# EDGAR Filing Document

**Accession Number:** 0001504461
**File Stem:** 0001504461-23-000010
**Filing Date:** 2023-2
**Character Count:** 254138
**Document Hash:** 0f914c725bffd22cc17b6d455fc34b96
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001504461-23-000010.hdr.sgml**: 20230209

**ACCESSION NUMBER**: 0001504461-23-000010

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 105

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230209

**DATE AS OF CHANGE**: 20230209

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** NGL Energy Partners LP
- **CENTRAL INDEX KEY:** 0001504461
- **STANDARD INDUSTRIAL CLASSIFICATION:** NATURAL GAS TRANSMISSION [4922]
- **IRS NUMBER:** 273427920
- **STATE OF INCORPORATION:** TX
- **FISCAL YEAR END:** 0331

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-35172
- **FILM NUMBER:** 23607002

**BUSINESS ADDRESS:**
- **STREET 1:** 6120 S. YALE
- **STREET 2:** SUITE 805
- **CITY:** TULSA
- **STATE:** OK
- **ZIP:** 74136
- **BUSINESS PHONE:** 918.481.1119

**MAIL ADDRESS:**
- **STREET 1:** 6120 S. YALE
- **STREET 2:** SUITE 805
- **CITY:** TULSA
- **STATE:** OK
- **ZIP:** 74136

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Silverthorne Energy Partners LP
- **DATE OF NAME CHANGE:** 20101028

?xml version="1.0" ? ngl-20221231

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**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 December 31, 2022**

**OR**

☐ **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** | **Delaware** | **27-3427920** |
| (State or Other Jurisdiction of Incorporation or Organization) | (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| **6120 South Yale Avenue, Suite 805** | **6120 South Yale Avenue, Suite 805** | |
| **Tulsa,** | **Oklahoma** | **74136** |
| (Address of Principal Executive Offices) | (Address of Principal Executive Offices) | (Zip Code) |

---

**(918) 481-1119**

(Registrant's Telephone Number, Including Area Code)

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 |

---

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.

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large accelerated filer | □ | &nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer | ⌧ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer | □ | &nbsp;&nbsp;&nbsp;&nbsp;Smaller reporting company | &nbsp;&nbsp;&nbsp;☐ |
| | | &nbsp;&nbsp;&nbsp;&nbsp;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 ☒

At February 6, 2023, there were 131,321,742 common units issued and outstanding.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| **<u>[PART I - FINANCIAL INFORMATION](#i89063293725243f1851a0cea68cbf46e_13)</u>** | **<u>[PART I - FINANCIAL INFORMATION](#i89063293725243f1851a0cea68cbf46e_13)</u>** | **<u>[PART I - FINANCIAL INFORMATION](#i89063293725243f1851a0cea68cbf46e_13)</u>** |
| <u>[Item 1.](#i89063293725243f1851a0cea68cbf46e_16)</u> | <u>[Financial Statements](#i89063293725243f1851a0cea68cbf46e_16)</u> | <u>[3](#i89063293725243f1851a0cea68cbf46e_16)</u> |
|  | <u>[Unaudited Condensed Consolidated Balance Sheets at](#i89063293725243f1851a0cea68cbf46e_19)[December](#i89063293725243f1851a0cea68cbf46e_19)[3](#i89063293725243f1851a0cea68cbf46e_19)[1](#i89063293725243f1851a0cea68cbf46e_19)[, 2022 and March 31, 2022](#i89063293725243f1851a0cea68cbf46e_19)</u> | <u>[3](#i89063293725243f1851a0cea68cbf46e_19)</u> |
|  | <u>[Unaudited Condensed Consolidated Statements of Operations for the three months and](#i89063293725243f1851a0cea68cbf46e_22)[nine](#i89063293725243f1851a0cea68cbf46e_22)[months ended](#i89063293725243f1851a0cea68cbf46e_22)[December](#i89063293725243f1851a0cea68cbf46e_22)[3](#i89063293725243f1851a0cea68cbf46e_22)[1](#i89063293725243f1851a0cea68cbf46e_22)[, 2022 and 2021](#i89063293725243f1851a0cea68cbf46e_22)</u> | <u>[4](#i89063293725243f1851a0cea68cbf46e_22)</u> |
|  | <u>[Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months and](#i89063293725243f1851a0cea68cbf46e_25)[nine](#i89063293725243f1851a0cea68cbf46e_25)[months ended](#i89063293725243f1851a0cea68cbf46e_25)[December](#i89063293725243f1851a0cea68cbf46e_25)[3](#i89063293725243f1851a0cea68cbf46e_25)[1](#i89063293725243f1851a0cea68cbf46e_25)[, 2022 and 2021](#i89063293725243f1851a0cea68cbf46e_25)</u> | <u>[5](#i89063293725243f1851a0cea68cbf46e_25)</u> |
|  | <u>[Unaudited Condensed Consolidated Statements of Changes in Equity for the three months and](#i89063293725243f1851a0cea68cbf46e_28)[nine](#i89063293725243f1851a0cea68cbf46e_28)[months ended](#i89063293725243f1851a0cea68cbf46e_28)[December](#i89063293725243f1851a0cea68cbf46e_28)[3](#i89063293725243f1851a0cea68cbf46e_28)[1](#i89063293725243f1851a0cea68cbf46e_28)[, 2022 and 2021](#i89063293725243f1851a0cea68cbf46e_28)</u> | <u>[6](#i89063293725243f1851a0cea68cbf46e_28)</u> |
|  | <u>[Unaudited Condensed Consolidated Statements of Cash Flows for the](#i89063293725243f1851a0cea68cbf46e_31)[nine](#i89063293725243f1851a0cea68cbf46e_31)[months ended](#i89063293725243f1851a0cea68cbf46e_31)[December](#i89063293725243f1851a0cea68cbf46e_31)[3](#i89063293725243f1851a0cea68cbf46e_31)[1](#i89063293725243f1851a0cea68cbf46e_31)[, 2022 and 2021](#i89063293725243f1851a0cea68cbf46e_31)</u> | <u>[8](#i89063293725243f1851a0cea68cbf46e_31)</u> |
|  | <u>[Notes to Unaudited Condensed Consolidated Financial Statements](#i89063293725243f1851a0cea68cbf46e_34)</u> | <u>[9](#i89063293725243f1851a0cea68cbf46e_34)</u> |
| <u>[Item 2.](#i89063293725243f1851a0cea68cbf46e_97)</u> | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#i89063293725243f1851a0cea68cbf46e_97)</u> | <u>[32](#i89063293725243f1851a0cea68cbf46e_97)</u> |
| <u>[Item 3.](#i89063293725243f1851a0cea68cbf46e_235)</u> | <u>[Quantitative and Qualitative Disclosures About Market Risk](#i89063293725243f1851a0cea68cbf46e_235)</u> | <u>[59](#i89063293725243f1851a0cea68cbf46e_235)</u> |
| <u>[Item 4.](#i89063293725243f1851a0cea68cbf46e_250)</u> | <u>[Controls and Procedures](#i89063293725243f1851a0cea68cbf46e_250)</u> | <u>[61](#i89063293725243f1851a0cea68cbf46e_250)</u> |
| **<u>[PART II - OTHER INFORMATION](#i89063293725243f1851a0cea68cbf46e_253)</u>** | **<u>[PART II - OTHER INFORMATION](#i89063293725243f1851a0cea68cbf46e_253)</u>** | **<u>[PART II - OTHER INFORMATION](#i89063293725243f1851a0cea68cbf46e_253)</u>** |
| <u>[Item 1.](#i89063293725243f1851a0cea68cbf46e_256)</u> | <u>[Legal Proceedings](#i89063293725243f1851a0cea68cbf46e_256)</u> | <u>[62](#i89063293725243f1851a0cea68cbf46e_256)</u> |
| <u>[Item 1A.](#i89063293725243f1851a0cea68cbf46e_259)</u> | <u>[Risk Factors](#i89063293725243f1851a0cea68cbf46e_259)</u> | <u>[62](#i89063293725243f1851a0cea68cbf46e_259)</u> |
| <u>[Item 2](#i89063293725243f1851a0cea68cbf46e_262)</u>. | <u>[Unregistered Sales of Equity Securities and Use of Proceeds](#i89063293725243f1851a0cea68cbf46e_262)</u> | <u>[62](#i89063293725243f1851a0cea68cbf46e_262)</u> |
| <u>[Item 3](#i89063293725243f1851a0cea68cbf46e_268)</u>. | <u>[Defaults Upon Senior Securities](#i89063293725243f1851a0cea68cbf46e_268)</u> | <u>[62](#i89063293725243f1851a0cea68cbf46e_268)</u> |
| <u>[Item 4.](#i89063293725243f1851a0cea68cbf46e_271)</u> | <u>[Mine Safety Disclosures](#i89063293725243f1851a0cea68cbf46e_271)</u> | <u>[62](#i89063293725243f1851a0cea68cbf46e_271)</u> |
| <u>[Item 5.](#i89063293725243f1851a0cea68cbf46e_274)</u> | <u>[Other Information](#i89063293725243f1851a0cea68cbf46e_274)</u> | <u>[62](#i89063293725243f1851a0cea68cbf46e_274)</u> |
| <u>[Item 6.](#i89063293725243f1851a0cea68cbf46e_277)</u> | <u>[Exhibits](#i89063293725243f1851a0cea68cbf46e_277)</u> | <u>[63](#i89063293725243f1851a0cea68cbf46e_277)</u> |
| <u>[SIGNATURES](#i89063293725243f1851a0cea68cbf46e_280)</u> | <u>[SIGNATURES](#i89063293725243f1851a0cea68cbf46e_280)</u> | <u>[64](#i89063293725243f1851a0cea68cbf46e_280)</u> |

---

i

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the prices of crude oil, natural gas liquids, gasoline, diesel, biodiesel and energy prices generally;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the general level of demand, and the availability of supply, for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the level of crude oil and natural gas drilling and production in areas where we have operations and facilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of weather conditions on supply and demand for crude oil, natural gas liquids, gasoline, diesel, and biodiesel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of natural disasters, earthquakes, hurricanes, tornados, lightning strikes, or other significant weather events;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the availability of local, intrastate, and interstate transportation infrastructure with respect to our transportation services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the availability, price, and marketing of competing fuels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of energy conservation efforts on product demand;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• energy efficiencies and technological trends;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• issuance of executive orders, changes in applicable laws, regulations and policies, including tax, environmental, transportation, and employment regulations, or new interpretations by regulatory agencies concerning such laws and regulations and the effect of such laws, regulations and policies (now existing or in the future) on our business operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of executive orders and legislative and regulatory actions on hydraulic fracturing, water disposal and transportation, and the treatment of flowback and produced water;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• hazards or operating risks related to transporting and distributing petroleum products that may not be fully covered by insurance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the maturity of the crude oil, natural gas liquids, and refined products industries and competition from other markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• loss of key personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the ability to renew contracts with key customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the ability to maintain or increase the margins we realize for our services;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inflation, interest rates, and general economic conditions (including recessions and other future disruptions and volatility in the global credit markets and the impact of these events on customers and suppliers);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the nonpayment, nonperformance or bankruptcy by our counterparties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the availability and cost of capital and our ability to access certain capital sources;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a deterioration of the credit and capital markets;

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the ability to successfully identify and complete accretive acquisitions and organic growth projects, and integrate acquired assets and businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the costs and effects of legal and administrative proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in general economic conditions, including market and macroeconomic disruptions resulting from global pandemics and related governmental responses; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• political pressure and influence of environmental groups upon policies and decisions related to the production, gathering, refining, processing, fractionation, transportation and sale of crude oil, refined products, natural gas, natural gas liquids, gasoline, diesel or biodiesel.

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, 2022.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**PART I - FINANCIAL INFORMATION**

**Item 1.&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements**

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Unaudited Condensed Consolidated Balance Sheets**

**(in Thousands, except unit amounts)**

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| **ASSETS** | | |
| CURRENT ASSETS: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $4534 | $3822 |
| &nbsp;&nbsp;Accounts receivable-trade, net of allowance for expected credit losses of $2,455 and $2,626, respectively | 1129294 | 1123163 |
| &nbsp;&nbsp;&nbsp;Accounts receivable-affiliates | 10257 | 8591 |
| &nbsp;&nbsp;&nbsp;Inventories | 238073 | 251277 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 135980 | 159486 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 1518138 | 1546339 |
| PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $1,000,765 and $887,006, respectively | 2400508 | 2462390 |
| GOODWILL | 744439 | 744439 |
| INTANGIBLE ASSETS, net of accumulated amortization of $563,075 and $507,285, respectively | 1078631 | 1135354 |
| INVESTMENTS IN UNCONSOLIDATED ENTITIES | 22769 | 21897 |
| OPERATING LEASE RIGHT-OF-USE ASSETS | 85576 | 114124 |
| OTHER NONCURRENT ASSETS | 64030 | 45802 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $5914091 | $6070345 |
| **LIABILITIES AND EQUITY** |  |  |
| CURRENT LIABILITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable-trade | $952506 | $1084837 |
| &nbsp;&nbsp;&nbsp;Accounts payable-affiliates | 65 | 73 |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other payables | 174400 | 140719 |
| &nbsp;&nbsp;&nbsp;Advance payments received from customers | 20957 | 7934 |
| &nbsp;&nbsp;&nbsp;Current maturities of long-term debt | 303788 | 2378 |
| &nbsp;&nbsp;&nbsp;Operating lease obligations | 32883 | 41261 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 1484599 | 1277202 |
| LONG-TERM DEBT, net of debt issuance costs of $32,986 and $42,988, respectively, and current maturities | 2921174 | 3350463 |
| OPERATING LEASE OBLIGATIONS | 53518 | 72784 |
| OTHER NONCURRENT LIABILITIES | 103378 | 104346 |
| COMMITMENTS AND CONTINGENCIES (NOTE 7) |  |  |
| CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively | 551097 | 551097 |
| EQUITY: |  |  |
| &nbsp;&nbsp;General partner, representing a 0.1% interest, 131,453 and 130,827 notional units, respectively | (52484) | (52478) |
| &nbsp;&nbsp;Limited partners, representing a 99.9% interest, 131,321,742 and 130,695,970 common units issued and outstanding, respectively | 488221 | 401486 |
| &nbsp;&nbsp;Class B preferred limited partners, 12,585,642 and 12,585,642 preferred units issued and outstanding, respectively | 305468 | 305468 |
| &nbsp;&nbsp;Class C preferred limited partners, 1,800,000 and 1,800,000 preferred units issued and outstanding, respectively | 42891 | 42891 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (439) | (308) |
| &nbsp;&nbsp;&nbsp;Noncontrolling interests | 16668 | 17394 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total equity | 800325 | 714453 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and equity | $5914091 | $6070345 |

---

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

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Unaudited Condensed Consolidated Statements of Operations**

**(in Thousands, except unit and per unit amounts)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| REVENUES: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Water Solutions | $180242 | $130653 | $511231 | $397089 |
| &nbsp;&nbsp;&nbsp;Crude Oil Logistics | 531613 | 607203 | 1971767 | 1715657 |
| &nbsp;&nbsp;&nbsp;Liquids Logistics | 1427385 | 1434020 | 4163072 | 3301922 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Revenues | 2139240 | 2171876 | 6646070 | 5414668 |
| COST OF SALES: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Water Solutions | 2534 | 5030 | 13679 | 21791 |
| &nbsp;&nbsp;&nbsp;Crude Oil Logistics | 471891 | 556531 | 1808460 | 1591877 |
| &nbsp;&nbsp;&nbsp;Liquids Logistics | 1385943 | 1388760 | 4057360 | 3187039 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Cost of Sales | 1860368 | 1950321 | 5879499 | 4800707 |
| OPERATING COSTS AND EXPENSES: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Operating | 81353 | 72807 | 237371 | 207610 |
| &nbsp;&nbsp;&nbsp;General and administrative | 17216 | 18925 | 50601 | 46149 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 69327 | 68480 | 204105 | 222145 |
| &nbsp;&nbsp;&nbsp;Loss on disposal or impairment of assets, net | 8306 | 12233 | 15791 | 93463 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating Income | 102670 | 49110 | 258703 | 44594 |
| OTHER INCOME (EXPENSE): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Equity in earnings of unconsolidated entities | 1213 | 119 | 3094 | 765 |
| &nbsp;&nbsp;&nbsp;Interest expense | (75920) | (68379) | (211528) | (204004) |
| &nbsp;&nbsp;&nbsp;Gain on early extinguishment of liabilities, net | 2667 | 9 | 6808 | 1131 |
| &nbsp;&nbsp;&nbsp;Other income, net | 28100 | 24 | 28731 | 2003 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (Loss) Before Income Taxes | 58730 | (19117) | 85808 | (155511) |
| INCOME TAX BENEFIT (EXPENSE) | 252 | 135 | (113) | 820 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Income (Loss) | 58982 | (18982) | 85695 | (154691) |
| LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (448) | 63 | (790) | (705) |
| NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP | $58534 | $(18919) | $84905 | $(155396) |
| NET INCOME (LOSS) ALLOCATED TO COMMON UNITHOLDERS - BASIC (NOTE 3) | $26007 | $(45233) | $(5571) | $(232361) |
| NET INCOME (LOSS) ALLOCATED TO COMMON UNITHOLDERS - DILUTED (NOTE 3) | $26123 | $(45233) | $(5571) | $(232361) |
| BASIC INCOME (LOSS) PER COMMON UNIT | $0.20 | $(0.35) | $(0.04) | $(1.79) |
| DILUTED INCOME (LOSS) PER COMMON UNIT | $0.19 | $(0.35) | $(0.04) | $(1.79) |
| BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | 131015658 | 129810245 | 130802920 | 129666303 |
| DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | 134485325 | 129810245 | 130802920 | 129666303 |

---

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

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)**

**(in Thousands)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Net income (loss) | $58982 | $(18982) | $85695 | $(154691) |
| &nbsp;&nbsp;&nbsp;Other comprehensive income (loss) | 1 | (4) | (131) | (48) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive income (loss) | $58983 | $(18986) | $85564 | $(154739) |

---

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

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Unaudited Condensed Consolidated Statement of Changes in Equity** 

**Three Months and Nine Months Ended December 31, 2022**

**(in Thousands, except unit amounts)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | **Limited Partners** | **Limited Partners** | **Limited Partners** | **Limited Partners** | | | |
| | | **Preferred** | **Preferred** | **Common** | **Common** | | | |
| |<br>**General<br>Partner** | **Units** | **Amount** | **Units** | **Amount** |<br>**Accumulated<br>Other Comprehensive<br>Income (Loss)** |<br>**Noncontrolling<br>Interests** |<br>**Total<br>Equity** |
| BALANCE AT MARCH 31, 2022 | $(52478) | 14385642 | $348359 | 130695970 | $401486 | $(308) | $17394 | $714453 |
| &nbsp;&nbsp;&nbsp;Distributions to noncontrolling interest owners |  |  |  |  |  |  | (975) | (975) |
| &nbsp;&nbsp;&nbsp;Equity issued pursuant to incentive compensation plan (Note 8) |  |  |  |  | 497 |  |  | 497 |
| &nbsp;&nbsp;&nbsp;Net (loss) income | (5) |  |  |  | 22866 |  | 245 | 23106 |
| &nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  |  |  | (50) |  | (50) |
| BALANCE AT JUNE 30, 2022 | (52483) | 14385642 | 348359 | 130695970 | 424849 | (358) | 16664 | 737031 |
| &nbsp;&nbsp;&nbsp;Distributions to noncontrolling interest owners |  |  |  |  |  |  | (274) | (274) |
| &nbsp;&nbsp;&nbsp;Equity issued pursuant to incentive compensation plan (Note 8) |  |  |  |  | 479 |  |  | 479 |
| &nbsp;&nbsp;&nbsp;Net (loss) income | (27) |  |  |  | 3537 |  | 97 | 3607 |
| &nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  |  |  | (82) |  | (82) |
| BALANCE AT SEPTEMBER 30, 2022 | (52510) | 14385642 | 348359 | 130695970 | 428865 | (440) | 16487 | 740761 |
| &nbsp;&nbsp;&nbsp;Distributions to noncontrolling interest owners |  |  |  |  |  |  | (267) | (267) |
| &nbsp;&nbsp;&nbsp;Common unit repurchases and cancellations (Note 8) |  |  |  | (31828) | (42) |  |  | (42) |
| &nbsp;&nbsp;&nbsp;Equity issued pursuant to incentive compensation plan (Note 8) |  |  |  | 657600 | 890 |  |  | 890 |
| &nbsp;&nbsp;&nbsp;Net income | 26 |  |  |  | 58508 |  | 448 | 58982 |
| &nbsp;&nbsp;&nbsp;Other comprehensive income |  |  |  |  |  | 1 |  | 1 |
| BALANCE AT DECEMBER 31, 2022 | $(52484) | 14385642 | $348359 | 131321742 | $488221 | $(439) | $16668 | $800325 |

---

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Unaudited Condensed Consolidated Statement of Changes in Equity** 

**Three Months and Nine Months Ended December 31, 2021** 

**(in Thousands, except unit amounts)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | **Limited Partners** | **Limited Partners** | **Limited Partners** | **Limited Partners** | | | |
| | | **Preferred** | **Preferred** | **Common** | **Common** | | | |
| |<br>**General<br>Partner** | **Units** | **Amount** | **Units** | **Amount** |<br>**Accumulated<br>Other Comprehensive<br>Income (Loss)** |<br>**Noncontrolling<br>Interests** |<br>**Total<br>Equity** |
| BALANCE AT MARCH 31, 2021 | $(52189) | 14385642 | $348359 | 129593939 | $582784 | $(266) | $69471 | $948159 |
| &nbsp;&nbsp;&nbsp;Distributions to noncontrolling interest owners |  |  |  |  |  |  | (444) | (444) |
| &nbsp;&nbsp;&nbsp;Sawtooth joint venture disposition |  |  |  |  |  |  | (51097) | (51097) |
| &nbsp;&nbsp;&nbsp;Equity issued pursuant to incentive compensation plan |  |  |  |  | 960 |  |  | 960 |
| &nbsp;&nbsp;&nbsp;Net (loss) income | (159) |  |  |  | (134781) |  | 438 | (134502) |
| &nbsp;&nbsp;&nbsp;Other comprehensive income |  |  |  |  |  | 8 |  | 8 |
| BALANCE AT JUNE 30, 2021 | (52348) | 14385642 | 348359 | 129593939 | 448963 | (258) | 18368 | 763084 |
| &nbsp;&nbsp;&nbsp;Distributions to noncontrolling interest owners |  |  |  |  |  |  | (513) | (513) |
| &nbsp;&nbsp;&nbsp;Equity issued pursuant to incentive compensation plan |  |  |  |  | 1048 |  |  | 1048 |
| &nbsp;&nbsp;&nbsp;Net (loss) income | (27) |  |  |  | (1510) |  | 330 | (1207) |
| &nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  |  |  | (52) |  | (52) |
| BALANCE AT SEPTEMBER 30, 2021 | (52375) | 14385642 | 348359 | 129593939 | 448501 | (310) | 18185 | 762360 |
| &nbsp;&nbsp;&nbsp;Distributions to noncontrolling interest owners |  |  |  |  |  |  | (388) | (388) |
| &nbsp;&nbsp;&nbsp;Common unit repurchases and cancellations |  |  |  | (8901) | (20) |  |  | (20) |
| &nbsp;&nbsp;&nbsp;Equity issued pursuant to incentive compensation plan |  |  |  | 399100 | 749 |  |  | 749 |
| &nbsp;&nbsp;&nbsp;Net loss | (47) |  |  |  | (18872) |  | (63) | (18982) |
| &nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  |  |  | (4) |  | (4) |
| BALANCE AT DECEMBER 31, 2021 | $(52422) | 14385642 | $348359 | 129984138 | $430358 | $(314) | $17734 | $743715 |

---

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

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Unaudited Condensed Consolidated Statements of Cash Flows**

**(in Thousands)**

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** |
| OPERATING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Net income (loss) | $85695 | $(154691) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization, including amortization of debt issuance costs | 217028 | 235357 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on early extinguishment of liabilities, net | (6808) | (1131) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity-based compensation expense | 1866 | (1044) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal or impairment of assets, net | 15791 | 93463 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in provision for expected credit losses | (485) | 88 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net adjustments to fair value of commodity derivatives | 13879 | 42875 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity in earnings of unconsolidated entities | (3094) | (765) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions of earnings from unconsolidated entities | 2568 | 2178 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lower of cost or net realizable value adjustments | 3050 | 6534 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other | 701 | 1593 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities, exclusive of acquisitions: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable-trade and affiliates | (4778) | (316477) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (24904) | (194053) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current and noncurrent assets | 6285 | 33792 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable-trade and affiliates | (131086) | 294230 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current and noncurrent liabilities | 31157 | (15038) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 206865 | 26911 |
| INVESTING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Capital expenditures | (122362) | (107480) |
| &nbsp;&nbsp;&nbsp;Net settlements of commodity derivatives | 28521 | (60972) |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of assets | 22120 | 8419 |
| &nbsp;&nbsp;&nbsp;Proceeds from divestitures of businesses and investments, net |  | 63489 |
| &nbsp;&nbsp;&nbsp;Investments in unconsolidated entities | (346) | (350) |
| &nbsp;&nbsp;&nbsp;Distributions of capital from unconsolidated entities |  | 393 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (72067) | (96501) |
| FINANCING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from borrowings under revolving credit facility | 1432000 | 1342000 |
| &nbsp;&nbsp;&nbsp;Payments on revolving credit facility | (1392000) | (1190000) |
| &nbsp;&nbsp;&nbsp;Repayment and repurchase of senior unsecured notes | (168047) | (60149) |
| &nbsp;&nbsp;&nbsp;Payments on other long-term debt | (1931) | (6772) |
| &nbsp;&nbsp;&nbsp;Debt issuance costs | (1340) | (12503) |
| &nbsp;&nbsp;&nbsp;Distributions to noncontrolling interest owners | (1516) | (1345) |
| &nbsp;&nbsp;&nbsp;Common unit repurchases and cancellations | (42) | (20) |
| &nbsp;&nbsp;&nbsp;Payments to settle contingent consideration liabilities | (1204) | (994) |
| &nbsp;&nbsp;&nbsp;Principal payments of finance leases | (6) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by financing activities | (134086) | 70217 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase in cash and cash equivalents | 712 | 627 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents, beginning of period | 3822 | 4829 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents, end of period | $4534 | $5456 |
| **Supplemental cash flow information:** |  |  |
| &nbsp;&nbsp;&nbsp;Cash interest paid | $163203 | $162053 |
| &nbsp;&nbsp;&nbsp;Income taxes paid (net of income tax refunds) | $3088 | $1896 |
| **Supplemental non-cash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Accrued capital expenditures | $7398 | $9949 |

---

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 ("GP"). At December 31, 2022, our operations included three segments:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our Water Solutions segment transports, treats, recycles and disposes of produced and flowback water generated from crude oil and natural gas production. We also sell produced water for reuse and recycle and brackish non-potable water to our producer customers to be used in their crude oil exploration and production activities. As part of processing water, we aggregate and sell recovered crude oil, also known as skim oil. We also dispose of solids such as tank bottoms, drilling fluids and drilling muds and perform other ancillary services such as truck and frac tank washouts. Our activities in this segment are underpinned by long-term, fixed fee contracts and acreage dedications, some of which contain minimum volume commitments with leading oil and gas companies including large, investment grade producer customers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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, and transportation services through its owned assets. Our activities in this segment are supported by certain long-term, fixed rate contracts which include minimum volume commitments on our owned and leased pipelines.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our Liquids Logistics segment conducts supply operations for natural gas liquids, refined petroleum products and biodiesel to a broad range of commercial, retail and industrial customers across the United States and Canada. These operations are conducted through our 24 owned terminals, third-party storage and terminal facilities, nine common carrier pipelines and a fleet of leased railcars. We also provide services for marine exports of butane through our facility located in Chesapeake, Virginia. Our propane pipeline in Michigan was completed on August 8, 2022.

**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, 2022 was derived from our audited consolidated financial statements for the fiscal year ended March 31, 2022 included in our Annual Report on Form 10-K ("Annual Report") filed with the SEC on June 6, 2022.

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, 2023.

*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.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

Critical accounting estimates we make in the preparation of our unaudited condensed consolidated financial statements include, among others, determining the impairment of goodwill and long-lived assets, useful lives and recoverability of property, plant and equipment and amortizable intangible assets, the fair value of derivative instruments, estimating certain revenues, the fair value of asset retirement obligations, the fair value of assets and liabilities acquired in acquisitions, the recoverability of inventories, the collectibility of accounts and notes receivable and accruals for environmental matters. 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.

*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 a deferred tax liability of $42.0 million and $43.5 million at December 31, 2022 and March 31, 2022, respectively, as a result of acquiring corporations in connection with certain of our acquisitions, which is included within other noncurrent liabilities in our unaudited condensed consolidated balance sheets. 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 during the nine months ended December 31, 2022 was $1.6 million with an effective tax rate of 25.1%. The deferred tax benefit recorded during the nine months ended December 31, 2021 was $2.0 million with an effective tax rate of 22.9%.

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 uncertain tax positions that required recognition in our unaudited condensed consolidated financial statements at December 31, 2022 or March 31, 2022.

*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:

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Propane | $97706 | $43971 |
| Crude oil | 69905 | 135485 |
| Butane | 39294 | 33144 |
| Biodiesel | 16598 | 20474 |
| Diesel | 5192 | 3504 |
| Ethanol | 798 | 3503 |
| Other | 8580 | 11196 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $238073 | $251277 |

---

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

*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.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Entity** | **Segment** | **Ownership Interest** | **December 31, 2022** | **March 31, 2022** |
| | | | **(in thousands)** | **(in thousands)** |
| Water services and land company | Water Solutions | 50% | $15963 | $15714 |
| Water services and land company | Water Solutions | 10% | 3615 | 2863 |
| Water services and land company | Water Solutions | 50% | 2281 | 2210 |
| Aircraft company (1) | Corporate and Other | 50% | 362 | 538 |
| Water services company | Water Solutions | 50% | 409 | 409 |
| Natural gas liquids terminal company | Liquids Logistics | 50% | 139 | 163 |
| &nbsp;&nbsp;&nbsp;Total |  |  | $22769 | $21897 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;This is an investment with a related party.

*Other Noncurrent Assets*

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

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Linefill (1) | $53772 | $28065 |
| Minimum shipping fees - pipeline commitments (2) | 5696 | 8899 |
| Loan receivable (3) |  | 3147 |
| Other | 4562 | 5691 |
| &nbsp;&nbsp;&nbsp;Total | $64030 | $45802 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Represents minimum volumes of product we are required to leave on certain third-party owned pipelines under long-term shipment commitments. At December 31, 2022 and March 31, 2022, linefill consisted of 717,686 and 423,978 barrels of crude oil, respectively. The increase was due primarily to capitalizing additional crude oil barrels as a result of increased requirements by third-party owned pipelines. Linefill held in pipelines we own is included within property, plant and equipment (see Note 4).

(2)&nbsp;&nbsp;&nbsp;&nbsp;Represents the noncurrent portion of minimum shipping fees paid in excess of volumes shipped, or deficiency credits, for a contract with a crude oil pipeline operator. This amount can be recovered when volumes shipped exceed the minimum monthly volume commitment (see Note 7). At December 31, 2022, the deficiency credit was $10.0 million, of which $4.3 million is recorded within prepaid expenses and other current assets in our unaudited condensed consolidated balance sheet.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Represents the noncurrent portion of a loan receivable, net of an allowance for an expected credit loss, with a former related party. During the nine months ended December 31, 2022, we received payments totaling $3.1 million to extinguish this loan receivable and we recorded a loss of $0.2 million within loss on disposal or impairment of assets, net to write off the remaining balance.

*Accrued Expenses and Other Payables*

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

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Accrued interest | $91873 | $56104 |
| Accrued compensation and benefits | 20543 | 18417 |
| Excise and other tax liabilities | 13753 | 10451 |
| Derivative liabilities | 13688 | 27108 |
| Product exchange liabilities | 10765 | 853 |
| Other | 23778 | 27786 |
| &nbsp;&nbsp;&nbsp;Total | $174400 | $140719 |

---

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

*Recent Accounting Pronouncements*

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." This ASU (i) simplifies an issuer's accounting for convertible instruments by eliminating two of the three models in Accounting Standards Codification ("ASC") 470-20 that require separate accounting for embedded conversion features, (ii) amends diluted earnings per share calculations for convertible instruments by requiring the use of the if-converted method and (iii) simplifies the settlement assessment entities are required to perform on contracts that can potentially settle in an entity's own equity by removing certain requirements. We adopted this guidance on April 1, 2022, using the modified retrospective method. Under our Class D Preferred Unit (as defined in Note 8) agreement, we are permitted to issue common units to redeem a portion of the outstanding Class D Preferred Units. Using the if-converted method, we expect our calculation of earnings per unit to be impacted by both an increase in the number of diluted weighted average common units outstanding and a decrease in the amount of Class D Preferred Unit distributions, when they are determined to be dilutive. Other than the potential impact to our future earnings per unit calculations, the adoption of this guidance did not impact our financial position, results of operations or cash flows related to any debt or preferred units issued prior to adoption.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate ("LIBOR") interest rate or another reference rate expected to be discontinued because of reference rate reform. This guidance was to be effective prospectively upon issuance through December 31, 2022 and applied from the beginning of an interim period that included the issuance date of this ASU. However, in December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" which deferred the sunset date from December 31, 2022 to December 31, 2024. All other provisions of ASU 2020-04 were unchanged. On April 13, 2022, the ABL Facility (as defined herein) was amended to replace the LIBOR benchmark with the SOFR (as defined herein) benchmark (as discussed further in Note 6). We are continuing to evaluate the effect that this guidance will have on our financial position, results of operations and cash flows.

**Note 3—Income (Loss) 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 December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Weighted average common units outstanding during the period: |  |  |  |  |
| Common units - Basic | 131015658 | 129810245 | 130802920 | 129666303 |
| Effect of Dilutive Securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Partial redemption of Class D Preferred Units (1) | 3469667 |  |  |  |
| Common units - Diluted | 134485325 | 129810245 | 130802920 | 129666303 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Under the if-converted method, amount represents the number of common units that would be issued to partially redeem outstanding Class D Preferred Units. Per the amended and restated limited partnership agreement (the "Partnership Agreement"), the Partnership can redeem up to 50% of the outstanding Class D Preferred Units, but is limited in the number of common units that can be used (the lower of 15% of the outstanding common units or 10 times the 30-day average daily trading volume) for the redemption.

For the three months ended December 31, 2022, the service awards and warrants were considered antidilutive and for the three months ended December 31, 2021 all convertible securities were considered antidilutive. For the nine months ended December 31, 2022 and 2021, all potential common units or convertible securities were considered antidilutive.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands, except unit and per unit amounts)** | **(in thousands, except unit and per unit amounts)** | **(in thousands, except unit and per unit amounts)** | **(in thousands, except unit and per unit amounts)** |
| Net income (loss) | $58982 | $(18982) | $85695 | $(154691) |
| Less: Net (income) loss attributable to noncontrolling interests | (448) | 63 | (790) | (705) |
| Net income (loss) attributable to NGL Energy Partners LP | 58534 | (18919) | 84905 | (155396) |
| Less: Distributions to preferred unitholders (1) | (32501) | (26361) | (90482) | (77198) |
| Less: Net (income) loss allocated to GP (2) | (26) | 47 | 6 | 233 |
| Net income (loss) allocated to common unitholders - basic | 26007 | (45233) | (5571) | (232361) |
| Plus: Distributions to preferred unitholders (3) | 116 |  |  |  |
| Net income (loss) allocated to common unitholders - diluted | $26123 | $(45233) | $(5571) | $(232361) |
| Basic income (loss) per common unit | $0.20 | $(0.35) | $(0.04) | $(1.79) |
| Diluted income (loss) per common unit | $0.19 | $(0.35) | $(0.04) | $(1.79) |
| Basic weighted average common units outstanding | 131015658 | 129810245 | 130802920 | 129666303 |
| Diluted weighted average common units outstanding | 134485325 | 129810245 | 130802920 | 129666303 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Includes cumulative distributions for the three months and nine months ended December 31, 2022 and 2021 which were earned but not declared or paid (see Note 8 for a further discussion of the suspension of common unit and preferred unit distributions).

(2)&nbsp;&nbsp;&nbsp;&nbsp;Net (income) loss allocated to the GP includes distributions to which it is entitled as the holder of incentive distribution rights.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Under the if-converted method, amount represents the Class D Preferred Unit distributions that would be eliminated due to the partial redemption of the Class D Preferred Units.

**Note 4—Property, Plant and Equipment**

Our property, plant and equipment consists of the following at the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Description** | **Estimated<br>Useful Lives** | **Estimated<br>Useful Lives** | **December 31, 2022** | **March 31, 2022** |
| | **(in years)** | **(in years)** | **(in thousands)** | **(in thousands)** |
| Natural gas liquids terminal and storage assets | 2 | 30 | $176894 | $173199 |
| Pipeline and related facilities | 30 | 40 | 265642 | 265643 |
| Vehicles and railcars (1) | 3 | 25 | 92851 | 93126 |
| Water treatment facilities and equipment | 3 | 30 | 2111554 | 2040687 |
| Crude oil tanks and related equipment | 2 | 30 | 237310 | 236805 |
| Barges and towboats | 5 | 30 | 146023 | 138778 |
| Information technology equipment | 3 | 7 | 38111 | 48664 |
| Buildings and leasehold improvements | 3 | 40 | 149342 | 151071 |
| Land |  |  | 92840 | 100038 |
| Tank bottoms and linefill (2) |  |  | 39794 | 30443 |
| Other | 3 | 20 | 12138 | 15252 |
| Construction in progress |  |  | 38774 | 55690 |
|  |  |  | 3401273 | 3349396 |
| Accumulated depreciation |  |  | (1000765) | (887006) |
| &nbsp;&nbsp;&nbsp;Net property, plant and equipment |  |  | $2400508 | $2462390 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Includes a finance lease right-of-use asset of $0.1 million.

(2)&nbsp;&nbsp;&nbsp;&nbsp;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. Linefill, 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.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Depreciation expense | $50005 | $48404 | $145862 | $156855 |
| Capitalized interest expense | $250 | $149 | $740 | $805 |

---

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 statement 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 December 31, 2022** | **Nine Months Ended December 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Water Solutions | $9467 | $20137 |
| Crude Oil Logistics | (213) | (1909) |
| Liquids Logistics | 54 | 51 |
| Corporate and Other | (694) | (1214) |
| &nbsp;&nbsp;&nbsp;Total | $8614 | $17065 |

---

**Note 5—Intangible Assets**

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

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **March 31, 2022** | **March 31, 2022** | **March 31, 2022** |
|<br>**Description** |<br>**Weighted-<br>Average<br>Remaining<br>Useful Life** | **Gross Carrying<br>Amount** | **Accumulated<br>Amortization** | **Net** | **Gross Carrying<br>Amount** | **Accumulated<br>Amortization** | **Net** |
| | **(in years)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Amortizable: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Customer relationships | 19.0 | $1200919 | $(480437) | $720482 | $1200919 | $(436837) | $764082 |
| &nbsp;&nbsp;&nbsp;Customer commitments | 21.5 | 192000 | (26880) | 165120 | 192000 | (21120) | 170880 |
| &nbsp;&nbsp;&nbsp;Pipeline capacity rights | 20.9 | 7799 | (2362) | 5437 | 7799 | (2167) | 5632 |
| &nbsp;&nbsp;&nbsp;Rights-of-way and easements | 31.0 | 94854 | (14396) | 80458 | 91664 | (12201) | 79463 |
| &nbsp;&nbsp;&nbsp;Water rights | 16.6 | 99869 | (24940) | 74929 | 99869 | (20404) | 79465 |
| &nbsp;&nbsp;&nbsp;Executory contracts and other agreements | 23.3 | 21431 | (4414) | 17017 | 20931 | (3014) | 17917 |
| &nbsp;&nbsp;&nbsp;Non-compete agreements | 0.3 | 1100 | (1027) | 73 | 7000 | (6487) | 513 |
| &nbsp;&nbsp;Debt issuance costs (1) | 3.2 | 23479 | (8619) | 14860 | 22202 | (5055) | 17147 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total amortizable |  | 1641451 | (563075) | 1078376 | 1642384 | (507285) | 1135099 |
| Non-amortizable: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Trade names |  | 255 |  | 255 | 255 |  | 255 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total |  | $1641706 | $(563075) | $1078631 | $1642639 | $(507285) | $1135354 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Includes debt issuance costs related to the ABL Facility (as defined herein). Debt issuance costs related to the fixed-rate notes 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)**

Amortization expense is as follows for the periods indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
|<br>**Recorded In** | **2022** | **2021** | **2022** | **2021** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Depreciation and amortization | $19322 | $20076 | $58243 | $65290 |
| Cost of sales | 68 | 69 | 205 | 213 |
| Interest expense | 1203 | 1283 | 3564 | 3658 |
| Operating expenses | 62 | 62 | 185 | 185 |
| &nbsp;&nbsp;&nbsp;Total | $20655 | $21490 | $62197 | $69346 |

---

The following table summarizes expected amortization of our intangible assets at December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| **Fiscal Year Ending March 31,** | |
| 2023 (three months) | $20647 |
| 2024 | 76228 |
| 2025 | 68007 |
| 2026 | 65091 |
| 2027 | 60388 |
| 2028 | 57535 |
| Thereafter | 730480 |
| &nbsp;&nbsp;&nbsp;Total | $1078376 |

---

**Note 6—Long-Term Debt**

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **March 31, 2022** | **March 31, 2022** | **March 31, 2022** |
| | **Face<br>Amount** | **Unamortized<br>Debt Issuance<br>Costs (1)** | **Book<br>Value** | **Face<br>Amount** | **Unamortized<br>Debt Issuance<br>Costs (1)** | **Book<br>Value** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Senior secured notes: |  |  |  |  |  |  |
| &nbsp;&nbsp;7.500% Notes due 2026 ("2026 Senior Secured Notes") | $2050000 | $(28314) | $2021686 | $2050000 | $(35140) | $2014860 |
| &nbsp;&nbsp;&nbsp;Asset-based revolving credit facility ("ABL Facility") | 156000 |  | 156000 | 116000 |  | 116000 |
| Senior unsecured notes: |  |  |  |  |  |  |
| &nbsp;&nbsp;7.500% Notes due 2023 ("2023 Notes") | 301885 | (633) | 301252 | 475702 | (1873) | 473829 |
| &nbsp;&nbsp;6.125% Notes due 2025 ("2025 Notes") | 380020 | (1825) | 378195 | 380020 | (2456) | 377564 |
| &nbsp;&nbsp;7.500% Notes due 2026 ("2026 Notes") | 330902 | (2796) | 328106 | 332402 | (3460) | 328942 |
| Other long-term debt | 39774 | (51) | 39723 | 41705 | (59) | 41646 |
|  | 3258581 | (33619) | 3224962 | 3395829 | (42988) | 3352841 |
| Less: Current maturities | 304421 | (633) | 303788 | 2378 |  | 2378 |
| &nbsp;&nbsp;&nbsp;Long-term debt | $2954160 | $(32986) | $2921174 | $3393451 | $(42988) | $3350463 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Debt issuance costs related to the ABL Facility are reported within intangible assets, rather than as a reduction of the carrying amount of long-term debt.

***2026 Senior Secured Notes***

The 2026 Senior Secured Notes bear interest at 7.5%, which is payable on February 1 and August 1 of each year, beginning on August 1, 2021. The 2026 Senior Secured Notes mature on February 1, 2026. The 2026 Senior Secured Notes were issued pursuant to an indenture dated February 4, 2021 (the "Indenture").

The 2026 Senior Secured Notes are secured by first priority liens on substantially all of our assets other than our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets and second priority liens on our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

The Indenture contains covenants that, among other things, limit our ability to: pay distributions or make other restricted payments or repurchase stock; incur or guarantee additional indebtedness or issue disqualified stock or certain preferred stock; make certain investments; create or incur liens; sell assets; enter into restrictions affecting the ability of restricted subsidiaries to make distributions, make loans or advances or transfer assets to the guarantors (including the Partnership); enter into certain transactions with our affiliates; designate restricted subsidiaries as unrestricted subsidiaries; and merge, consolidate or transfer or sell all or substantially all of our assets. The Indenture specifically restricts our ability to pay distributions until our total leverage ratio (as defined in the Indenture) for the most recently ended four full fiscal quarters at the time of the distribution is not greater than 4.75 to 1.00. These covenants are subject to a number of important exceptions and qualifications.

*Compliance*

At December 31, 2022, we were in compliance with the covenants under the Indenture.

***ABL Facility***

The ABL Facility is subject to a borrowing base, which includes a sub-limit for letters of credit. The initial commitments under the ABL Facility were $500.0 million. On April 13, 2022, we amended the ABL Facility to increase the commitments to $600.0 million under the accordion feature within the ABL Facility. As part of the amendment, we agreed to reduce the commitments back to $500.0 million on or before March 31, 2023. In addition, the sub-limit for letters of credit was increased to $250.0 million and the LIBOR benchmark was replaced with an adjusted forward-looking term rate based on the secured overnight financing rate ("SOFR") as the interest rate benchmark. The ABL Facility is secured by a lien on substantially all of our assets, including among other things, a first priority lien on our accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets and a second priority lien on all of our other assets. At December 31, 2022, $156.0 million had been borrowed under the ABL Facility and we had letters of credit outstanding of approximately $168.4 million. The ABL Facility is scheduled to mature at the earliest of (a) February 4, 2026 or (b) 91 days prior to the earliest maturity date in respect to any of our indebtedness in an aggregate principal amount of $50.0 million or greater, if such indebtedness is outstanding at such time, subject to certain exceptions.

At December 31, 2022, the borrowings under the ABL Facility had a weighted average interest rate of 7.37% calculated as the prime rate of 7.50% plus a margin of 1.75% on the alternate base borrowings and the weighted average SOFR of 4.33% plus a margin of 2.75% for the SOFR borrowings. On December 31, 2022, the interest rate in effect on letters of credit was 2.75%.

The ABL Facility contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of assets, distributions and other restricted payments, investments (including acquisitions) and transactions with affiliates. The ABL Facility contains, as the only financial covenant, a fixed charge coverage ratio that is tested based on the financial statements for the most recently ended fiscal quarter upon the occurrence and during the continuation of a Cash Dominion Event (as defined in the ABL Facility). At December 31, 2022, no Cash Dominion Event had occurred.

*Compliance*

At December 31, 2022, we were in compliance with the covenants under the ABL Facility.

***Senior Unsecured Notes***

The senior unsecured notes include the 2023 Notes, which mature on November 1, 2023, the 2025 Notes, which mature on March 1, 2025 and the 2026 Notes, which mature on April 15, 2026 (collectively, the "Senior Unsecured Notes").

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

*Repurchases*

The following table summarizes repurchases of Senior Unsecured Notes for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **Three Months Ended December 31, 2022** | **Nine Months Ended December 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| 2023 Notes |  |  |
| &nbsp;&nbsp;&nbsp;Notes repurchased | $97457 | $173817 |
| &nbsp;&nbsp;&nbsp;Cash paid (excluding payments of accrued interest) | $94575 | $166926 |
| &nbsp;&nbsp;&nbsp;Gain on early extinguishment of debt (1) | $2667 | $6444 |
| 2026 Notes |  |  |
| &nbsp;&nbsp;&nbsp;Notes repurchased | $— | $1500 |
| &nbsp;&nbsp;&nbsp;Cash paid (excluding payments of accrued interest) | $— | $1121 |
| &nbsp;&nbsp;&nbsp;Gain on early extinguishment of debt (2) | $— | $364 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Gain on early extinguishment of debt for the three months and nine months ended December 31, 2022 is inclusive of the write-off of debt issuance costs of $0.2 million and $0.4 million, respectively. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statements of operations.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Gain on early extinguishment of debt for the nine months ended December 31, 2022 is inclusive of the write-off of debt issuance costs of less than $0.1 million. The gain is reported within gain on early extinguishment of liabilities, net within our unaudited condensed consolidated statements of operations.

Subsequent to December 31, 2022, we have repurchased $98.5 million of the 2023 Notes and as of February 8, 2023, the outstanding balance of the 2023 Notes is $203.4 million.

We expect to pay off the remaining outstanding 2023 Notes no later than June 30, 2023, using cash flows from operations, and if needed, borrowings under our ABL Facility. Proceeds generated from other cash flow positive initiatives currently being pursued, such as sales of non-core assets, may also be used for additional debt reductions.

*Redemption*

We currently have the right to redeem all of the outstanding 2023 Notes at 100% of the principal amount plus accrued and unpaid interest. As of March 1, 2023, we will have the right to redeem all or a portion of the outstanding 2025 Notes at 100% of the principal amount plus accrued and unpaid interest. As of April 15, 2024, we will have the right to redeem all or a portion of the outstanding 2026 Notes at 100% of the principal amount plus accrued and unpaid interest.

*Compliance*

At December 31, 2022, we were in compliance with the covenants under all of the Senior Unsecured Notes indentures.

***Other Long-Term Debt***

On October 29, 2020, we entered into an equipment loan for $45.0 million which bears interest at a rate of 8.6% and is secured by certain of our barges and towboats. We have an aggregate principal balance of $39.8 million at December 31, 2022. The loan matures on November 1, 2027.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

***Debt Maturity Schedule***

The scheduled maturities of our long-term debt are as follows at December 31, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Fiscal Year Ending March 31,** | **2026 Senior Secured Notes** | **ABL Facility** | **Senior Unsecured Notes** | **Other<br>Long-Term<br>Debt** | **Total** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| 2023 (three months) | $— | $— | $— | $446 | $446 |
| 2024 |  |  | 301885 | 2816 | 304701 |
| 2025 |  |  | 380020 | 3068 | 383088 |
| 2026 | 2050000 | 156000 |  | 3343 | 2209343 |
| 2027 |  |  | 330902 | 3642 | 334544 |
| 2028 |  |  |  | 26459 | 26459 |
| &nbsp;&nbsp;&nbsp;Total | $2050000 | $156000 | $1012807 | $39774 | $3258581 |

---

***Amortization of Debt Issuance Costs***

Amortization expense for debt issuance costs related to long-term debt was $3.0 million and $3.0 million during the three months ended December 31, 2022 and 2021, respectively, and $9.0 million and $9.2 million during the nine months ended December 31, 2022 and 2021, respectively.

The following table summarizes expected amortization of debt issuance costs at December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| **Fiscal Year Ending March 31,** | |
| 2023 (three months) | $2908 |
| 2024 | 11319 |
| 2025 | 10808 |
| 2026 | 8531 |
| 2027 | 46 |
| 2028 | 7 |
| &nbsp;&nbsp;&nbsp;Total | $33619 |

---

**Note 7—Commitments and Contingencies**

*Legal Contingencies*

In August 2015, LCT Capital, LLC ("LCT") filed a lawsuit against 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. On December 5, 2019, in response to the defendants' post-trial motion, the Court issued an Order overturning the jury's damages award and ordering the case to be set for a damages-only trial (the "December 5th Order"). Both parties filed applications with the trial court asking the trial court to certify the December 5th Order for interlocutory, immediate review by the Appellate Court. On January 7, 2020, the Supreme Court of Delaware ("Supreme Court") entered an Order accepting an interlocutory appeal of various issues relating to both the *quantum meruit* and fraudulent misrepresentation verdicts. The Supreme Court heard oral arguments of the parties on November 4, 2020, took the matters presented under advisement and on January 28, 2021, issued a ruling that (a) LCT is not entitled to "benefit-of-the-bargain" damages on its fraud claim; (b) LCT is not entitled to receive fraudulent misrepresentation damages separate from its *quantum meruit* damages; (c) the trial court abused its discretion when it ordered a new trial on damages relating to LCT's claim of fraudulent misrepresentation; and (d) the trial court properly ordered a new trial on LCT's claim of *quantum meruit* damages. The trial that is limited to the claim of *quantum meruit* damages, started on February 6, 2023. Any allocation of the ultimate verdict award, if any, between the GP and the Partnership will be made by the board of directors of our GP once all information is available to it and after the new trial, any post-trial and/or any appellate process has concluded and the verdict is final as a matter of law. As of December 31, 2022, we have accrued $2.5 million related to this matter.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

The Partnership is a party defendant to a purported class action complaint filed in the federal court in the Northern District of Oklahoma styled *Gary R. Underwood, Successor Trustee for the James L. Price Revocable Living Trust, on behalf of the Trust and all others similarly situated v. NGL Energy Partners LP*, Case No. 4:21-cv-00135-CVE-SH. This case seeks class certification on behalf of owners who allege the Partnership's Crude Oil Logistics group violated Oklahoma's Production Revenue Standards Act when it failed to include statutory interest on proceeds payments it made to certain mineral owners and to state unclaimed property divisions for oil purchased from certain Oklahoma wells. A substantial portion of the statutory interest claimed to be owed in the lawsuit related to suspended proceeds we inherited from our predecessors and remitted to various state unclaimed property divisions in 2016. With no admission of liability or wrongdoing, but only to avoid the expense and uncertainty of future litigation, the Partnership entered into a settlement agreement in this case to resolve all claims made against it by the plaintiff and the proposed class. We have agreed to pay the sum of approximately $8.4 million to the plaintiff and the proposed class, and we accrued the amount as of December 31, 2022. The settlement agreement is subject to court approval and a full fairness hearing will be held in the coming months.

We are party to various other 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 December 31, 2022, we have an environmental liability, measured on an undiscounted basis, of $1.7 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.

*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, 2022 | $29941 |
| &nbsp;&nbsp;Liabilities incurred | 2367 |
| &nbsp;&nbsp;Liabilities associated with disposed assets (1) | (878) |
| &nbsp;&nbsp;Liabilities settled | (171) |
| &nbsp;&nbsp;Accretion expense | 2195 |
| Balance at December 31, 2022 | $33454 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Relates to the sale of six saltwater disposal wells and other long-lived assets within our Water Solutions business.

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.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

*Pipeline Capacity Agreements*

We have 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 and in other noncurrent 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).

The following table summarizes future minimum throughput payments under these agreements at December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| **Fiscal Year Ending March 31,** | |
| 2023 (three months) | $9466 |
| 2024 | 38495 |
| 2025 | 33588 |
| &nbsp;&nbsp;&nbsp;Total | $81549 |

---

*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 December 31, 2022, we had the following commodity purchase commitments:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Crude Oil (1)** | **Crude Oil (1)** | **Natural Gas Liquids** | **Natural Gas Liquids** |
| | **Value** | **Volume<br>(in barrels)** | **Value** | **Volume<br>(in gallons)** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Fixed-Price Commodity Purchase Commitments: |  |  |  |  |
| 2023 (three months) | $74358 | 1086 | $10651 | 11112 |
| 2024 |  |  | 7367 | 8904 |
| 2025 |  |  | 2829 | 3486 |
| 2026 |  |  | 1982 | 2730 |
| 2027 |  |  | 1808 | 2520 |
| &nbsp;&nbsp;&nbsp;Total | $74358 | 1086 | $24637 | 28752 |
| Index-Price Commodity Purchase Commitments: |  |  |  |  |
| 2023 (three months) | $1465229 | 18666 | $368303 | 373268 |
| 2024 | 2592153 | 34575 | 224896 | 247447 |
| 2025 | 1582749 | 22775 | 6910 | 10500 |
| 2026 | 659019 | 10410 |  |  |
| &nbsp;&nbsp;&nbsp;Total | $6299150 | 86426 | $600109 | 631215 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;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 December 31, 2022, we had the following commodity sale commitments:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Crude Oil** | **Crude Oil** | **Natural Gas Liquids** | **Natural Gas Liquids** |
| | &nbsp;&nbsp;**Value** | **Volume<br>(in barrels)** | &nbsp;&nbsp;**Value** | **Volume<br>(in gallons)** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Fixed-Price Commodity Sale Commitments: |  |  |  |  |
| 2023 (three months) | $72426 | 1050 | $153699 | 119489 |
| 2024 |  |  | 26197 | 26608 |
| 2025 |  |  | 4035 | 4548 |
| 2026 |  |  | 2304 | 3056 |
| 2027 |  |  | 2065 | 2805 |
| &nbsp;&nbsp;&nbsp;Total | $72426 | 1050 | $188300 | 156506 |
| Index-Price Commodity Sale Commitments: |  |  |  |  |
| 2023 (three months) | $1332521 | 17188 | $390313 | 340449 |
| 2024 | 1310390 | 16672 | 31860 | 33009 |
| 2025 | 743470 | 10220 |  |  |
| 2026 | 27493 | 390 |  |  |
| &nbsp;&nbsp;&nbsp;Total | $3413874 | 44470 | $422173 | 373458 |

---

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 9) 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 9 and represent $35.0 million of our prepaid expenses and other current assets and $13.6 million of our accrued expenses and other payables at December 31, 2022.

*Other Commitments*

We have noncancelable agreements for product storage, railcar spurs and real estate. The following table summarizes future minimum payments under these agreements at December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| **Fiscal Year Ending March 31,** | |
| 2023 (three months) | $2070 |
| 2024 | 10004 |
| 2025 | 3707 |
| 2026 | 1342 |
| 2027 | 1328 |
| 2028 | 1269 |
| Thereafter | 4222 |
| &nbsp;&nbsp;&nbsp;Total | $23942 |

---

As part of the acquisition of Hillstone Environmental Partners, LLC, we assumed an obligation to pay a quarterly subsidy payment in the event that specified volumetric thresholds are not exceeded at a third-party facility (the "Subsidy Agreement"). For the three months and nine months ended December 31, 2022, we recorded $0.5 million and $1.3 million, respectively, and for the three months and nine months ended December 31, 2021, we recorded $0.6 million and $1.7 million, respectively, within operating expense in our unaudited condensed consolidated statements of operations. The Subsidy Agreement expired on December 31, 2022.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

**Note 8—Equity**

*Partnership Equity*

The Partnership's equity consists of a 0.1% GP interest and a 99.9% limited partner interest, which consists of common units. Our GP has the right, but not the obligation, to contribute a proportionate amount of capital to the Partnership to maintain its 0.1% GP interest. Our GP is not required to guarantee or pay any of our debts and obligations. At December 31, 2022, we owned 8.69% of our GP.

*General Partner Contributions*

In connection with the issuance of common units for the vesting of restricted units during the nine months ended December 31, 2022, we issued 626 notional units to our GP for less than $0.1 million in order to maintain its 0.1% interest in the Partnership.

*Suspension of Common Unit and Preferred Unit Distributions*

The board of directors of our GP temporarily suspended all distributions (common unit distributions which began with the quarter ended December 31, 2020 and preferred unit distributions which began with the quarter ended March 31, 2021) in order to deleverage our balance sheet and meet the financial performance ratios set within the Indenture of the 2026 Senior Secured Notes, as discussed further in Note 6.

*Class B Preferred Units* 

As of December 31, 2022, there were 12,585,642 of our Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units ("Class B Preferred Units") outstanding.

On July 1, 2022, the Class B Preferred Units distribution rate changed from a fixed rate of 9.00% to a floating rate of the three-month LIBOR interest rate (3.75% for the quarter ended December 31, 2022) plus a spread of 7.21%. For the quarter ended December 31, 2022, we did not declare or pay distributions to the holders of the Class B Preferred Units, thus the quarterly distribution for December 31, 2022 is $0.6855 and the cumulative distribution since suspension for each Class B Preferred Unit is $4.6541. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount due as of December 31, 2022 is $63.1 million.

*Class C Preferred Units*

As of December 31, 2022, there were 1,800,000 of our Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units ("Class C Preferred Units") outstanding.

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). For the quarter ended December 31, 2022, we did not declare or pay distributions to the holders of the Class C Preferred Units, thus the quarterly distribution for December 31, 2022 is $0.6016 and the cumulative distribution since suspension for each Class C Preferred Unit is $4.8125. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount due as of December 31, 2022 is $9.4 million.

*Class D Preferred Units*

As of December 31, 2022, there were 600,000 preferred units ("Class D Preferred Units") and warrants exercisable to purchase an aggregate of 25,500,000 common units outstanding.

The current distribution rate for the Class D Preferred Units increased on July 1, 2022 from 9.00% to 10.00% per year per unit (equal to $100.00 per every $1,000 in unit value per year), and includes an additional 1.50% rate increase due to us exceeding the adjusted total leverage ratio and due to a Class D distribution payment default, as defined within the amended Partnership Agreement. For the quarter ended December 31, 2022, we did not declare or pay distributions to the holders of the Class D Preferred Units, thus the average quarterly distribution at December 31, 2022 is $29.92 and the average cumulative distribution since suspension for each Class D Preferred unit is $222.42. In addition, the amount of cumulative but unpaid

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount due as of December 31, 2022 is $145.9 million.

*Equity-Based Incentive Compensation*

Our GP adopted a long-term incentive plan ("LTIP"), which allowed for the issuance of equity-based compensation. Our GP granted certain restricted units to employees and directors, which vest in tranches, subject to the continued service of the recipients through the vesting date (the "Service Awards"). The Service Awards may also vest upon a change of control, at the discretion of the board of directors of our GP. No distributions accrue to or are paid on the Service Awards during the vesting period. The LTIP expired on May 10, 2021.

The following table summarizes the Service Award activity during the nine months ended December 31, 2022:

---

| | | |
|:---|:---|:---|
| | **Number of Units** | **Weighted-Average<br>Grant Date<br>Fair Value<br>Per Unit** |
| Unvested Service Award units at March 31, 2022 | 2188800 | $2.15 |
| &nbsp;&nbsp;&nbsp;Units vested and issued | (657600) | $2.15 |
| &nbsp;&nbsp;&nbsp;Units forfeited | (218750) | $2.15 |
| Unvested Service Award units at December 31, 2022 | 1312450 | $2.15 |

---

In connection with the vesting of certain Service Awards during the nine months ended December 31, 2022, 31,828 of the newly-vested common units were surrendered by employees in satisfaction of less than $0.1 million of employee withholding taxes paid by the Partnership. Pursuant to the expiration of the LTIP discussed below, those surrendered units are not available for future grants.

As the LTIP expired on May 10, 2021, we had no common units available for grant for the nine months ended December 31, 2022.

As of December 31, 2022, there are 656,225 unvested Service Award units which are expected to vest during the fiscal year ending March 31, 2023 and 656,225 unvested Service Award units which are expected to vest during the fiscal year ending March 31, 2024. Also, any current unvested Service Awards that are forfeited or canceled will not be available for future grants.

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 December 31, 2022 and 2021, we recorded compensation expense related to Service Award units of $0.9 million and $0.7 million, respectively. During the nine months ended December 31, 2022 and 2021, we recorded compensation expense related to Service Award units of $1.9 million and $2.8 million, respectively.

For the unvested Service Award units at December 31, 2022, we had estimated future expense of $0.9 million which we expect to record during the fiscal year ending March 31, 2023 and $1.2 million which we expect to record during the fiscal year ending March 31, 2024.

**Note 9—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 sheets at the dates indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **March 31, 2022** | **March 31, 2022** |
| | **Derivative<br>Assets** | **Derivative<br>Liabilities** | **Derivative<br>Assets** | **Derivative<br>Liabilities** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Level 1 measurements | $59865 | $(9175) | $73353 | $(47585) |
| Level 2 measurements | 36415 | (14166) | 51968 | (27372) |
|  | 96280 | (23341) | 125321 | (74957) |
| Netting of counterparty contracts (1) | (9713) | 9713 | (47585) | 47585 |
| Net cash collateral (held) provided | (37712) | (98) | 839 |  |
| &nbsp;&nbsp;&nbsp;Commodity derivatives | $48855 | $(13726) | $78575 | $(27372) |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;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:

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Prepaid expenses and other current assets | $48855 | $78575 |
| Accrued expenses and other payables | (13688) | (27108) |
| Other noncurrent liabilities | (38) | (264) |
| &nbsp;&nbsp;&nbsp;Net commodity derivative asset | $35129 | $51203 |

---

------

**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<br>(Short)<br>Notional Units<br>(in barrels)** | **Fair Value<br>of<br>Net Assets<br>(Liabilities)** |
| | | **(in thousands)** | **(in thousands)** |
| At December 31, 2022: |  |  |  |
| &nbsp;&nbsp;&nbsp;Crude oil fixed-price (1) | January 2023–December 2023 | 12 | $53476 |
| &nbsp;&nbsp;&nbsp;Propane fixed-price (1) | January 2023–December 2024 | (71) | (6820) |
| &nbsp;&nbsp;&nbsp;Refined products fixed-price (1) | January 2023–December 2023 | (436) | 510 |
| &nbsp;&nbsp;&nbsp;Butane fixed-price (1) | January 2023–January 2024 | (230) | 3855 |
| &nbsp;&nbsp;&nbsp;Other | January 2023–August 2024 |  | 21918 |
|  |  |  | 72939 |
| &nbsp;&nbsp;&nbsp;Net cash collateral held |  |  | (37810) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net commodity derivative asset |  |  | $35129 |
| At March 31, 2022: |  |  |  |
| &nbsp;&nbsp;&nbsp;Crude oil fixed-price (1) | April 2022–December 2023 | (1330) | $35662 |
| &nbsp;&nbsp;&nbsp;Propane fixed-price (1) | April 2022–December 2023 | 184 | 3785 |
| &nbsp;&nbsp;&nbsp;Refined products fixed-price (1) | April 2022–December 2022 | 685 | (6063) |
| &nbsp;&nbsp;&nbsp;Butane fixed-price (1) | April 2022–December 2023 | (268) | (1711) |
| &nbsp;&nbsp;&nbsp;Other | April 2022–March 2023 |  | 18691 |
|  |  |  | 50364 |
| &nbsp;&nbsp;&nbsp;Net cash collateral provided |  |  | 839 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net commodity derivative asset |  |  | $51203 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;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.

During the three months ended December 31, 2022 and 2021, we recorded net losses of $0.8 million and $2.2 million, respectively, from our commodity derivatives to revenues and cost of sales in our unaudited condensed consolidated statements of operations. During the nine months ended December 31, 2022 and 2021, we recorded net losses of $13.9 million and $42.9 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 December 31, 2022, 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.

*Interest Rate Risk*

The ABL Facility is variable-rate debt with interest rates that are generally indexed to the prime rate or SOFR, an adjusted forward-looking term rate based on the secured overnight financing rate. At December 31, 2022, we had $156.0 million of outstanding borrowings under the ABL Facility at a weighted average interest rate of 7.37%.

On July 1, 2022, the Class B Preferred Units distribution rate changed from a fixed rate of 9.00% to a floating rate of the three-month LIBOR interest rate (3.75% for the quarter ended December 31, 2022) plus a spread of 7.21%.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

For our Class C Preferred Units, distributions on and after April 15, 2024 will accumulate at a percentage of the $25.00 liquidation preference equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in the Partnership Agreement) plus a spread of 7.384%. On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time to time, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in the Partnership Agreement) plus a spread of 7.00% ("Class D Variable Rate", as defined in the Partnership Agreement). Each Class D Variable Rate election shall be effective for at least four quarters following such election.

*Fair Value of Fixed-Rate Notes*

The following table provides fair value estimates of our fixed-rate notes at December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| Senior Secured Notes: |  |
| &nbsp;&nbsp;&nbsp;2026 Senior Secured Notes | $1823830 |
| Senior Unsecured Notes: |  |
| &nbsp;&nbsp;&nbsp;2023 Notes | $292577 |
| &nbsp;&nbsp;&nbsp;2025 Notes | $305916 |
| &nbsp;&nbsp;&nbsp;2026 Notes | $253692 |

---

For the 2026 Senior Secured Notes and Senior Unsecured Notes, the fair value estimates were developed based on publicly traded quotes and would be classified as Level 2 in the fair value hierarchy.

**Note 10—Segments**

Our operations are organized into three reportable segments: (i) Water Solutions, (ii) Crude Oil Logistics and (iii) Liquids Logistics, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for these operations. Our Liquids Logistics reportable segment includes operating segments that have been aggregated based on the nature of the products and services provided. Operating income of these segments is reviewed by the chief operating decision maker to evaluate performance and make business decisions. Intersegment transactions are recorded based on prices negotiated between the segments and are eliminated upon consolidation.

See Note 1 for a discussion of the products and services of our reportable segments. The remainder of our business operations is presented as "Corporate and Other" and consists of certain corporate expenses that are not allocated to the reportable segments. The following table summarizes revenues related to our segments for the periods indicated:

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Revenues: |  |  |  |  |
| Water Solutions: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Topic 606 revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Disposal service fees | $136211 | $102917 | $382483 | $303106 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sale of recovered crude oil | 30284 | 17865 | 96205 | 48848 |
| &nbsp;&nbsp;&nbsp;&nbsp;Sale of water | 6127 | 6842 | 15300 | 31694 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other service revenues | 7620 | 3029 | 17243 | 13441 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Water Solutions revenues | 180242 | 130653 | 511231 | 397089 |
| Crude Oil Logistics: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Topic 606 revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Crude oil sales | 507793 | 588729 | 1906963 | 1660225 |
| &nbsp;&nbsp;&nbsp;&nbsp;Crude oil transportation and other | 23676 | 18826 | 67083 | 56088 |
| &nbsp;&nbsp;&nbsp;Non-Topic 606 revenues | 1876 | 2153 | 5562 | 6518 |
| &nbsp;&nbsp;&nbsp;Elimination of intersegment sales | (1732) | (2505) | (7841) | (7174) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Crude Oil Logistics revenues | 531613 | 607203 | 1971767 | 1715657 |
| Liquids Logistics: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Topic 606 revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Refined products sales | 609686 | 503348 | 1994123 | 1340725 |
| &nbsp;&nbsp;&nbsp;&nbsp;Propane sales | 331031 | 396457 | 751609 | 776157 |
| &nbsp;&nbsp;&nbsp;&nbsp;Butane sales | 241462 | 296481 | 593654 | 582358 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other product sales | 120454 | 155556 | 436549 | 409452 |
| &nbsp;&nbsp;&nbsp;&nbsp;Service revenues | 384 | 361 | 7027 | 8849 |
| &nbsp;&nbsp;&nbsp;Non-Topic 606 revenues | 124368 | 81817 | 380110 | 185705 |
| &nbsp;&nbsp;&nbsp;Elimination of intersegment sales |  |  |  | (1324) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Liquids Logistics revenues | 1427385 | 1434020 | 4163072 | 3301922 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | $2139240 | $2171876 | $6646070 | $5414668 |

---

The following tables summarize depreciation and amortization expense (including amortization expense recorded within interest expense, cost of sales and operating expenses in Note 5 and Note 6) and operating income (loss) by segment for the periods indicated.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Depreciation and Amortization: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Water Solutions | $52653 | $50877 | $153951 | $164651 |
| &nbsp;&nbsp;&nbsp;Crude Oil Logistics | 11664 | 12166 | 35193 | 37029 |
| &nbsp;&nbsp;&nbsp;Liquids Logistics | 3485 | 3824 | 10399 | 15627 |
| &nbsp;&nbsp;&nbsp;Corporate and Other | 5816 | 6066 | 17485 | 18050 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $73618 | $72933 | $217028 | $235357 |
| Operating Income (Loss): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Water Solutions | $59721 | $19851 | $160454 | $60206 |
| &nbsp;&nbsp;&nbsp;Crude Oil Logistics | 35096 | 21291 | 87012 | 37941 |
| &nbsp;&nbsp;&nbsp;Liquids Logistics | 20513 | 23158 | 48806 | (18790) |
| &nbsp;&nbsp;&nbsp;Corporate and Other | (12660) | (15190) | (37569) | (34763) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $102670 | $49110 | $258703 | $44594 |

---

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

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.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Water Solutions | $19292 | $21254 | $100989 | $81807 |
| Crude Oil Logistics | 1516 | 515 | 7793 | 1986 |
| Liquids Logistics | 880 | 4248 | 4685 | 10308 |
| Corporate and Other | 984 | 341 | 1734 | 1504 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $22672 | $26358 | $115201 | $95605 |

---

The following tables summarize long-lived assets, net (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:

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Long-lived assets, net: |  |  |
| &nbsp;&nbsp;&nbsp;Water Solutions | $2884147 | $2970911 |
| &nbsp;&nbsp;&nbsp;Crude Oil Logistics | 1017379 | 1050546 |
| &nbsp;&nbsp;&nbsp;Liquids Logistics (1) | 367460 | 385783 |
| &nbsp;&nbsp;&nbsp;Corporate and Other | 40168 | 49067 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $4309154 | $4456307 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Includes $14.2 million and $17.1 million of non-US long-lived assets at December 31, 2022 and March 31, 2022, respectively.

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Total assets: |  |  |
| &nbsp;&nbsp;&nbsp;Water Solutions | $3062983 | $3130659 |
| &nbsp;&nbsp;&nbsp;Crude Oil Logistics | 1865022 | 1952048 |
| &nbsp;&nbsp;&nbsp;Liquids Logistics (1) | 929646 | 888927 |
| &nbsp;&nbsp;&nbsp;Corporate and Other | 56440 | 98711 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $5914091 | $6070345 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Includes $58.0 million and $40.2 million of non-US total assets at December 31, 2022 and March 31, 2022, respectively.

**Note 11—Transactions with Affiliates**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Purchases from equity method investees | $372 | $243 | $1251 | $784 |
| Purchases from entities affiliated with management | $— | $957 | $— | $1045 |

---

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

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| NGL Energy Holdings LLC | $9630 | $8483 |
| Equity method investees | 627 | 107 |
| Entities affiliated with management |  | 1 |
| &nbsp;&nbsp;&nbsp;Total | $10257 | $8591 |

---

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

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

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Equity method investees | $64 | $27 |
| Entities affiliated with management | 1 | 46 |
| &nbsp;&nbsp;&nbsp;Total | $65 | $73 |

---

***Other Related Party Transactions***

*Guarantee of Outstanding Loan for KAIR2014 LLC ("KAIR2014")*

In connection with the purchase of our 50% interest in an aircraft company, KAIR2014, we executed a joint and several guarantee for the benefit of the lender for KAIR2014's outstanding loan. The other owner of KAIR2014, our Chief Executive Officer, H. Michael Krimbill, is a party to a similar guarantee. This guarantee obligates us for the payment and performance of KAIR2014 with respect to the repayment of the loan. As of December 31, 2022, the outstanding balance of the loan is approximately $2.3 million. Payments are made monthly, reducing the outstanding balance, and the loan matures in September 2023. As the guarantee is joint and several, we could be liable for the entire outstanding balance of the loan. The loan is collateralized by the airplane owned by KAIR2014 and in the event of a default, the lender could seek payment in full from us. As of December 31, 2022, no accrual has been recorded related to this guarantee.

**Note 12—Revenue from Contracts with Customers**

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. Our revenue contracts in the scope of ASC 606 primarily have a single performance obligation and we do not receive material amounts of non-cash consideration. Our costs to obtain or fulfill our revenue contracts were not material as of December 31, 2022.

The majority of our revenue agreements are in the scope of 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 in the scope of ASC 845 and ASC 842, respectively. See Note 10 for a detail of disaggregated revenue. Revenue from contracts accounted for as derivatives under ASC 815 within our Liquids Logistics segment includes $3.9 million of net losses related to changes in the mark-to-market value of these contracts recorded during the nine months ended December 31, 2022.

*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 utilized 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 December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| **Fiscal Year Ending March 31,** | |
| 2023 (three months) | $37188 |
| 2024 | 90551 |
| 2025 | 81206 |
| 2026 | 23041 |
| 2027 | 8130 |
| 2028 | 1269 |
| Thereafter | 804 |
| &nbsp;&nbsp;&nbsp;Total | $242189 |

---

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

*Contract Assets and Liabilities*

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

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **March 31, 2022** |
| | **(in thousands)** | **(in thousands)** |
| Accounts receivable from contracts with customers | $530676 | $605384 |

---

---

| | |
|:---|:---|
| Contract liabilities balance at March 31, 2022 | $7667 |
| &nbsp;&nbsp;&nbsp;Payment received and deferred | 47424 |
| &nbsp;&nbsp;&nbsp;Payment recognized in revenue | (34295) |
| Contract liabilities balance at December 31, 2022 | $20796 |

---

**Note 13—Leases**

***Lessee Accounting***

Our operating lease activity primarily consists of product storage, office space, real estate, railcars, and equipment.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Operating lease cost (1) | $12436 | $14180 | $39596 | $44474 |
| Variable lease cost (1) | 7397 | 5725 | 21987 | 15978 |
| Short-term lease cost (1) | 94 | 60 | 242 | 219 |
| Finance lease cost |  |  |  |  |
| &nbsp;&nbsp;Amortization of right-of-use asset (2) | 1 |  | 2 |  |
| &nbsp;&nbsp;Interest on lease obligation (3) | 4 |  | 6 |  |
| Total lease cost | $19932 | $19965 | $61833 | $60671 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Included in operating expenses in our unaudited condensed consolidated statements of operations.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Included in depreciation and amortization expense in our unaudited condensed consolidated statements of operations.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Included in interest expense in our unaudited condensed consolidated statements of operations.

The following table summarizes maturities of our lease obligations at December 31, 2022 (in thousands):

---

| | | |
|:---|:---|:---|
|<br>**Fiscal Year Ending March 31,** | **Operating**<br>**Leases** | **Finance**<br>**Lease (1)** |
| 2023 (three months) | $10987 | $7 |
| 2024 | 35071 | 28 |
| 2025 | 22041 | 28 |
| 2026 | 9895 | 28 |
| 2027 | 4593 | 28 |
| 2028 | 4016 | 10 |
| Thereafter | 26763 |  |
| &nbsp;&nbsp;&nbsp;Total lease payments | 113366 | 129 |
| Less imputed interest | (26965) |  |
| &nbsp;&nbsp;&nbsp;Total lease obligations | $86401 | $129 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;At December 31, 2022, the short-term finance lease obligation of less than $0.1 million is included in accrued expenses and other payables and the long-term finance lease obligation of $0.1 million is included in other noncurrent liabilities.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

The following table summarizes supplemental cash flow information related to our leases for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** |
| **Supplemental Cash Flow Information** |  |  |
| Cash paid for amounts included in the measurement of lease obligations |  |  |
| &nbsp;&nbsp;Operating cash outflows from operating leases | $39207 | $43919 |
| &nbsp;&nbsp;Operating cash outflows from finance lease | $6 | $— |
| &nbsp;&nbsp;Financing cash outflows from finance lease | $6 | $— |
| Right-of-use assets obtained in exchange for lease obligations |  |  |
| &nbsp;&nbsp;Operating leases | $17452 | $11738 |
| &nbsp;&nbsp;Finance lease | $102 | $— |

---

***Lessor Accounting and Subleases***

Our lessor arrangements include storage and railcar contracts. 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 December 31, 2022 and 2021, fixed rental revenue was $4.5 million, which includes $2.3 million of sublease revenue, and $3.7 million, which includes $0.5 million of sublease revenue, respectively. During the nine months ended December 31, 2022 and 2021, fixed rental revenue was $11.2 million, which includes $3.4 million of sublease revenue and $10.9 million, which includes $1.1 million of sublease revenue, respectively.

The following table summarizes future minimum lease payments to be received under various noncancelable operating lease agreements at December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| **Fiscal Year Ending March 31,** | |
| 2023 (three months) | $3143 |
| 2024 | 15534 |
| 2025 | 4698 |
| 2026 | 4017 |
| 2027 | 4017 |
| 2028 | 4016 |
| &nbsp;&nbsp;Total | $35425 |

---

**Note 14—Allowance for Current Expected Credit Loss (CECL)**

ASU 2016-13 requires that an allowance for expected credit losses be recognized for certain financial assets that reflects the current expected credit loss over the financial asset's contractual life. The valuation allowance considers the risk of loss, even if remote, and considers past events, current conditions and reasonable and supportable forecasts.

We are exposed to credit losses primarily through sale of products and services and notes receivable from third-parties. A counterparty's ability to pay is assessed through a credit process that considers the payment terms, the counterparty's established credit rating or our assessment of the counterparty's credit worthiness and other risks. We can require prepayment or collateral to mitigate credit risks.

We group our financial assets into pools of counterparties with similar risk characteristics for the purpose of determining the allowance for expected credit losses. Each reporting period, we assess whether a significant change in the risk of expected credit loss has occurred. Among the quantitative and qualitative factors considered in calculating our allowance for expected credit losses are historical financial data, including write-offs and allowances, current conditions, industry risk and current credit ratings. Financial assets will be written off in whole, or in part, when practical recovery efforts have been exhausted and no reasonable expectation of recovery exists. Subsequent recoveries of amounts previously written off are recorded as an increase to the allowance for expected credit losses. We manage receivable pools using past due balances as a key credit quality indicator.

------

**NGL ENERGY PARTNERS LP AND SUBSIDIARIES**

**Notes to Unaudited Condensed Consolidated Financial Statements (Continued)**

The following table summarizes changes in our allowance for expected credit losses:

---

| | | |
|:---|:---|:---|
| | **Accounts Receivable - Trade** | **Notes Receivable and Other** |
| | **(in thousands)** | **(in thousands)** |
| Balance at March 31, 2022 | $2626 | $458 |
| &nbsp;&nbsp;&nbsp;Change in provision for expected credit losses | (27) | (458) |
| &nbsp;&nbsp;&nbsp;Write-offs charged against the provision | (144) |  |
| Balance at December 31, 2022 | $2455 | $— |

---

**Note 15—Other Matters**

*Dispute Settlement*

During the three months ended December 31, 2022, we recorded other income of $29.5 million to settle a dispute associated with commercial activities not occurring in the current reporting periods. We received payment on December 29, 2022. This amount is recorded within other income, net in our unaudited condensed consolidated statements of operations for the three months and nine months ended December 31, 2022.

*Third-party Loan Receivable*

As previously disclosed, we had an outstanding loan receivable, including accrued interest, associated with our interest in a facility that was utilized by a third-party. Due to the bankruptcy of the third-party, we wrote down the remaining outstanding balance to what we expected to collect as an unsecured claim. At March 31, 2022, the outstanding balance of our unsecured claim was $0.6 million, net of an allowance for an expected credit loss, which was recorded within prepaid expenses and other current assets in our consolidated balance sheet. During the three months ended June 30, 2022, we received $1.0 million to settle our unsecured claim and we reversed the allowance for the expected credit loss.

**Note 16—Subsequent Events**

Subsequent to December 31, 2022, we repurchased $98.5 million of the 2023 Notes. See Note 6 for a further discussion related to the repurchasing of the 2023 Notes.

**Item 2.&nbsp;&nbsp;&nbsp;&nbsp;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 nine months ended December 31, 2022. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q ("Quarterly Report"), as well as Part II, Item 7–"Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 ("Annual Report") filed with the Securities and Exchange Commission ("SEC") on June 6, 2022.

**Overview**

We are a Delaware limited partnership. NGL Energy Holdings LLC serves as our general partner ("GP"). At December 31, 2022, our operations included three segments: Water Solutions, Crude Oil Logistics and Liquids Logistics. See Note 1 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion of these businesses.

*Global Pandemic and Ukraine War*

While the COVID-19 pandemic did not have as significant of an impact on our business and industry in 2022 as it did in prior periods, primarily due to reopening economies and the reduction in oil and natural gas supply, intermittent lockdowns, travel bans and similar restrictions in certain markets from time to time continue to impact our business and cause volatility in commodity prices. Additional factors impacting volatility in commodity prices and production levels include inflation, supply chain issues and the Russia-Ukraine conflict.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

*Seismic Activity*

The subsurface injection of produced water for disposal has been associated with recent induced seismic events in Texas and New Mexico. While these events have been of relatively low magnitude, industry and relevant state regulators are, nevertheless, taking proactive measures to attempt to prevent similar induced seismic events. More specifically, we are engaged in various collaborative industry efforts with other disposal operators and relevant state regulatory agencies, working to collect and review data, enhance understanding of regional fault systems, and ultimately develop and implement appropriate longer-term mitigation strategies. As part of this effort, we have implemented reductions in injected volumes at certain facilities, and where appropriate have temporarily shut-in facilities. To date, due to the capacity of our integrated system in the affected areas, the diverse locations of our disposal facilities, and the connectivity of our system, our ability to dispose of produced water has not been materially impacted by these actions.

**Consolidated Results of Operations**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Revenues | $2139240 | $2171876 | $6646070 | $5414668 |
| Cost of sales | 1860368 | 1950321 | 5879499 | 4800707 |
| Operating expenses | 81353 | 72807 | 237371 | 207610 |
| General and administrative expense | 17216 | 18925 | 50601 | 46149 |
| Depreciation and amortization | 69327 | 68480 | 204105 | 222145 |
| Loss on disposal or impairment of assets, net | 8306 | 12233 | 15791 | 93463 |
| Operating income | 102670 | 49110 | 258703 | 44594 |
| Equity in earnings of unconsolidated entities | 1213 | 119 | 3094 | 765 |
| Interest expense | (75920) | (68379) | (211528) | (204004) |
| Gain on early extinguishment of liabilities, net | 2667 | 9 | 6808 | 1131 |
| Other income, net | 28100 | 24 | 28731 | 2003 |
| Income (loss) before income taxes | 58730 | (19117) | 85808 | (155511) |
| Income tax benefit (expense) | 252 | 135 | (113) | 820 |
| Net income (loss) | 58982 | (18982) | 85695 | (154691) |
| Less: Net (income) loss attributable to noncontrolling interests | (448) | 63 | (790) | (705) |
| Net income (loss) attributable to NGL Energy Partners LP | $58534 | $(18919) | $84905 | $(155396) |

---

***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 acquisitions, dispositions and other transactions. Our results of operations for the three months and nine months ended December 31, 2022 are not necessarily indicative of the results of operations to be expected for future periods or for the full fiscal year ending March 31, 2023.

**Recent Developments**

*Repurchases of Senior Unsecured Notes*

During the three months ended December 31, 2022, we repurchased $97.5 million of the 7.5% senior unsecured notes due 2023 ("2023 Notes").

*Acquisitions and Dispositions*

The following transaction impacted the comparability of our results of operations between our current and prior fiscal years.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• On June 18, 2021, we sold our approximately 71.5% interest in Sawtooth Caverns, LLC ("Sawtooth") to a group of buyers.

*Subsequent Events*

See Note 16 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a discussion of transactions that occurred subsequent to December 31, 2022.

**Segment Operating Results for the Three Months Ended December 31, 2022 and 2021**

***Water Solutions***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per barrel and per day amounts)** | **(in thousands, except per barrel and per day amounts)** | **(in thousands, except per barrel and per day amounts)** |
| Revenues: |  |  |  |
| &nbsp;&nbsp;&nbsp;Water disposal service fees | $133673 | $100106 | $33567 |
| &nbsp;&nbsp;&nbsp;Sale of recovered crude oil | 30284 | 17865 | 12419 |
| &nbsp;&nbsp;&nbsp;Recycled water | 5470 | 869 | 4601 |
| &nbsp;&nbsp;&nbsp;Other revenues | 10815 | 11813 | (998) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 180242 | 130653 | 49589 |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 2534 | 4944 | (2410) |
| &nbsp;&nbsp;&nbsp;Derivative loss |  | 86 | (86) |
| &nbsp;&nbsp;&nbsp;Operating expenses | 54665 | 43177 | 11488 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 2772 | 1783 | 989 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 52591 | 50815 | 1776 |
| &nbsp;&nbsp;&nbsp;Loss on disposal or impairment of assets, net | 7959 | 9997 | (2038) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 120521 | 110802 | 9719 |
| &nbsp;&nbsp;&nbsp;Segment operating income | $59721 | $19851 | $39870 |
| Produced water processed (barrels per day) |  |  |  |
| &nbsp;&nbsp;&nbsp;Delaware Basin | 2128673 | 1551621 | 577052 |
| &nbsp;&nbsp;&nbsp;Eagle Ford Basin | 131551 | 110243 | 21308 |
| &nbsp;&nbsp;&nbsp;DJ Basin | 151265 | 159332 | (8067) |
| &nbsp;&nbsp;&nbsp;Other Basins | 14335 | 18351 | (4016) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 2425824 | 1839547 | 586277 |
| Recycled water (barrels per day) | 167774 | 52854 | 114920 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total (barrels per day) | 2593598 | 1892401 | 701197 |
| Skim oil sold (barrels per day) | 4099 | 2678 | 1421 |
| Service fees for produced water processed ($/barrel) (1) | $0.60 | $0.59 | $0.01 |
| Recovered crude oil for produced water processed ($/barrel) (1) | $0.14 | $0.11 | $0.03 |
| Operating expenses for produced water processed ($/barrel) (1) | $0.25 | $0.26 | $(0.01) |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Total produced water barrels processed during the three months ended December 31, 2022 and 2021 were 223,175,902 and 169,238,413, respectively.

*Water Disposal Service Fee Revenues.* The increase was due to an increase in produced water volumes processed as a result of increased crude oil production driven by higher crude oil prices and completion activity, primarily in the Delaware Basin as well as higher fees charged for spot volumes.

*Recovered Crude Oil Revenues.* The increase was due primarily to higher volumes of skim oil barrels sold due to an increase in produced water volumes processed as well as higher realized crude oil prices received from the sale of skim oil barrels. Additionally, an increase in the number of wells completed in our area of operations during the period with increased flowback activity resulted in higher skim oil volumes per barrel of produced water processed.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

*Recycled Water Revenues.* Revenue from recycled water includes the sale of produced water and recycled water for use in our customers' completion activities. The increase was due primarily to increasing demand for water to be used in completions, driven by an increase in drilling and completion activity primarily in the Delaware Basin, and our customers' transition from brackish non-potable water to recycled water and higher pricing for recycled water.

*Other Revenues.* Other revenues primarily include brackish non-potable water revenues, water pipeline revenues, land surface use revenues, solids disposal revenues and reimbursements from customer projects. The decrease was due primarily to lower sales of brackish non-potable water related to the termination of a joint marketing agreement as well as our customers transitioning from brackish non-potable water to recycled water, partially offset by reimbursements for construction projects in the current period.

*Cost of Sales-Excluding Impact of Derivatives*. The decrease was due primarily to lower purchases of brackish non-potable water from third-parties to meet customer needs due to the termination of a joint marketing agreement.

*Derivative Loss*. We enter into derivatives in our Water Solutions segment to protect against the risk of a decline in the market price of the crude oil we expect to recover when processing produced water and selling recovered skim oil. During the three months ended December 31, 2022, we had no derivative activity. During the three months ended December 31, 2021, we had $1.8 million of net unrealized losses on derivatives and $1.7 million of net realized gains on derivatives.

*Operating and General and Administrative Expenses*. The increase was due primarily to higher utility, royalty and chemical expenses as a result of the increase in produced water volumes processed. Utility, royalty and chemical expenses, which are three of our largest variable expenses, were not impacted by the rise in inflation due to negotiated long-term utility contracts with fixed rates, royalty contracts with no escalation clauses and a fixed chemical expense per barrel with our chemical provider. The increase was also due to higher severance taxes due to the increase in revenue from recovered crude oil.

*Depreciation and Amortization Expense*. The increase was due primarily to depreciation of newly developed facilities and infrastructure. This increase was partially offset by certain long-term assets being fully amortized or impaired during the fiscal year ended March 31, 2022 and nine months ended December 31, 2022.

*Loss on Disposal or Impairment of Assets, Net.* During the three months ended December 31, 2022, we recorded a net loss of $6.1 million primarily related to the sale of certain assets. We also recorded a net loss of $4.0 million to write down the value of two inactive saltwater disposal facilities and damaged equipment at another saltwater disposal facility as well as the abandonment of certain capital projects and the retirement of certain assets. In addition, we recorded a gain of $2.2 million from an insurance recovery for saltwater disposal facility damaged in a prior period. During the three months ended December 31, 2021, we recorded a net loss of $14.3 million primarily related to the write-down of an inactive saltwater disposal facility and damaged equipment and wells at other facilities, abandonment of certain capital projects and the sale of certain other miscellaneous assets and a gain of $4.3 million on the sale of certain land and a landfill permit.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Crude Oil Logistics***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per barrel amounts)** | **(in thousands, except per barrel amounts)** | **(in thousands, except per barrel amounts)** |
| Revenues: |  |  |  |
| &nbsp;&nbsp;&nbsp;Crude oil sales | $507793 | $588729 | $(80936) |
| &nbsp;&nbsp;&nbsp;Crude oil transportation and other | 25552 | 20979 | 4573 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues (1) | 533345 | 609708 | (76363) |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 478889 | 556581 | (77692) |
| &nbsp;&nbsp;&nbsp;Derivative (gain) loss | (5266) | 2455 | (7721) |
| &nbsp;&nbsp;&nbsp;Operating expenses | 11441 | 13079 | (1638) |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 1244 | 1874 | (630) |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 11664 | 12166 | (502) |
| &nbsp;&nbsp;&nbsp;Loss on disposal or impairment of assets, net | 277 | 2262 | (1985) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 498249 | 588417 | (90168) |
| &nbsp;&nbsp;&nbsp;Segment operating income | $35096 | $21291 | $13805 |
| Crude oil sold (barrels) | 5955 | 7515 | (1560) |
| Crude oil transported on owned pipelines (barrels) | 7062 | 7590 | (528) |
| Crude oil storage capacity - owned and leased (barrels) (2) | 5232 | 5232 |  |
| Crude oil storage capacity leased to third-parties (barrels) (2) | 2000 | 1501 | 499 |
| Crude oil inventory (barrels) (2) | 892 | 1295 | (403) |
| Crude oil sold ($/barrel) | $85.272 | $78.341 | $6.931 |
| Cost per crude oil sold ($/barrel) (3) | $80.418 | $74.063 | $6.355 |
| Crude oil product margin ($/barrel) (3) | $4.854 | $4.278 | $0.576 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Revenues include $1.7 million and $2.5 million of intersegment sales during the three months ended December 31, 2022 and 2021, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Information is presented as of December 31, 2022 and December 31, 2021, respectively. The decrease in crude oil inventory was due primarily to capitalizing additional crude oil barrels as linefill as a result of increased requirements.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Cost and product margin per barrel excludes the impact of derivatives.

*Crude Oil Sales Revenues.* The decrease was due primarily to a reduction in sales volumes primarily due to lower production in the DJ Basin and increased buy/sell transactions during the quarter ended December 31, 2022. Buy/sell transactions are transactions in which we purchase product from a counterparty and sell the same volumes of product to the same counterparty at a different location or time. The revenues, cost of sales and volumes are netted for these transactions. The decrease was partially offset by an increase in crude oil prices during the three months ended December 31, 2022, compared to the three months ended December 31, 2021

*Crude Oil Transportation and Other Revenues.* The increase was primarily due to an increase in charter days and day rates within our marine transportation business due to increased demand.

During the three months ended December 31, 2022, physical volumes on the Grand Mesa Pipeline averaged approximately 77,000 barrels per day, compared to approximately 83,000 barrels per day for the three months ended December 31, 2021 (volume amounts are from both internal and external parties). Both contracted and non-contracted volumes decreased as overall production in the DJ Basin declined in part due to producer permitting issues.

*Cost of Sales-Excluding Impact of Derivatives.* The decrease was due primarily to a reduction in sales volumes, as discussed above, which was partially offset by an increase in crude oil prices.

*Derivative (Gain) Loss.* Our cost of sales during the three months ended December 31, 2022 included $3.5 million of net realized gains on derivatives, driven by decreasing crude oil prices, and $1.8 million of net unrealized gains on derivatives. The amount for the three months ended December 31, 2022 includes net realized gains of $10.1 million and net unrealized

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

losses of $0.7 million associated with derivative instruments related to our hedge of the CMA Differential Roll, defined and discussed below under "Non-GAAP Financial Measures." Our cost of sales during the three months ended December 31, 2021 included $34.7 million of net realized losses on derivatives, driven by the increase in crude oil prices, and $32.2 million of net unrealized gains on derivatives. The amount for the three months ended December 31, 2021 includes net realized losses of $25.5 million and net unrealized gains of $26.4 million associated with derivative instruments related to our hedge of the CMA Differential Roll.

*Crude Oil Product Margin*. The increase was due to higher crude oil prices due to higher contracted rates with certain producers as well as increased differentials on certain other sales contracts. Crude oil product margin calculations do not include gains and losses from derivatives that may offset the movement in the physical margin.

*Operating and General and Administrative Expenses*. The decrease was primarily related to the sale of the trucking business during the three months ended March 31, 2022.

*Depreciation and Amortization Expense.* The decrease was due primarily to the sale of our trucking assets during the three months ended March 31, 2022.

*Loss on Disposal or Impairment of Assets, Net*. During the three months ended December 31, 2022, we recorded a net loss of $0.3 million primarily due to disposals and retirements of certain assets. During the three months ended December 31, 2021, we recorded a net loss of $2.2 million for an impairment due to damage caused by Hurricane Ida to one of our Gulf Coast terminals.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Liquids Logistics***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** |
| Refined products sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues-excluding impact of derivatives | $609686 | $503383 | $106303 |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 593704 | 493388 | 100316 |
| &nbsp;&nbsp;&nbsp;Derivative loss | 1023 | 189 | 834 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 14959 | 9806 | 5153 |
| Propane sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues | 332328 | 397365 | (65037) |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 313151 | 403814 | (90663) |
| &nbsp;&nbsp;&nbsp;Derivative loss (gain) | 7486 | (1392) | 8878 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin (loss) | 11691 | (5057) | 16748 |
| Butane sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues | 241805 | 296844 | (55039) |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 237478 | 272450 | (34972) |
| &nbsp;&nbsp;&nbsp;Derivative gain | (3628) | (5959) | 2331 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 7955 | 30353 | (22398) |
| Other product sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues-excluding impact of derivatives | 231650 | 228541 | 3109 |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 225480 | 213654 | 11826 |
| &nbsp;&nbsp;&nbsp;Derivative loss | 1189 | 6816 | (5627) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 4981 | 8071 | (3090) |
| Service revenues: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues | 2310 | 2280 | 30 |
| &nbsp;&nbsp;&nbsp;Cost of sales | 454 | 193 | 261 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 1856 | 2087 | (231) |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Operating expenses | 15247 | 16551 | (1304) |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 2266 | 1821 | 445 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 3417 | 3756 | (339) |
| &nbsp;&nbsp;&nbsp;Gain on disposal or impairment of assets, net | (1) | (26) | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 20929 | 22102 | (1173) |
| &nbsp;&nbsp;&nbsp;Segment operating income | $20513 | $23158 | $(2645) |

---

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** |
| Natural gas liquids and refined products storage capacity - owned and leased (gallons) (1) | 159999 | 168189 | (8190) |
| Refined products sold (gallons) | 192340 | 203898 | (11558) |
| Refined products sold ($/gallon) | $3.170 | $2.469 | $0.701 |
| Cost per refined products sold ($/gallon) (2) | $3.087 | $2.420 | $0.667 |
| Refined products product margin ($/gallon) (2) | $0.083 | $0.049 | $0.034 |
| Refined products inventory (gallons) (1) | 1738 | 1314 | 424 |
| Propane sold (gallons) | 305067 | 294282 | 10785 |
| Propane sold ($/gallon) | $1.089 | $1.350 | $(0.261) |
| Cost per propane sold ($/gallon) (2) | $1.026 | $1.372 | $(0.346) |
| Propane product margin (loss) ($/gallon) (2) | $0.063 | $(0.022) | $0.085 |
| Propane inventory (gallons) (1) | 97283 | 125235 | (27952) |
| Butane sold (gallons) | 177061 | 180191 | (3130) |
| Butane sold ($/gallon) | $1.366 | $1.647 | $(0.281) |
| Cost per butane sold ($/gallon) (2) | $1.341 | $1.512 | $(0.171) |
| Butane product margin ($/gallon) (2) | $0.025 | $0.135 | $(0.110) |
| Butane inventory (gallons) (1) | 31029 | 45129 | (14100) |
| Other products sold (gallons) | 96349 | 99915 | (3566) |
| Other products sold ($/gallon) | $2.404 | $2.287 | $0.117 |
| Cost per other products sold ($/gallon) (2) | $2.340 | $2.138 | $0.202 |
| Other products product margin ($/gallon) (2) | $0.064 | $0.149 | $(0.085) |
| Other products inventory (gallons) (1) | 13360 | 23491 | (10131) |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Information is presented as of December 31, 2022 and December 31, 2021, respectively.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Cost and product margin per gallon excludes the impact of derivatives.

*Refined Products Revenues and Cost of Sales-Excluding Impact of Derivatives.* The increases in revenues and cost of sales, excluding the impact of derivatives, were due to an increase in refined products prices. This was partially offset by a decrease in volumes primarily related to tighter supply in certain markets.

*Refined Products Derivative Loss.* Our refined products margin during the three months ended December 31, 2022 included a realized loss of $1.0 million and the three months ended December 31, 2021 included a realized loss of $0.2 million.

Refined Products product margins increased during the three months ended December 31, 2022 due to continued higher demand in several markets that were experiencing tighter supply as well as being positioned from a supply and inventory perspective during the continued period of extreme volatility in commodity prices.

*Propane Sales and Cost of Sales-Excluding Impact of Derivatives.* The decreases in revenues and cost of sales were due to significantly lower propane market prices during the three months ended December 31, 2022 compared to the three months ended December 31, 2021. Propane prices have declined along with the decline in global energy prices as a result of the increase in interest rates to curb inflation and the overall concerns in the economy about a potential recession, as well as due to an increase in days of domestic supply available, combined with lower forecasted demand. Sales volumes increased as customers started taking delivery of their forward fixed-priced sales contracts. This was partially offset by sales volumes decreases due to the decommissioning of a critical underground storage facility in the Midwest in April 2022. We expect the volume previously sold at this facility will be partially replaced by redirecting customers to other facilities and by transloading product from railcars to trucks.

*Propane Derivative Loss (Gain).* Our wholesale cost of propane sales during the three months ended December 31, 2022 included net unrealized gains of $1.2 million on derivatives and $8.7 million of net realized losses on derivatives. During the three months ended December 31, 2021, our wholesale cost of propane sales included $29.7 million of net unrealized losses on derivatives and $31.1 million of net realized gains on derivatives.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

Propane product margins, excluding the impact of derivatives, increased as our current inventory value has reduced with purchases in a lower price environment and the margins from forward fixed-priced sales contracts which were delivered to our customers during the three months ended December 31, 2022. During the three months ended December 31, 2021, we experienced the opposite situation and were replacing our inventory when prices were rising.

*Butane Sales and Cost of Sales-Excluding Impact of Derivatives.* The decreases in revenues and cost of sales were due to lower prices and weaker spot demand for the product, especially exports. The softening of export economics continued during the three months ended December 31, 2022, which led to lower domestic prices as less product was being moved abroad. Overall concerns about the economy and inflation also continued to weigh on the domestic market. The decline in volumes was primarily due to the export market as we were able to supply more product in the prior year to export companies.

*Butane Derivative Gain.* Our cost of butane sales during the three months ended December 31, 2022 included $9.1 million of net unrealized losses on derivatives and $12.8 million of net realized gains on derivatives. Our cost of butane sales included $12.9 million of net unrealized gains on derivatives and $6.9 million of net realized losses on derivatives during the three months ended December 31, 2021.

Butane product margins, excluding the impact of derivatives, decreased during the three months ended December 31, 2022, as compared to the three months ended December 31, 2021 due to the declining prices, lower export demand and increased freight charges due to higher fuel surcharges.

*Other Products Sales and Cost of Sales-Excluding Impact of Derivatives.* The increases in revenues and cost of sales, excluding the impact of derivatives, were due to our increased supply of biodiesel to sell during the three months ended December 31, 2022 as compared to the three months ended December 31, 2021 due to favorable supply contracts entered into in the prior year. This was partially offset by a decrease in asphalt revenues as we were impacted by supply constraints during the first two months of the quarter.

*Other Products Derivative Loss.* Our derivatives of other products included $1.3 million of net unrealized gains and $2.5 million of net realized losses on derivatives during the three months ended December 31, 2022. Our derivatives of other products during the three months ended December 31, 2021 included $0.1 million of net unrealized losses and $6.7 million of net realized losses on derivatives.

Other product sales product margins during the three months ended December 31, 2022 decreased from the prior year primarily due to a decrease in feedstock prices, which drove a decrease in the index price of biodiesel. The decrease in feedstock prices was largely driven by the Environmental Protection Agency's finalization of its renewables volume obligation requirements for biodiesel producers for future periods, which was announced in December 2022. Also, asphalt margins declined as we had supply constraints in October and November 2022.

*Service Revenues.* This revenue includes storage, terminaling and transportation services income. Revenues during the three months ended December 31, 2022 were consistent with the three months ended December 31, 2021.

*Operating and General and Administrative Expenses*. The decrease was primarily related to lower incentive compensation costs due to lower operating results.

*Depreciation and Amortization Expense.* The decrease was primarily due to lower amortization expense due to certain intangible assets being fully amortized as of December 31, 2021.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Corporate and Other***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | $10934 | $13447 | $(2513) |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 1655 | 1743 | (88) |
| &nbsp;&nbsp;&nbsp;Loss on disposal or impairment of assets, net | 71 |  | 71 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 12660 | 15190 | (2530) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating loss | $(12660) | $(15190) | $2530 |

---

*General and Administrative Expenses.* The expenses during the three months ended December 31, 2022 were lower due to lower compensation expense as a result of lower headcount and lower consulting fees.

*Depreciation and Amortization Expense.* Depreciation and amortization expense during the three months ended December 31, 2022 was consistent with the three months ended December 31, 2021.

*Loss on Disposal or Impairment of Assets, Net*. During the three months ended December 31, 2022, we recorded an impairment loss on the sublease of a building we were no longer using.

***Equity in Earnings of Unconsolidated Entities***

Equity in earnings of unconsolidated entities was $1.2 million during the three months ended December 31, 2022, compared to $0.1 million during the three months ended December 31, 2021. The increase of $1.1 million during the three months ended December 31, 2022 was due primarily to higher earnings from certain membership interests related to specific land and water services operations and a lower loss from our interest in an aircraft company.

***Interest Expense***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Senior secured notes | $38438 | $38438 | $— |
| Senior unsecured notes | 18925 | 21797 | (2872) |
| Revolving credit facility | 5244 | 2955 | 2289 |
| Other indebtedness | 9152 | 867 | 8285 |
| &nbsp;&nbsp;Total debt interest expense | 71759 | 64057 | 7702 |
| Amortization of debt issuance costs | 4161 | 4322 | (161) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | $75920 | $68379 | $7541 |

---

The debt interest expense increased $7.7 million during the three months ended December 31, 2022 due primarily to the accrual of a settlement of a claim for the failure to pay interest on royalty payments, as discussed further in Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report. This increase was also due in part to an increase in the average balance outstanding under our revolving credit facility in the current period compared to the same period in the prior year and increased floating interest rates, offset by lower interest expense resulting from repurchases of a portion of our Senior Unsecured Notes.

***Gain on Early Extinguishment of Liabilities, Net***

Gain on early extinguishment of liabilities, net was $2.7 million during the three months ended December 31, 2022, compared to less than $0.1 million during the three months ended December 31, 2021. During the three months ended December 31, 2022 and 2021, the net gain (inclusive of debt issuance costs written off) relates to the early extinguishment of a

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

portion of the outstanding Senior Unsecured Notes (as defined herein). See Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

***Other Income, Net***

The increase in other income, net for the three months ended December 31, 2022, compared to the three months ended December 31, 2021, was due primarily to the settlement of a dispute associated with commercial activities not occurring in the current reporting periods. See Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

***Income Tax Benefit***

Income tax benefit was $0.3 million during the three months ended December 31, 2022, compared to an income tax benefit of $0.1 million during the three months ended December 31, 2021. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

***Noncontrolling Interests***

Noncontrolling interests represent the portion of certain consolidated subsidiaries that are owned by third-parties. Noncontrolling interest income was $0.4 million during the three months ended December 31, 2022, compared to a noncontrolling interest loss of $0.1 million during the three months ended December 31, 2021. The increase during the three months ended December 31, 2022 was due primarily to higher income from certain water solutions operations.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**Segment Operating Results for the Nine Months Ended December 31, 2022 and 2021**

***Water Solutions***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per barrel and per day amounts)** | **(in thousands, except per barrel and per day amounts)** | **(in thousands, except per barrel and per day amounts)** |
| Revenues: |  |  |  |
| &nbsp;&nbsp;&nbsp;Water disposal service fees | $373851 | $293291 | $80560 |
| &nbsp;&nbsp;&nbsp;Sale of recovered crude oil | 96205 | 48848 | 47357 |
| &nbsp;&nbsp;&nbsp;Recycled water | 12842 | 7207 | 5635 |
| &nbsp;&nbsp;&nbsp;Other revenues | 28333 | 47743 | (19410) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 511231 | 397089 | 114142 |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 9316 | 20892 | (11576) |
| &nbsp;&nbsp;&nbsp;Derivative loss | 4363 | 899 | 3464 |
| &nbsp;&nbsp;&nbsp;Operating expenses | 158401 | 125667 | 32734 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 6996 | 5509 | 1487 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 153766 | 164466 | (10700) |
| &nbsp;&nbsp;&nbsp;Loss on disposal or impairment of assets, net | 17935 | 19450 | (1515) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 350777 | 336883 | 13894 |
| &nbsp;&nbsp;&nbsp;Segment operating income | $160454 | $60206 | $100248 |
| Produced water processed (barrels per day) |  |  |  |
| &nbsp;&nbsp;&nbsp;Delaware Basin | 2001242 | 1488529 | 512713 |
| &nbsp;&nbsp;&nbsp;Eagle Ford Basin | 114191 | 99298 | 14893 |
| &nbsp;&nbsp;&nbsp;DJ Basin | 151792 | 142606 | 9186 |
| &nbsp;&nbsp;&nbsp;Other Basins | 15114 | 25516 | (10402) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 2282339 | 1755949 | 526390 |
| Recycled water (barrels per day) | 132851 | 76319 | 56532 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total (barrels per day) | 2415190 | 1832268 | 582922 |
| Skim oil sold (barrels per day) | 3757 | 2667 | 1090 |
| Service fees for produced water processed ($/barrel) (1) | $0.60 | $0.61 | $(0.01) |
| Recovered crude oil for produced water processed ($/barrel) (1) | $0.15 | $0.10 | $0.05 |
| Operating expenses for produced water processed ($/barrel) (1) | $0.25 | $0.26 | $(0.01) |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Total produced water barrels processed during the nine months ended December 31, 2022 and 2021 were 627,643,232 and 482,885,902, respectively.

*Water Disposal Service Fee Revenues.* The increase was due to an increase in produced water volumes processed as a result of increased crude oil production driven by higher crude oil prices and completion activity, primarily in the Delaware Basin. This was partially offset by lower service fees received per barrel due to increased volumes from customers with long-term acreage dedications or minimum volume commitments with lower contracted fees.

*Recovered Crude Oil Revenues.* The increase was due primarily to higher volumes of skim oil barrels sold due to an increase in produced water volumes processed as well as higher realized crude oil prices received from the sale of skim oil barrels. Additionally, an increase in the number of wells completed in our area of operations during the period with increased flowback activity resulted in higher skim oil volumes per barrel of produced water processed

*Recycled Water Revenues.* The increase was due primarily to increasing demand for water to be used in completions, driven by an increase in drilling and completion activity primarily in the Delaware Basin, and our customers' transition from brackish non-potable water to recycled water and higher pricing for recycled water.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

*Other Revenues.* The decrease was due primarily to lower sales of brackish non-potable water related to the termination of a joint marketing agreement as well as our customers transitioning from brackish non-potable water to recycled water, partially offset by reimbursements for construction projects in the current period.

*Cost of Sales-Excluding Impact of Derivatives*. The decrease was due primarily to lower purchases of brackish non-potable water from third-parties to meet customer needs due to the termination of a joint marketing agreement.

*Derivative Loss*. During the nine months ended December 31, 2022, we had $4.5 million of net unrealized gains on derivatives and $8.8 million of net realized losses on derivatives. During the nine months ended December 31, 2021, we had $6.8 million of net unrealized losses on derivatives and $5.9 million of net realized gains on derivatives.

*Operating and General and Administrative Expenses*. The increase was due primarily to higher utility, royalty and chemical expenses as a result of the increase in produced water volumes processed. Utility, royalty and chemical expenses, which are three of our largest variable expenses, were not impacted by the rise in inflation due to negotiated long-term utility contracts with fixed rates, royalty contracts with no escalation clauses and a fixed chemical expense per barrel with our chemical provider. The increase was also due to higher repairs and maintenance expense due to timing of repairs and the operation of temporary booster stations, higher incentive compensation expense and higher severance taxes due to the increase in revenue from recovered crude oil.

*Depreciation and Amortization Expense*. The decrease was due primarily to certain long-term assets being fully amortized or impaired during the fiscal year ended March 31, 2022 and nine months ended December 31, 2022. This decrease was partially offset by the depreciation of newly developed facilities and infrastructure.

*Loss on Disposal or Impairment of Assets, Net*. During the nine months ended December 31, 2022, we recorded a net loss of $11.8 million to write down the value of two inactive saltwater disposal facilities and damaged equipment at another saltwater disposal facility, as well as the abandonment of certain capital projects and the retirement of certain assets. We also recorded a net loss of $8.0 million primarily related to the sale of certain assets and a loss of $0.5 million related to the termination of a joint marketing agreement. In addition, we recorded a gain of $2.2 million from an insurance recovery for a saltwater disposal facility damaged in a prior period. During the nine months ended December 31, 2021, we recorded a net loss of $23.7 million primarily related to the write-down of an inactive saltwater disposal facility and damaged equipment and wells at other facilities, abandonment of certain capital projects and the sale of certain other miscellaneous assets and a gain of $4.3 million on the sale of certain land and a landfill permit.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Crude Oil Logistics***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per barrel amounts)** | **(in thousands, except per barrel amounts)** | **(in thousands, except per barrel amounts)** |
| Revenues: |  |  |  |
| &nbsp;&nbsp;&nbsp;Crude oil sales | $1906963 | $1660225 | $246738 |
| &nbsp;&nbsp;&nbsp;Crude oil transportation and other | 72645 | 62606 | 10039 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues (1) | 1979608 | 1722831 | 256777 |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 1823514 | 1557202 | 266312 |
| &nbsp;&nbsp;&nbsp;Derivative (gain) loss | (7213) | 41849 | (49062) |
| &nbsp;&nbsp;&nbsp;Operating expenses | 38563 | 40862 | (2299) |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 3818 | 5742 | (1924) |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 35193 | 37029 | (1836) |
| &nbsp;&nbsp;&nbsp;(Gain) loss on disposal or impairment of assets, net | (1279) | 2206 | (3485) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 1892596 | 1684890 | 207706 |
| &nbsp;&nbsp;&nbsp;Segment operating income | $87012 | $37941 | $49071 |
| Crude oil sold (barrels) | 19428 | 23027 | (3599) |
| Crude oil transported on owned pipelines (barrels) | 20832 | 21961 | (1129) |
| Crude oil storage capacity - owned and leased (barrels) (2) | 5232 | 5232 |  |
| Crude oil storage capacity leased to third-parties (barrels) (2) | 2000 | 1501 | 499 |
| Crude oil inventory (barrels) (2) | 892 | 1295 | (403) |
| Crude oil sold ($/barrel) | $98.155 | $72.099 | $26.056 |
| Cost per crude oil sold ($/barrel) (3) | $93.860 | $67.625 | $26.235 |
| Crude oil product margin ($/barrel) (3) | $4.295 | $4.474 | $(0.179) |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Revenues include $7.8 million and $7.2 million of intersegment sales during the nine months ended December 31, 2022 and 2021, respectively, that are eliminated in our unaudited condensed consolidated statements of operations.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Information is presented as of December 31, 2022 and December 31, 2021, respectively. The decrease in crude oil inventory was due primarily to capitalizing additional crude oil barrels as linefill as a result of increased requirements.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Cost and product margin per barrel excludes the impact of derivatives.

*Crude Oil Sales Revenues.* The increase was due primarily to an increase in crude oil prices during the nine months ended December 31, 2022, compared to the nine months ended December 31, 2021. This was partially offset by a reduction in sales volumes primarily due to lower production in the DJ Basin and increased buy/sell transactions during the nine months ended December 31, 2022.

*Crude Oil Transportation and Other Revenues.* The increase was primarily due to an increase in charter days and day rates within our marine transportation business due to increased demand.

During the nine months ended December 31, 2022, physical volumes on the Grand Mesa Pipeline averaged approximately 76,000 barrels per day, compared to approximately 80,000 barrels per day for the nine months ended December 31, 2021 (volume amounts are from both internal and external parties). Both contracted and non-contracted volumes decreased as overall production in the DJ Basin declined in part due to producer permitting issues.

*Cost of Sales-Excluding Impact of Derivatives.* The increase was due primarily to an increase in crude oil prices during the nine months ended December 31, 2022, compared to the nine months ended December 31, 2021.

*Derivative (Gain) Loss.* Our cost of sales during the nine months ended December 31, 2022 included $50.2 million of net realized losses on derivatives, driven by increasing crude oil prices, and $57.4 million of net unrealized gains on derivatives. The amount for the nine months ended December 31, 2022 includes net realized losses of $27.4 million and net unrealized gains of $35.3 million associated with derivative instruments related to our hedge of the CMA Differential Roll defined and discussed below under "Non-GAAP Financial Measures." Our cost of sales during the nine months ended December 31, 2021

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

included $95.7 million of net realized losses on derivatives, driven by the increase in crude oil prices, and $53.8 million of net unrealized gains on derivatives. The amount for the nine months ended December 31, 2021 includes net realized losses of $65.7 million and net unrealized gains of $54.3 million associated with derivative instruments related to our hedge of the CMA Differential Roll.

*Crude Oil Product Margin*. The decrease in product margin was primarily due to the sale of higher priced inventory into a market in which prices were declining during the first six months of the current period. In the prior year, lower priced inventory was sold into a market in which prices were rising during the first six months of the prior year period. In addition, we incurred increased freight costs during the current period. This decrease in product margin was offset by higher contracted rates with certain producers as well as increased differentials on certain other sales contracts in the last three months of the period. Crude oil product margin calculations do not include gains and losses from derivatives that may offset the movement in the physical margin.

*Operating and General and Administrative Expenses*. The decrease was primarily related to the sale of the trucking business during the three months ended March 31, 2022, and the completion of the renegotiation of certain leases that resulted in a reduction to expense during the current period.

*Depreciation and Amortization Expense.* The decrease was due primarily to the sale of our trucking assets during the three months ended March 31, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(Gain) Loss on Disposal or Impairment of Assets, Net*. During the nine months ended December 31, 2022, we recorded a net gain of $1.3 million primarily due to disposals and retirements of certain assets. During the nine months ended December 31, 2021, we recorded a net loss of $2.2 million for an impairment due to damage caused by Hurricane Ida to one of our Gulf Coast terminals.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Liquids Logistics***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** |
| Refined products sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues-excluding impact of derivatives (1) | $1994123 | $1340824 | $653299 |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 1960944 | 1324587 | 636357 |
| &nbsp;&nbsp;&nbsp;Derivative loss | 1596 | 1309 | 287 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 31583 | 14928 | 16655 |
| Propane sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues (1) | 754438 | 778308 | (23870) |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 723486 | 771116 | (47630) |
| &nbsp;&nbsp;&nbsp;Derivative loss (gain) | 18304 | (26221) | 44525 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 12648 | 33413 | (20765) |
| Butane sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues (1) | 594612 | 583080 | 11532 |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 597181 | 540607 | 56574 |
| &nbsp;&nbsp;&nbsp;Derivative (gain) loss | (22551) | 15554 | (38105) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 19982 | 26919 | (6937) |
| Other product sales: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues-excluding impact of derivatives (1) | 812398 | 570878 | 241520 |
| &nbsp;&nbsp;&nbsp;Cost of sales-excluding impact of derivatives | 761761 | 535203 | 226558 |
| &nbsp;&nbsp;&nbsp;Derivative loss | 19380 | 9484 | 9896 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 31257 | 26191 | 5066 |
| Service revenues: |  |  |  |
| &nbsp;&nbsp;&nbsp;Revenues (1) | 11394 | 14583 | (3189) |
| &nbsp;&nbsp;&nbsp;Cost of sales | 1152 | 1151 | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product margin | 10242 | 13432 | (3190) |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Operating expenses | 40407 | 41081 | (674) |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 6254 | 5376 | 878 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 10194 | 15409 | (5215) |
| &nbsp;&nbsp;&nbsp;Loss on disposal or impairment of assets, net | 51 | 71807 | (71756) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 56906 | 133673 | (76767) |
| &nbsp;&nbsp;&nbsp;Segment operating income (loss) | $48806 | $(18790) | $67596 |

---

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

---

| | | | |
|:---|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** | **(in thousands, except per gallon amounts)** |
| Natural gas liquids and refined products storage capacity - owned and leased (gallons) (2) | 159999 | 168189 | (8190) |
| Refined products sold (gallons) | 566997 | 586136 | (19139) |
| Refined products sold ($/gallon) | $3.517 | $2.288 | $1.229 |
| Cost per refined products sold ($/gallon) (3) | $3.458 | $2.260 | $1.198 |
| Refined products product margin ($/gallon) (3) | $0.059 | $0.028 | $0.031 |
| Refined products inventory (gallons) (2) | 1738 | 1314 | 424 |
| Propane sold (gallons) | 639686 | 644883 | (5197) |
| Propane sold ($/gallon) | $1.179 | $1.207 | $(0.028) |
| Cost per propane sold ($/gallon) (3) | $1.131 | $1.196 | $(0.065) |
| Propane product margin ($/gallon) (3) | $0.048 | $0.011 | $0.037 |
| Propane inventory (gallons) (2) | 97283 | 125235 | (27952) |
| Butane sold (gallons) | 409137 | 427646 | (18509) |
| Butane sold ($/gallon) | $1.453 | $1.363 | $0.090 |
| Cost per butane sold ($/gallon) (3) | $1.460 | $1.264 | $0.196 |
| Butane product (loss) margin ($/gallon) (3) | $(0.007) | $0.099 | $(0.106) |
| Butane inventory (gallons) (2) | 31029 | 45129 | (14100) |
| Other products sold (gallons) | 294965 | 290078 | 4887 |
| Other products sold ($/gallon) | $2.754 | $1.968 | $0.786 |
| Cost per other products sold ($/gallon) (3) | $2.583 | $1.845 | $0.738 |
| Other products product margin ($/gallon) (3) | $0.171 | $0.123 | $0.048 |
| Other products inventory (gallons) (2) | 13360 | 23491 | (10131) |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Revenue includes $1.3 million of intersegment sales during the nine months ended December 31, 2021 that is eliminated in our unaudited condensed consolidated statement of operations.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Information is presented as of December 31, 2022 and December 31, 2021, respectively.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Cost and product margin per gallon excludes the impact of derivatives.

*Refined Products Revenues and Cost of Sales-Excluding Impact of Derivatives.* The increases in revenues and cost of sales, excluding the impact of derivatives, were due to an increase in refined products prices. This was partially offset by a decrease in volumes primarily related to tighter supply in certain markets.

*Refined Products Derivative Loss.* Our refined products margin during the nine months ended December 31, 2022 included a realized loss of $1.6 million and the nine months ended December 31, 2021 included a realized loss of $1.3 million.

Refined Products product margins for the nine months ended December 31, 2022 increased from the nine months ended December 31, 2021 due to higher demand in several markets that were experiencing tighter supply as well as being well positioned from a supply and inventory perspective during the continued period of extreme volatility in commodity prices.

*Propane Sales and Cost of Sales-Excluding Impact of Derivatives.* The decreases in revenues and cost of sales were due to lower propane prices. Propane prices have declined along with the decline in global energy prices as a result of the increase in interest rates to curb inflation and the overall concerns in the economy about a potential recession, as well as due to an increase in days of domestic supply available, combined with lower forecasted demand. Sales volumes decreased due to the decommissioning of a critical underground storage facility in the Midwest in April 2022.

*Propane Derivative Loss (Gain).* Our wholesale propane cost of sales included $10.7 million of net unrealized losses on derivatives and $7.6 million of net realized losses on derivatives during the nine months ended December 31, 2022. During the nine months ended December 31, 2021, our cost of wholesale propane sales included $4.0 million of net unrealized gains on derivatives and $22.3 million of net realized gains on derivatives.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

Propane product margins, excluding the impact of derivatives, increased as we replaced our inventory in a lower price environment and we realized the margin associated with our forward fixed-priced sales contracts and lower inventory costs due to the decreasing prices throughout the nine months ended December 31, 2022. During the nine months ended December 31, 2021, we experienced the opposite situation and were replacing our inventory when prices were rising.

*Butane Sales and Cost of Sales-Excluding Impact of Derivatives.* The increases in revenues and cost of sales were due primarily to higher butane prices which were offset by lower volumes due to export economics beginning to soften during the three months ended June 30, 2022, which led to lower domestic prices as less product was being moved abroad. Prices also declined during the three months ended September 30, 2022 due to overall concerns about the economy and inflation weighing on the domestic market.

*Butane Derivative (Gain) Loss.* Our cost of butane sales during the nine months ended December 31, 2022 included $5.7 million of net unrealized gains on derivatives and $16.9 million of net realized gains on derivatives. Our cost of butane sales included $2.6 million of net unrealized losses on derivatives and $12.9 million of net realized losses on derivatives during the nine months ended December 31, 2021.

Butane product margins, excluding the impact of derivatives, decreased during the nine months ended December 31, 2022, as compared to the nine months ended December 31, 2021 due to the declining prices, lower export demand and increased freight charges due to higher fuel surcharges. In addition, we were also negatively impacted by lower location differentials as the product we contracted to purchase in the beginning of the season was continuing to compete with product purchased in the discounted market.

*Other Products Sales and Cost of Sales-Excluding Impact of Derivatives.* The increases in revenues and cost of sales, excluding the impact of derivatives, were due to higher commodity prices and an increased supply of biodiesel to sell during the current year compared to the prior year period due to favorable supply contracts entered into in the prior year.

*Other Products Derivatives Loss.* Our derivatives of other products included $0.1 million of net unrealized gains on derivatives and $19.5 million of net realized losses on derivatives during the nine months ended December 31, 2022. Our derivatives of other products during the nine months ended December 31, 2021 included less than $0.1 million of net unrealized losses on derivatives and $9.5 million of net realized losses on derivatives.

Other product sales product margins during the nine months ended December 31, 2022 increased due to an increase in biodiesel and biodiesel renewable identification number market prices, as well as securing favorable biodiesel supply contracts in the Midwest and transporting the product for sale in more favorable markets.

*Service Revenues.* This revenue includes storage, terminaling and transportation services income. The decrease during the nine months ended December 31, 2022 was due to the disposition of Sawtooth in June 2021 as well as less throughput in certain of our propane and butane terminals.

*Operating and General and Administrative Expenses*. The increase was primarily due to an increase in travel and entertainment, materials and supplies and repair and maintenance expenses partially offset by the sale of Sawtooth in June 2021.

*Depreciation and Amortization Expense*. The decrease was primarily due to the disposition of Sawtooth in June 2021 as well as lower amortization expense due to certain intangible assets being fully amortized as of December 31, 2022.

*Loss on Disposal or Impairment of Assets, Net.* During the nine months ended December 31, 2022, we recorded a net loss of $0.1 million primarily due to disposals of certain assets. During the nine months ended December 31, 2021, we recorded a net loss of $60.1 million related to the sale of Sawtooth and a net loss of $11.8 million related to the sale of another terminal during the three months ended September 30, 2021.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Corporate and Other***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | $33533 | $29522 | $4011 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization expense | 4952 | 5241 | (289) |
| &nbsp;&nbsp;&nbsp;Gain on disposal or impairment of assets, net | (916) |  | (916) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses | 37569 | 34763 | 2806 |
| &nbsp;&nbsp;&nbsp;Operating loss | $(37569) | $(34763) | $(2806) |

---

*General and Administrative Expenses.* The expenses during the nine months ended December 31, 2022 were higher than the nine months ended December 31, 2021 due to increased incentive compensation expense compared to the prior year. Equity-based compensation also increased primarily due to a reversal of an incentive compensation accrual during the nine months ended December 31, 2021.

*Depreciation and Amortization Expense.* Depreciation and amortization expense during the nine months ended December 31, 2022 was consistent with the nine months ended December 31, 2021.

*Gain on Disposal or Impairment of Assets, Net*. During the nine months ended December 31, 2022, we sold an airplane for a gain of $1.3 million, which was partially offset by a loss recorded to write-off the remaining amount of a loan receivable, due July 31, 2023, that was prepaid by the debtor (as discussed further in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report) and an impairment loss recorded on the sublease of a building we were no longer using.

***Equity in Earnings of Unconsolidated Entities***

Equity in earnings of unconsolidated entities was $3.1 million during the nine months ended December 31, 2022, compared to $0.8 million during the nine months ended December 31, 2021. The increase of $2.3 million during the nine months ended December 31, 2022 was due primarily to higher earnings from certain membership interests related to specific land and water services operations and a lower loss from our interest in an aircraft company.

***Interest Expense***

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

---

| | | | |
|:---|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** | |
| | **2022** | **2021** |<br>**Change** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Senior secured notes | $115313 | $115313 | $— |
| Senior unsecured notes | 60028 | 66471 | (6443) |
| Revolving credit facility | 13146 | 7201 | 5945 |
| Other indebtedness | 10508 | 2205 | 8303 |
| &nbsp;&nbsp;Total debt interest expense | 198995 | 191190 | 7805 |
| Amortization of debt issuance costs | 12533 | 12814 | (281) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | $211528 | $204004 | $7524 |

---

The debt interest expense increased $7.8 million during the nine months ended December 31, 2022 due primarily to the accrual of a settlement of a claim for the failure to pay interest on royalty payments, as discussed further in Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report. This increase was also due in part to an increase in the average balance outstanding under our revolving credit facility in the current period compared to the same period in the prior year and increased floating interest rates, offset by lower interest expense resulting from repurchases of a portion of our Senior Unsecured Notes.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Gain on Early Extinguishment of Liabilities, Net***

Gain on early extinguishment of liabilities, net was $6.8 million during the nine months ended December 31, 2022, compared to $1.1 million during the nine months ended December 31, 2021. During the nine months ended December 31, 2022 and 2021, the net gain (inclusive of debt issuance costs written off) primarily relates to the early extinguishment of a portion of the outstanding Senior Unsecured Notes (as defined herein). For the nine months ended December 31, 2021, the net gain was partially offset by a loss on the early extinguishment of the Sawtooth credit agreement. See Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

***Other Income, Net***

The increase in other income, net for the nine months ended December 31, 2022, compared to the nine months ended December 31, 2021, was due primarily to the settlement of a dispute associated with commercial activities not occurring in the current reporting periods. See Note 15 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

***Income Tax (Expense) Benefit***

Income tax expense was $0.1 million during the nine months ended December 31, 2022, compared to an income tax benefit of $0.8 million during the nine months ended December 31, 2021. See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report for a further discussion.

***Noncontrolling Interests***

Noncontrolling interest income was $0.8 million during the nine months ended December 31, 2022, compared to $0.7 million during the nine months ended December 31, 2021. The increase during the nine months ended December 31, 2022 was due primarily to higher income from certain water solutions operations during the nine months ended December 31, 2022 and a loss of $0.2 million from the operations of Sawtooth during the nine months ended December 31, 2021, partially offset by lower income from certain recycling operations during the nine months ended December 31, 2022.

**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 net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities, certain legal settlements and other. We also include in Adjusted EBITDA certain inventory valuation adjustments related to certain refined products businesses within our Liquids Logistics segment as discussed below. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), income (loss) 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 certain businesses within our Liquids Logistics 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 certain businesses within our Liquids Logistics segment. The primary hedging strategy of these businesses is to hedge against the risk of declines in the value

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

of inventory over the course of the contract cycle, and many of the hedges cover extended periods of time. The "inventory valuation adjustment" row in the reconciliation table reflects the difference between the market value of the inventory of these businesses at the balance sheet date and its cost. 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. In our Crude Oil Logistics segment, we purchase certain crude oil barrels using the West Texas Intermediate ("WTI") calendar month average ("CMA") price and sell the crude oil barrels using the WTI CMA price plus the Argus CMA Differential Roll Component ("CMA Differential Roll") per our contracts. To eliminate the volatility of the CMA Differential Roll, we entered into derivative instrument positions in January 2021 to secure a margin of approximately $0.20 per barrel on 1.5 million barrels per month from May 2021 through December 2023. Due to the nature of these positions, the cash flow and earnings recognized on a GAAP basis will differ from period to period depending on the current crude oil price and future estimated crude oil price which are valued utilizing third-party market quoted prices. We are recognizing in Adjusted EBITDA the gains and losses from the derivative instrument positions entered into in January 2021 to properly align with the physical margin we are hedging each month through the term of this transaction. This representation aligns with management's evaluation of the transaction.

The following table reconciles net income (loss) to EBITDA and Adjusted EBITDA for the periods indicated:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Net income (loss) | $58982 | $(18982) | $85695 | $(154691) |
| Less: Net (income) loss attributable to noncontrolling interests | (448) | 63 | (790) | (705) |
| Net income (loss) attributable to NGL Energy Partners LP | 58534 | (18919) | 84905 | (155396) |
| Interest expense | 75934 | 68395 | 211573 | 204037 |
| Income tax (benefit) expense | (252) | (135) | 113 | (820) |
| Depreciation and amortization | 69308 | 68452 | 204025 | 221352 |
| &nbsp;&nbsp;&nbsp;EBITDA | 203524 | 117793 | 500616 | 269173 |
| Net unrealized losses (gains) on derivatives | 4800 | (13500) | (56930) | (48254) |
| CMA Differential Roll net losses (gains) (1) | (8678) | 23872 | 19424 | 60987 |
| Inventory valuation adjustment (2) | (2650) | 1145 | (6765) | 1912 |
| Lower of cost or net realizable value adjustments | (12568) | 2921 | (11711) | 2636 |
| Loss on disposal or impairment of assets, net | 8290 | 12035 | 15775 | 93268 |
| Gain on early extinguishment of liabilities, net | (2667) | (9) | (6808) | (1168) |
| Equity-based compensation expense | 890 | 749 | 1866 | (1044) |
| Acquisition expense (3) |  | (36) |  | 67 |
| Other (4) | 2315 | 2770 | 3907 | 7525 |
| &nbsp;&nbsp;&nbsp;Adjusted EBITDA | $193256 | $147740 | $459374 | $385102 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Adjustment to align, within Adjusted EBITDA, the net gains and losses of the Partnership's CMA Differential Roll derivative instruments positions with the physical margin being hedged. See "Non-GAAP Financial Measures" section above for a further discussion.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Amount reflects the difference between the market value of the inventory at the balance sheet date and its cost. See "Non-GAAP Financial Measures" section above for a further discussion.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions.

(4)&nbsp;&nbsp;&nbsp;&nbsp;Amounts represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized gains/losses on marketable securities, accretion expense for asset retirement obligations and the write off of an asset acquired in a prior period acquisition.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

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 December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Depreciation and amortization per EBITDA table | $69308 | $68452 | $204025 | $221352 |
| &nbsp;&nbsp;Intangible asset amortization recorded to cost of sales | (68) | (69) | (205) | (213) |
| &nbsp;&nbsp;Depreciation and amortization of unconsolidated entities | (193) | (187) | (557) | (545) |
| &nbsp;&nbsp;Depreciation and amortization attributable to noncontrolling interests | 280 | 284 | 842 | 1551 |
| Depreciation and amortization per unaudited condensed consolidated statements of operations | $69327 | $68480 | $204105 | $222145 |

---

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** |
| Depreciation and amortization per EBITDA table | $204025 | $221352 |
| &nbsp;&nbsp;Amortization of debt issuance costs recorded to interest expense | 12533 | 12814 |
| &nbsp;&nbsp;Amortization of royalty expense recorded to operating expense | 185 | 185 |
| &nbsp;&nbsp;Depreciation and amortization of unconsolidated entities | (557) | (545) |
| &nbsp;&nbsp;Depreciation and amortization attributable to noncontrolling interests | 842 | 1551 |
| Depreciation and amortization per unaudited condensed consolidated statements of cash flows | $217028 | $235357 |

---

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 December 31,** | **Three Months Ended December 31,** | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Interest expense per EBITDA table | $75934 | $68395 | $211573 | $204037 |
| &nbsp;&nbsp;&nbsp;Interest expense attributable to unconsolidated entities | (14) | (15) | (45) | (49) |
| &nbsp;&nbsp;&nbsp;Interest expense attributable to noncontrolling interests |  | (1) |  | 16 |
| Interest expense per unaudited condensed consolidated statements of operations | $75920 | $68379 | $211528 | $204004 |

---

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

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2022** |
| | **Water<br>Solutions** | **Crude Oil<br>Logistics** | **Liquids<br>Logistics** | **Corporate<br>and Other** | **Consolidated** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Operating income (loss) | $59721 | $35096 | $20513 | $(12660) | $102670 |
| Depreciation and amortization | 52591 | 11664 | 3417 | 1655 | 69327 |
| Amortization recorded to cost of sales |  |  | 68 |  | 68 |
| Net unrealized (gains) losses on derivatives |  | (1810) | 6610 |  | 4800 |
| CMA Differential Roll net losses (gains) |  | (8678) |  |  | (8678) |
| Inventory valuation adjustment |  |  | (2650) |  | (2650) |
| Lower of cost or net realizable value adjustments |  | (3321) | (9247) |  | (12568) |
| Loss (gain) on disposal or impairment of assets, net | 7959 | 277 | (1) | 71 | 8306 |
| Equity-based compensation expense |  |  |  | 890 | 890 |
| Other income (expense), net | 2 | 59 | (1481) | 29520 | 28100 |
| Adjusted EBITDA attributable to unconsolidated entities | 1357 |  | 21 | 45 | 1423 |
| Adjusted EBITDA attributable to noncontrolling interest | (747) |  |  |  | (747) |
| Other | 829 | (27) | 1513 |  | 2315 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA | $121712 | $33260 | $18763 | $19521 | $193256 |

---

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended December 31, 2021** | **Three Months Ended December 31, 2021** | **Three Months Ended December 31, 2021** | **Three Months Ended December 31, 2021** | **Three Months Ended December 31, 2021** |
| | **Water<br>Solutions** | **Crude Oil<br>Logistics** | **Liquids<br>Logistics** | **Corporate<br>and Other** | **Consolidated** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Operating income (loss) | $19851 | $21291 | $23158 | $(15190) | $49110 |
| Depreciation and amortization | 50815 | 12166 | 3756 | 1743 | 68480 |
| Amortization recorded to cost of sales |  |  | 69 |  | 69 |
| Net unrealized losses (gains) on derivatives | 1758 | (32201) | 16943 |  | (13500) |
| CMA Differential Roll net losses (gains) |  | 23872 |  |  | 23872 |
| Inventory valuation adjustment |  |  | 1145 |  | 1145 |
| Lower of cost or net realizable value adjustments |  |  | 2921 |  | 2921 |
| Loss (gain) on disposal or impairment of assets, net | 9997 | 2262 | (26) |  | 12233 |
| Equity-based compensation expense |  |  |  | 749 | 749 |
| Acquisition expense | 4 |  |  | (40) | (36) |
| Other (expense) income, net | (6) |  | (31) | 61 | 24 |
| Adjusted EBITDA attributable to unconsolidated entities | 384 |  | 10 | (70) | 324 |
| Adjusted EBITDA attributable to noncontrolling interest | (419) |  | (3) |  | (422) |
| Other | 360 | 2374 | 37 |  | 2771 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA | $82744 | $29764 | $47979 | $(12747) | $147740 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Nine Months Ended December 31, 2022** | **Nine Months Ended December 31, 2022** | **Nine Months Ended December 31, 2022** | **Nine Months Ended December 31, 2022** | **Nine Months Ended December 31, 2022** |
| | **Water<br>Solutions** | **Crude Oil<br>Logistics** | **Liquids<br>Logistics** | **Corporate<br>and Other** | **Consolidated** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Operating income (loss) | $160454 | $87012 | $48806 | $(37569) | $258703 |
| Depreciation and amortization | 153766 | 35193 | 10194 | 4952 | 204105 |
| Amortization recorded to cost of sales |  |  | 205 |  | 205 |
| Net unrealized (gains) losses on derivatives | (4464) | (57390) | 4924 |  | (56930) |
| CMA Differential Roll net losses (gains) |  | 19424 |  |  | 19424 |
| Inventory valuation adjustment |  |  | (6765) |  | (6765) |
| Lower of cost or net realizable value adjustments |  | (2247) | (9464) |  | (11711) |
| Loss (gain) on disposal or impairment of assets, net | 17935 | (1279) | 51 | (916) | 15791 |
| Equity-based compensation expense |  |  |  | 1866 | 1866 |
| Other income (expense), net | 10 | 390 | (1665) | 29996 | 28731 |
| Adjusted EBITDA attributable to unconsolidated entities | 3569 |  | (3) | 134 | 3700 |
| Adjusted EBITDA attributable to noncontrolling interest | (1652) |  |  |  | (1652) |
| Other | 1915 | 98 | 1894 |  | 3907 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA | $331533 | $81201 | $48177 | $(1537) | $459374 |

---

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Nine Months Ended December 31, 2021** | **Nine Months Ended December 31, 2021** | **Nine Months Ended December 31, 2021** | **Nine Months Ended December 31, 2021** | **Nine Months Ended December 31, 2021** |
| | **Water<br>Solutions** | **Crude Oil<br>Logistics** | **Liquids<br>Logistics** | **Corporate<br>and Other** | **Consolidated** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| Operating income (loss) | $60206 | $37941 | $(18790) | $(34763) | $44594 |
| Depreciation and amortization | 164466 | 37029 | 15409 | 5241 | 222145 |
| Amortization recorded to cost of sales |  |  | 213 |  | 213 |
| Net unrealized losses (gains) on derivatives | 6845 | (53808) | (1291) |  | (48254) |
| CMA Differential Roll net losses (gains) |  | 60987 |  |  | 60987 |
| Inventory valuation adjustment |  |  | 1912 |  | 1912 |
| Lower of cost or net realizable value adjustments |  | (11) | 2647 |  | 2636 |
| Loss on disposal or impairment of assets, net | 19450 | 2206 | 71807 |  | 93463 |
| Equity-based compensation expense |  |  |  | (1044) | (1044) |
| Acquisition expense | 4 |  |  | 63 | 67 |
| Other income, net | 616 | 350 | 627 | 410 | 2003 |
| Adjusted EBITDA attributable to unconsolidated entities | 1559 |  | (9) | (190) | 1360 |
| Adjusted EBITDA attributable to noncontrolling interest | (1987) |  | (529) |  | (2516) |
| Other | 520 | 6994 | 22 |  | 7536 |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA | $251679 | $91688 | $72018 | $(30283) | $385102 |

---

**Liquidity, Sources of Capital and Capital Resource Activities**

***General***

Our principal sources of liquidity and capital resource requirements are cash flows from our operations, borrowings under our asset-based revolving credit facility ("ABL Facility"), debt issuances and the issuance of common and preferred units. We expect our primary cash outflows to be related to capital expenditures, interest and repayment of debt maturities.

We believe that our anticipated cash flows from operations and the borrowing capacity under our ABL Facility will be sufficient to meet our liquidity needs, including the repayment of the 2023 Notes. Our borrowing needs vary during the year due in part to the seasonal nature of certain businesses within our Liquids Logistics segment. 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 butane blending and heating seasons. Our working capital borrowing needs generally decline during the period of January through March, when the cash inflows from our Liquids Logistics segment are the greatest. In addition, our working capital borrowing needs vary with changes in commodity prices.

***Cash Management***

We manage cash by utilizing a centralized cash management program that concentrates the cash assets of our operating subsidiaries in joint accounts for the purposes of providing financial flexibility and lowering the cost of borrowing, transaction costs and bank fees. Our centralized cash management program provides that funds in excess of the daily needs of our operating subsidiaries are concentrated, consolidated or otherwise made available for use by other entities within our consolidated group. All of our wholly-owned operating subsidiaries participate in this program. Under the cash management program, depending on whether a participating subsidiary has short-term cash surpluses or cash requirements, we provide cash to the subsidiary or the subsidiary provides cash to us.

***Short-Term Liquidity***

Our principal sources of short-term liquidity consist of cash generated from operating activities and borrowings under our ABL Facility, which we believe will provide liquidity to operate our business, manage our working capital requirements and repay current maturities. Current commitments under the ABL Facility are $600.0 million, but as part of amending the ABL Facility on April 13, 2022, we agreed to reduce the commitments back to $500.0 million on or before March 31, 2023. We currently anticipate having minimal needs for acquisitions or expansion projects and expect to fund these items through cash flows from operations or borrowings under the ABL Facility. At December 31, 2022, $156.0 million had been borrowed under the ABL Facility and we had letters of credit outstanding of approximately $168.4 million. The ABL Facility is scheduled to mature at the earliest of (a) February 4, 2026 or (b) 91 days prior to the earliest maturity date in respect to any of our

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

indebtedness in an aggregate principal amount of $50.0 million or greater, if such indebtedness is outstanding at such time, subject to certain exceptions. See below for further discussion on the timing of paying down the 2023 Notes.

We are currently working with the banking group under our ABL Facility to extend the additional $100 million of commitments currently available under the ABL Facility, which is set to expire on or before March 31, 2023.

As of December 31, 2022, our current assets exceeded our current liabilities by approximately $33.5 million.

For additional information related to our ABL Facility, see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

***Long-Term Financing***

In addition to our principal sources of short-term liquidity discussed above, we expect to fund our longer-term financing requirements by issuing long-term notes, common units and/or preferred units, loans from financial institutions, asset securitizations or the sale of assets.

*Senior Secured Notes*

On February 4, 2021, we issued $2.05 billion of 7.5% 2026 Senior Secured Notes ("2026 Senior Secured Notes") in a private placement. The 2026 Senior Secured Notes bear interest, which is payable on February 1 and August 1 of each year, beginning on August 1, 2021. The 2026 Senior Secured Notes mature on February 1, 2026.

*Senior Unsecured Notes*

The senior unsecured notes include the 2023 Notes, which mature on November 1, 2023, the 6.125% senior unsecured notes due 2025 ("2025 Notes"), which mature on March 1, 2025 and the 7.5% senior unsecured notes due 2026 ("2026 Notes"), which mature on April 15, 2026 (collectively, the "Senior Unsecured Notes").

*Repurchases*

During the three months ended December 31, 2022, we repurchased $97.5 million of the 2023 Notes at a total cash cost of $94.6 million (excluding payments of accrued interest). Subsequent to December 31, 2022, we have repurchased $98.5 million of the 2023 Notes and as of February 8, 2023, the outstanding balance of the 2023 Notes is $203.4 million.

We expect to pay off the remaining outstanding 2023 Notes no later than June 30, 2023, using cash flows from operations, and if needed, borrowings under our ABL Facility. Proceeds generated from other cash flow positive initiatives currently being pursued, such as sales of non-core assets, may also be used for additional debt reductions.

*Redemption*

We currently have the right to redeem all of the outstanding 2023 Notes at 100% of the principal amount plus accrued and unpaid interest. As of March 1, 2023, we will have the right to redeem all or a portion of the outstanding 2025 Notes at 100% of the principal amount plus accrued and unpaid interest. As of April 15, 2024, we will have the right to redeem all or a portion of the outstanding 2026 Notes at 100% of the principal amount plus accrued and unpaid interest.

*Other Long-Term Debt*

On October 29, 2020, we entered into an equipment loan for $45.0 million which bears interest at a rate of 8.6% and is secured by certain of our barges and towboats. Under this agreement, we are required to make monthly payments of $0.5 million (principal and interest) and a balloon payment of $23.9 million when this loan matures on November 1, 2027.

For additional information related to our long-term debt, see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

***Capital Expenditures, Acquisitions and Other Investments***

The following table summarizes expansion and maintenance capital expenditures (which excludes additions for tank bottoms and linefill and has been prepared on the accrual basis), acquisitions and other investments for the periods indicated.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Capital Expenditures** | **Capital Expenditures** | | |
| | **Expansion** | **Maintenance** |<br>**Acquisitions (1)** | **Other**<br>**Investments (2)** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|<br><br>**Three Months Ended December 31,** | | | | |
| 2022 | $11208 | $11464 | $— | $— |
| 2021 | $13029 | $13329 | $— | $115 |
| **Nine Months Ended December 31,** |  |  |  |  |
| 2022 | $74151 | $41050 | $— | $346 |
| 2021 | $57552 | $38053 | $— | $350 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;There were no acquisitions during the three months or nine months ended December 31, 2022 or 2021.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Amounts for the three months ended December 31, 2021 and nine months ended December 31, 2022 and 2021 relate to contributions made to unconsolidated entities. There were no other investments during the three months ended December 31, 2022.

Capital expenditures for the fiscal year ending March 31, 2023 are expected to be approximately $115 - $125 million.

***Distributions Declared***

The board of directors of our GP decided to temporarily suspend all distributions in order to deleverage our balance sheet until we meet the 4.75 to 1.00 total leverage ratio set forth within the indenture of the 2026 Senior Secured Notes. This resulted in the suspension of the quarterly common unit distributions, which began with the quarter ended December 31, 2020, and all preferred unit distributions, which began with the quarter ended March 31, 2021. The board of directors of our GP expects to evaluate the reinstatement of the common unit and all preferred unit distributions in due course, taking into account a number of important factors, including our leverage, liquidity, the sustainability of cash flows, upcoming debt maturities, capital expenditures and the overall performance of our businesses.

**Contractual Obligations**

Our contractual obligations primarily consist of purchase commitments, outstanding debt principal and interest obligations, lease obligations, pipeline commitments, asset retirement obligations and other commitments.

For a discussion of contractual obligations, see Note 6, Note 7 and Note 13 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

***Cash Flows***

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

---

| | | |
|:---|:---|:---|
| | **Nine Months Ended December 31,** | **Nine Months Ended December 31,** |
|<br>**Cash Flows Provided by (Used in):** | **2022** | **2021** |
|  | **(in thousands)** | **(in thousands)** |
| Operating activities, before changes in operating assets and liabilities | $330191 | $224457 |
| Changes in operating assets and liabilities | (123326) | (197546) |
| Operating activities | $206865 | $26911 |
| Investing activities | $(72067) | $(96501) |
| Financing activities | $(134086) | $70217 |

---

*Operating Activities.* The seasonality of our Liquids Logistics segment 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 Logistics segment, we typically experience operating losses or lower operating income during our first and second quarters, or the six months ending September

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

30, as a result of lower volumes of natural gas liquids sales and when we are building our inventory levels for the upcoming butane blending and heating seasons, which generally begin in late fall, under normal demand conditions, and run through February or March. 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 increase in net cash provided by operating activities during the nine months ended December 31, 2022 was due primarily to fluctuations in working capital, particularly accounts receivable, inventory and accounts payable, during the nine months ended December 31, 2022, and increased earnings from operations.

*Investing Activities*. Net cash used in investing activities was $72.1 million during the nine months ended December 31, 2022, compared to net cash used in investing activities of $96.5 million during the nine months ended December 31, 2021. The decrease in net cash used in investing activities was due primarily to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• an $89.5 million decrease in payments to settle derivatives; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•*** a $13.7 million increase in proceeds received from certain asset sales during the nine months ended December 31, 2022.

These decreases in net cash used in investing activities were partially offset by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• lower proceeds from the divestitures of business and investments as we received net proceeds (gross cash proceeds less the amount of cash sold, excluding accrued expenses) of $63.5 million from the sale of our interest in Sawtooth in June 2021; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• an increase in capital expenditures from $107.5 million (includes payment of amounts accrued as of March 31, 2021) during the nine months ended December 31, 2021 to $122.4 million (includes payment of amounts accrued as of March 31, 2022) during the nine months ended December 31, 2022 due primarily to the timing of the expenditures in our Water Solutions segment.

*Financing Activities*. Net cash used in financing activities was $134.1 million during the nine months ended December 31, 2022, compared to net cash provided by financing activities of $70.2 million during the nine months ended December 31, 2021. The increase in net cash used in financing activities was due primarily to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* a decrease of $112.0 million in borrowings on the revolving credit facility (net of repayments) during the nine months ended December 31, 2022; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• an increase of $107.9 million paid in cash to repurchase a portion of our Senior Unsecured Notes during the nine months ended December 31, 2022.

These increases in net cash used in financing activities were partially offset by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* a decrease of $11.2 million in debt issuance costs for the revolving credit facility during the nine months ended December 31, 2022; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a decrease of $5.0 million in payments on other long-term debt as the Sawtooth credit agreement was paid off and terminated prior to us selling our ownership interest in Sawtooth in June 2021.

***Supplemental Guarantor Information***

NGL Energy Partners LP (parent) and NGL Energy Finance Corp. are co-issuers of the Senior Unsecured Notes (see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report). Certain of our wholly owned subsidiaries ("Guarantor Subsidiaries") have, jointly and severally, fully and unconditionally guaranteed the Senior Unsecured Notes.

The guarantees are senior unsecured obligations of each Guarantor Subsidiary and rank equally in right of payment with other existing and future senior indebtedness of such Guarantor Subsidiary, and senior in right of payment to all existing and future subordinated indebtedness of such Guarantor Subsidiary. The guarantee of our Senior Unsecured Notes by each Guarantor Subsidiary is subject to certain automatic customary releases, including in connection with the sale, disposition or transfer of all of the capital stock, or of all or substantially all of the assets, of such Guarantor Subsidiary to one or more persons that are not us or a restricted subsidiary, the exercise of legal defeasance or covenant defeasance options, the satisfaction and discharge of the indentures governing our Senior Unsecured Notes, the designation of such Guarantor Subsidiary as a non-

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the indentures governing our Senior Unsecured Notes, the release of such Guarantor Subsidiary from its guarantee under our revolving credit facility, the liquidation or dissolution of such Guarantor Subsidiary or upon the consolidation, merger or transfer of all assets of the Guarantor Subsidiary to us or another Guarantor Subsidiary in which the Guarantor Subsidiary dissolves or ceases to exist (collectively, the "Releases"). The obligations of each Guarantor Subsidiary under its note guarantee are limited as necessary to prevent such note guarantee from constituting a fraudulent conveyance under applicable law. We are not restricted from making investments in the Guarantor Subsidiaries and there are no significant restrictions on the ability of the Guarantor Subsidiaries to make distributions to NGL Energy Partners LP (parent). 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.

The rights of holders of our Senior Unsecured Notes against the Guarantor Subsidiaries may be limited under the U.S. Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law.

In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 of Regulation S-X to simplify disclosure requirements related to certain registered securities. The amendments became effective on January 4, 2021. As a result of these amendments, parent company and co-issuer subsidiary obligations guaranteed by one or more consolidated subsidiaries are not required to provide separate financial statements, provided that each subsidiary issuer/guarantor is consolidated into the parent company's consolidated financial statements, the parent company issues the obligations and the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and, subject to certain exceptions, summarized financial information. Accordingly, as permitted under Rule 13-01(a)(4)(vi), we have excluded summarized financial information for the Partnership because the assets, liabilities, and results of operations of NGL Energy Partners LP (parent), NGL Energy Finance Corp. and the Guarantor Subsidiaries are not materially different than the corresponding amounts in our consolidated financial statements, and we believe that such summarized financial information would be repetitive and would not provide incremental value to investors.

**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 Estimates**

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 more critical judgment areas in the application of our 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 estimates previously disclosed in our Annual Report.

**Item 3.&nbsp;&nbsp;&nbsp;&nbsp;Quantitative and Qualitative Disclosures About Market Risk**

**Interest Rate Risk**

A 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 ABL Facility is variable-rate debt with interest rates that are generally indexed to the prime rate or SOFR, an adjusted forward-looking term rate based on the secured overnight financing rate. At December 31, 2022, we had $156.0 million of outstanding borrowings under the ABL Facility at a weighted average interest rate of 7.37%. A change in interest

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

rates of 0.125% would result in an increase or decrease of our annual interest expense of $0.2 million, based on borrowings outstanding at December 31, 2022.

On July 1, 2022, the Class B Preferred Units distribution rate changed from a fixed rate of 9.00% to a floating rate of the three-month London Interbank Offered Rate ("LIBOR") interest rate (3.75% for the quarter ended December 31, 2022) plus a spread of 7.21%. A change in interest rates of 0.125% would result in an increase or decrease of our Class B Preferred Unit distribution of $0.1 million, based on the Class B Preferred Units outstanding at December 31, 2022.

For our Class C Preferred Units, distributions on and after April 15, 2024 will accumulate at a percentage of the $25.00 liquidation preference equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in the amended and restated limited partnership agreement (the "Partnership Agreement")) plus a spread of 7.384%. On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time to time, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in the Partnership Agreement) plus a spread of 7.00% ("Class D Variable Rate", as defined in the Partnership Agreement). Each Class D Variable Rate election shall be effective for at least four quarters following such election.

**Commodity Price Risk**

Our operations are subject to certain business risks, including commodity price 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. Procedures and limits for managing commodity price risks are specified in our market risk policy. Open commodity positions and market price changes are monitored daily and are reported to senior management and to marketing operations personnel.

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.

The following table summarizes the hypothetical impact on the December 31, 2022 fair value of our commodity derivatives of an increase of 10% in the value of the underlying commodity (in thousands):

---

| | |
|:---|:---|
| | **Increase<br>(Decrease)<br>To Fair Value** |
| Crude oil (Crude Oil Logistics segment) | $(3811) |
| Propane (Liquids Logistics segment) | $(605) |
| Butane (Liquids Logistics segment) | $(1270) |
| Refined Products (Liquids Logistics segment) | $(5126) |
| Other Products (Liquids Logistics segment) | $10101 |
| Canadian dollars (Liquids Logistics segment) | $124 |

---

Changes in commodity prices may also impact the volumes that we are able to transport, dispose, store and market, which also impact our cash flows.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**Credit Risk**

Our operations are also subject to credit risk, which is the risk of loss from nonperformance by suppliers, customers or financial counterparties to a contract. Procedures and limits for managing credit risk are specified in our credit policy. Credit risk is monitored daily and we believe we minimize exposure through the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring certain customers to prepay or place deposits for our products and services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring certain customers to post letters of credit or other forms of surety;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• monitoring individual customer receivables relative to previously-approved credit limits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring certain customers to take delivery of their contracted volume ratably rather than allow them to take delivery at their discretion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• entering into master netting agreements that allow for offsetting counterparty receivable and payable balances for certain transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reviewing the receivable aging regularly to identify issues or trends that may develop; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring marketing personnel to manage their customers' receivable position and suspend sales to customers that have not timely paid outstanding invoices.

At December 31, 2022, our primary counterparties were retailers, resellers, energy marketers, producers, refiners, and dealers.

**Fair Value**

We determine the fair value of our exchange traded derivative financial instruments utilizing publicly available prices, and for non-exchange traded derivative financial instruments, we utilize pricing models for similar instruments including publicly available prices and forward curves generated from a compilation of data gathered from third-parties.

**Item 4.&nbsp;&nbsp;&nbsp;&nbsp;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 ensure the 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 December 31, 2022. Based on this evaluation, the principal executive officer and principal financial officer of our general partner have concluded that as of December 31, 2022, such disclosure controls and procedures were effective.

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 December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**PART II - OTHER INFORMATION**

**Item 1.&nbsp;&nbsp;&nbsp;&nbsp;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 caption "*Legal Contingencies*" in Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report, which is incorporated by reference into this Item 1.

**Item 1A.&nbsp;&nbsp;&nbsp;&nbsp;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, 2022.

**Item 2.&nbsp;&nbsp;&nbsp;&nbsp;Unregistered Sales of Equity Securities and Use of Proceeds**

During November 2022, 31,828 common units were surrendered by employees to pay tax withholding in connection with the vesting of restricted common units. As a result, we are deeming the surrenders to be "repurchases." The average price paid per common unit was $1.31. These repurchases were not part of a publicly announced program to repurchase our common units, nor do we have a publicly announced program to repurchase our common units.

**Item 3.&nbsp;&nbsp;&nbsp;&nbsp;Defaults Upon Senior Securities**

Pursuant to certain covenants within the indenture of our 2026 Senior Secured Notes, the board of directors of our general partner temporarily suspended all common unit and preferred unit distributions. For additional information related to the suspension of distributions, see Note 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

**Item 4.&nbsp;&nbsp;&nbsp;&nbsp;Mine Safety Disclosures**

Not applicable.

**Item 5.&nbsp;&nbsp;&nbsp;&nbsp;Other Information**

None.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**Item 6.&nbsp;&nbsp;&nbsp;&nbsp;Exhibits**

---

| | |
|:---|:---|
| **Exhibit Number** | **Exhibit** |
| 22.1 | <u>[List of Issuers and Guarantor Subsidiaries of NGL Energy Partners LP (incorporated by reference to Exhibit 22.1 to the Annual Report on Form 10-K (File No. 001-35172) for the year ended March 31, 2022 filed with the SEC on June 6, 2022)](http://www.sec.gov/Archives/edgar/data/1504461/000150446122000010/ex22103312210k.htm)</u> |
| 31.1\* | <u>[Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](ex31112312210q.htm)</u> |
| 31.2\* | <u>[Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](ex31212312210q.htm)</u> |
| 32.1\* | <u>[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](ex32112312210q.htm)</u> |
| 32.2\* | <u>[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](ex32212312210q.htm)</u> |
| 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) |

---

\*&nbsp;&nbsp;&nbsp;&nbsp;Exhibits filed with this report.

\*\*&nbsp;&nbsp;&nbsp;&nbsp;The following documents are formatted in Inline XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets at December 31, 2022 and March 31, 2022, (ii) Unaudited Condensed Consolidated Statements of Operations for the three months and nine months ended December 31, 2022 and 2021, (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended December 31, 2022 and 2021, (iv) Unaudited Condensed Consolidated Statements of Changes in Equity for the three months and nine months ended December 31, 2022 and 2021, (v) Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2022 and 2021, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.

------

<u>[**Table of Contents**](#i89063293725243f1851a0cea68cbf46e_7)</u>

**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 | NGL ENERGY PARTNERS LP | NGL ENERGY PARTNERS LP |
| | By: | NGL Energy Holdings LLC, its general partner | NGL Energy Holdings LLC, its general partner |
| Date: February 9, 2023 |  | By: | /s/ H. Michael Krimbill |
|  |  |  | H. Michael Krimbill |
|  |  |  | Chief Executive Officer |
| Date: February 9, 2023 |  | By: | /s/ Brad Cooper |
|  |  |  | Brad Cooper |
|  |  |  | Chief Financial Officer |

---

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION**

I, H. Michael Krimbill, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Quarterly Report on Form 10-Q of NGL Energy Partners LP;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: February 9, 2023 | /s/ H. Michael Krimbill |
| | H. Michael Krimbill |
| | Chief Executive Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION**

I, Brad Cooper, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Quarterly Report on Form 10-Q of NGL Energy Partners LP;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: February 9, 2023 | /s/ Brad Cooper |
| | Brad Cooper |
| | Chief Financial Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION<br>PURSUANT TO 18 U.S.C. SECTION 1350**

In connection with the Quarterly Report of NGL Energy Partners LP (the "***Partnership***") on Form 10-Q for the fiscal quarter ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "***Report***"), I, H. Michael Krimbill, Chief Executive Officer of NGL Energy Holdings LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("***Section 906***"), that, to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

---

| | |
|:---|:---|
| Date: February 9, 2023 | /s/ H. Michael Krimbill |
| | H. Michael Krimbill |
| | Chief Executive Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP |

---

This certification is being furnished solely pursuant to Section 906 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION<br>PURSUANT TO 18 U.S.C. SECTION 1350**

In connection with the Quarterly Report of NGL Energy Partners LP (the "***Partnership***") on Form 10-Q for the fiscal quarter ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "***Report***"), I, Brad Cooper, Chief Financial Officer of NGL Energy Holdings LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("***Section 906***"), that, to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

---

| | |
|:---|:---|
| Date: February 9, 2023 | /s/ Brad Cooper |
| | Brad Cooper |
| | Chief Financial Officer of NGL Energy Holdings LLC, the general partner of NGL Energy Partners LP |

---

This certification is being furnished solely pursuant to Section 906 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

<br>