the same number of competitors, then folks are dropping their margins to try to keep their business or win new. But on the flip side, we're going to have Contango. Contango's increasing, I think, dramatically, today, it looked look like we had 3 or 4 months over $0.70, and then some other months and $0.60. And that's an area we're really excited about, because we think -- and I think some of our competitors have mentioned this as well, you get out of the driving season after Labor Day, and you get some turnarounds, which to our understanding, some refiners, if not many, have delayed turnarounds, take advantage of margins this summer. So if we have a lot of turnarounds in October, you could see the Cushing inventories spike up again, and that would -- should give rise to some really nice Contango margins, which we will lock in.

Just last one. On the segment, obviously, the year-over-year of TransMontaigne, but you were asking more base quarter-over-quarter, gross margin was improved quite a bit. Such as -- you're saying... H. Krimbill: Yes. The improvement was totally a result of the business we bought from Morgan Stanley and TransMontaigne. We were running, I think, a penny or a little more on the Gavilon legacy business. And with the TransMontaigne -- and really, it's Morgan Stanley business, so we'll get our share of TransMontaigne, but all this volume you're seeing is volume on that we purchased from Morgan Stanley the we put through the Southeast terminals.

And a lot of it is contracted out for 12 months or over. H. Krimbill: Yes, it's all contracted.

Versus the legacy business which is primarily a wrapped business, where you can charge usually just a penny. Here, we're having this allocated blank space that we own in Colonial, gives us -- allows us to harvest the additional profitability. And that's what also makes our ownership in these terminals along the Colonial pipeline, very valuable because it allows us to optimize our margins based on when profitability is higher.

[Operator Instructions] Your next question is from the line of Miles Barnett of HITE Hedge.

This is Matt Niblack with HITE. A question on the Morgan Stanley assets. How close are you getting to full potential versus the plan when you bought the assets? H. Krimbill: Yes. We're over full potential. We had -- I think we had a bunch of about half of what we’re actually experiencing today.

For last year, we said that we were going to do, for the first 9, 12 months, we said that we are going to book EBITDA of $30 million. And just last year, at 9 months, we did over $50 million. And this quarter, obviously, when you book to the segment [indiscernible]. Well ahead of that -- of the run rate from last year, so extremely pleased. H. Krimbill: Yes, we don't expect any more -- I'm just saying. We're not expecting the increased margins at all. We're happy as a clam with these.

$0.05 or $0.06. H. Krimbill: What we did do is we went out. There was a market for line space that lasted about 1 week as a result of a proposed change to the pair of some Colonial. And we purchased an additional 25,000 barrels per cycle, which would be 5,000 barrels per day based on a 5-day cycle. So we tried to increase our volumes where we could, and very happy with the margins.

How was long is the contract on Colonial? H. Krimbill: With the customers, those contracts are 1 to 2 years.

But your space on Colonial? H. Krimbill: It's much like the propane pipeline, common care pipeline, where it's based on your -- what you nominate. So as long as you continue nominating shipping in the same volume, then you will keep your line space in perpetuity.

Got it. So given that you've actually changed the business by adding Colonial, are the higher margins something that should be sustainable?

I'll say, yes, as a result of Line 1 being on allocation all the time, which is gasoline. So you can't get any more gasoline. So demand increases, you kind of see what happens. So margins would go up a little bit, but you're going to -- eventually, if margins go up so much, then it will become economic to rail product in or truck it in, some other mode of transportation.

And then, apologize if I missed this earlier in the call, but there was a large line item for stock-based compensation, and it was surprising that this was so large, given the direction that the stock has went along with the rest of market, obviously. Could you give a little color on what that is, and how it got to be so big? And is it something we'll see repeated? H. Krimbill: Yes, it's -- I think we filed an 8-K, but it was performance plan, and it's based on a trailing 3-year performance. So you look back at 3 years ago, what was the unit price? We're using the Alerian index as the measurement tool. And then you look at the price at the end of June. And so at the of June, we were around 30 -- a little over $30. So that was the -- that caused us to be in the top quartile in terms of performance. Now with the falling price, it's anybody's guess what happens next year, wherever we -- for $24, $25. And I think we've fallen further than most and I would say it may not be repeatable.

Got it. And so the way that we can think about the magnitude of that number is that it's going to be correlated to the June of the year it's paid, versus June 3 years ago and the out-performance and underperformance relative to the Alerian index over that time frame? H. Krimbill: I'm not sure -- it's...

So December 2016, it'll be June 2016, June 30, 2016, share price last June 30, 2014, I guess.

'14. That's correct. '13 and '14. '13, yes.

'13. But it's not the absolute price return. It's the relative performance over that period compared to the Alerian index. H. Krimbill: Correct.

So if everyone goes down... H. Krimbill: Yes, you're right.

Right, all right. So if everybody's up and you're up last, and there's no or very little of it; and if you're up -- everybody's down, then you're up more. And if everyone is down, and you're not down as much, then there can still be a good number there? H. Krimbill: Yes. If we're in the bottom half of the Alerian, there is a 0 payout.

Your next question comes from the line of Selman Akyol with Stifel.

You talked about some of your competitors disappearing. And I'm just kind of wondering, are you anticipating or watching any assets that they have that appeal to you? Or is there any way you -- that will really work to your benefit in terms of either picking up market share or as I said, picking up assets, expanding your footprint? H. Krimbill: Yes. In water in particular, we are -- there are very few competitors, if any, that they would be interested in buying. They just don't know what we've done with their wells. We've much rather drill our own and take care of them in the last 15 years. And so we can still pick up market share by providing other services, which is what we're doing. We process solids now, building water pipelines, which is basically you, kind of an acreage dedication without having a contract. Although you do have a contract on price, and after bringing all the volumes that go to that water collection site. So it's -- I think we get larger market share. We get lots of revenue streams without having to spend money other than for our water pipelines and our solids plans.

That concludes our Q&A. There are no further questions. I'll now turn the call over back to Mr. Mike Krimbill for closing remarks. H. Krimbill: Well, thank you very much. I guess, we -- as long as we beat our numbers, we'd have short calls. Thank you, and we'll talk you again in a few months.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.